Early Briefing: General Growth's Bankruptcy
General Growth Properties, the giant shopping mall company whose holdings stretch from Tysons Corner to the planned community of Columbia and Baltimore's Inner Harbor, yesterday sought protection in bankruptcy court, citing debts of more than $27 billion.
The bankruptcy heralds a wave of trouble in commercial real estate that threatens to put another damper on the economy, industry analysts said. By the end of 2011, $1.2 trillion of commercial real estate debt will come due, and like General Growth, many of the borrowers will be unable to refinance or repay their loans, said Gregory H. Leisch, chief executive of consulting at of Delta Associates, which tracks the industry.
That would spell more losses for banks and institutional investors such as life insurance companies that are already coping with the meltdown in residential real estate.
The bankruptcy adds a new element of uncertainty to the future development of Columbia, where General Growth has been working on a long-term plan that county officials have been counting on to revitalize the downtown. The economic crisis already promised to delay for the first major effort to remake the 1960-era planned community in decades.
But for people visiting General Growth's malls, the Chapter 11 reorganization could be imperceptible.
Standard & Poor's said it lowered a key debt rating on Marriott International, saying that steep declines in lodging demand will cut into the hotel operator's revenue this year. S&P cut the Bethesda company's corporate credit rating to "BBB-" from "BBB." The new and previous ratings are both considered investment grade. The ratings agency said it expects industry-wide revenue per available room -- a key measurement for hotel performance -- to fall by 14 to 16 percent this year. That metric is already about 10 percent lower, on average, this year than in 2008, S&P said.
Deltek of Herndon released preliminary first-quarter results that are lower than its guidance. When it announces its final first-quarter results on April 30, it said it expects to report revenue of $62 million, compared with guidance of $67 million to $68 million, and earnings per share of 5 to 6 cents a share, compared with 6 to 7 cents. Deltek, whose software helps government contractors and other clients with accounting, said its customers are being hurt by the economic downturn.
"Although our customers believe their businesses will continue to be impacted by the economy, they are encouraged by their future prospects and the anticipated impact of the government's economic stimulus package," chief executive Kevin Parker said in a statement.
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