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ARI SHAPIRO, host:

It's MORNING EDITION from NPR News. I'm Ari Shapiro.

STEVE INSKEEP, host:

And I'm Steve Inskeep. Good morning. Step inside any shopping mall and you'll find some retailers holding up better than others, which also goes for the companies that own the malls. The number two mall owner in the U.S. is in trouble, but the biggest mall owner is okay. NPR's David Kestenbaum reports.

DAVID KESTENBAUM: Simon Property Group owns malls in 41 states, also France, Italy, South Korean, China, Mexico, Poland and Japan. The company's headquarters: a tall, shiny building in Indianapolis. That's theirs too.

Mr. DAVID SIMON (CEO, Simon Property Group): We own this office building.

KESTENBAUM: This David Simon.

Mr. SIMON: Yeah, chairman and CEO of Simon Property Group.

KESTENBAUM: It's possible you may have passed David Simon in some mall, though he likes to keep a low profile so no one knows the big boss is around.

Mr. SIMON: I tend to go incognito, but more than often, you know, more cases than not they find out what I'm doing.

KESTENBAUM: Does that ever happen, that you see them cleaning the - mopping the floor ahead of you…

Mr. SIMON: Well, it's, you know, it's tended to, frankly, so that's why I like to go unannounced.

KESTENBAUM: The first thing he usually checks out: the bathrooms, to make sure they're clean. Analysts will tell you that David Simon's company is on firm footing these days, despite all the financial turmoil. Simon talked to us from a room filled with mementos from big deals. He picked up what looks like a glass paperweight celebrating something that in ordinary times would be unremarkable. They sold some bonds.

Mr. SIMON: …May 12, 2008, $1.5 billion of notes due 2013 and 2018.

KESTENBAUM: Investors loaned his company $1.5 billion. And raising money like that is essential in this business, because buying a mall is not so different from buying a house, except that a mall, unlike a house, can cost hundreds of millions of dollars. If you take out a mortgage on a house, you pay it off bit by bit over 30 years. But banks don't like to loan hundreds of millions of dollars and wait 30 years to get it all back.

So the banks say, look, I'll loan you the money, but I only want to have this arrangement for, say, five years. At the end we'll either negotiate and extension or you've got to pay me the rest of what you owe me right then, which would be terrifying.

Mr. RICH MOORE (Analyst, RBC Capital): What's interesting is over the past 20 years it really hasn't been an issue.

KESTENBAUM: Rich Moore has followed the mall business for 12 years. He's an analyst at RBC Capital, Royal Bank of Canada.

Mr. MOORE: As long as the mall is high quality, you will typically as a landlord find the money out there to refinance that debt.

KESTENBAUM: And this is where we get to the number two mall company, General Growth Properties. General Growth wasn't actually the number two mall owner until 2004, when it bought the Rouse Company that had a lot of malls. Total cost: $12 billion. Rich Moore says General Growth wanted to be one of the biggest players so it could attract the best stores.

Mr. MOORE: What General Growth did is made a purchase that didn't make them quite as big as Simon but very, very close. So you had Westfield out of Australia, Simon out of the U.S. and General Growth out of the U.S. that were the biggest operators across not just the U.S. but across the world.

KESTENBAUM: But that $12 billion General Growth spent? Much of it was borrowed, he says. So the company was operating with a lot of debt.

Mr. MOORE: What happened in November is they had $900 million coming due on two malls located on the strip in Las Vegas.

KESTENBAUM: Fashion Show Mall and a mall in the Palazzo Casino Hotel. Things got very, very tense as that day approached when the $900 million was due.

Mr. MOORE: And so they went right up to the wire. They got an extension from the consortium of banks that are in the two loans. And that extension went into December of 2008. And then they got a second extension when that came due.

KESTENBAUM: The new due date has actually passed, and the company is still trying to work things out.

Mr. MOORE: It was in one sense very exhilarating but in another sense very terrifying, because this was a situation that simply had not existed over the past 15 to 20 years. Basically, we had a very large, very successful company asking lenders, whether banks or insurance companies or anyone who's interested, please lend me money on two very, very good retail properties. And the lending community simply said no.

KESTENBAUM: Rich Moore says a lot of General Growth debt is now coming due. Its stock price, which was over $40 a share, has fallen to 50 cents. If the company can't refinance, it could be forced into bankruptcy. Some of the banks currently lending the company money are themselves fragile. But Rich Moore doesn't think bankruptcy is really in anyone's interest. And one way out would be for General Growth to sell some malls and hope to raise enough money, though that might mean turning over some prized properties to the competition - David Simon of Simon Property. That's if David Simon is interested. I asked him.

Mr. SIMON: I'll answer it generically. If we can buy great retail real estate at the right price, we're always interested.

KESTENBAUM: At this point, buying up someone else's mall is pretty much the only way for one of these companies to get bigger. Analysts say the U.S. is done building malls for a while. According to some recent numbers per person the U.S. has 20 square feet of retail space.

David Kestenbaum, NPR News.

INSKEEP: And here's another number, the U.S. has six times as many malls per capita as any other country. If you want to know which country comes in a distant second go to our Planet Money blog at npr.org/money.

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