Monday, April 20, 2009
Life Insurance Companies and Bankrupt Shopping Center Developers: Chapter 2 Begins
...Many life insurance companies and pension funds have invested aggressively in shopping center mortgages for many decades. Some of these loans were, and are, self-amortizing over the term of the loan, but some have maturity dates of, say, ten years, leaving a substantial “balloon” amount still due. The expectation has been that the unpaid amount would be refinanced (“rolled over”) into a new loan at that time.
The plan works just fine when credit is loose. It doesn’t work so well when credit is tight.
That’s what befell General Growth Properties, which has just now filed in bankruptcy. We understand that GG’s problem was particularly acute because it had relied heavily on short-term financing, probably more so than most shopping center development companies, when it purchased the Rouse Company and, in so doing, large tracts of undeveloped land. GG found itself in a bind because short-term loans which it had historically rolled over without much problem became unavailable at all...
Jutia Group: Life Insurance Companies and Bankrupt Shopping Center Developers: Chapter 2 Begins
The plan works just fine when credit is loose. It doesn’t work so well when credit is tight.
That’s what befell General Growth Properties, which has just now filed in bankruptcy. We understand that GG’s problem was particularly acute because it had relied heavily on short-term financing, probably more so than most shopping center development companies, when it purchased the Rouse Company and, in so doing, large tracts of undeveloped land. GG found itself in a bind because short-term loans which it had historically rolled over without much problem became unavailable at all...
Jutia Group: Life Insurance Companies and Bankrupt Shopping Center Developers: Chapter 2 Begins
Permalink posted by markw @ 4:27 AM 
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