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General Growth eyes bankruptcy

The debt-laden REIT says it is examining its future, including potential bankruptcy protection, as it struggles to refinance billions of debt in a stalled refinancing market. The REIT is reportedly in default on loans secured by two malls in Las Vegas, including the Fashion Show Mall.

General Growth Properties is considering bankruptcy if it is unable to refinance its massive debt-load, the retail real estate investment trust said while announcing its fourth quarter results.

Despite General Growth’s reporting a decline in net operating income of just 2.4 percent over the past year to $701.8 million, the REIT said it might have to consider “legal protection” from its creditors if it was unable to refinance its heavy debt load.

The US’ second largest mall owner said it was “past due” on about $1.2 billion of debt, with another $6.1 billion set to mature over the coming months and years. That $6.1 billion includes $4.1 billion of debt that could have its maturity date brought forward in the case of default, $1.4 billion of consolidated mortgage debt and $595 million of unsecured bonds scheduled to mature in 2009.

“In the event that we are unable to extend or refinance our near and intermediate term loan maturities, we may be required to seek legal protection from our creditors,” General Growth said in a statement.

General Growth is in default on loans secured by the Fashion Show Mall and the Shoppes at the Palazzo in Las Vegas, according to a report by Bloomberg. The struggling REIT has also suspended its cash dividend, halted or slowed all development projects, cut 20 percent of its workforce and sold certain non-mall assets in a bid to reduce its debt.

Distressed REITs have caught the eye of private equity real estate firms already. Green Courte Partners last week completed its bid to acquire Florida-based senior housing REIT American Land Lease after 93 percent of its stock was tendered. The Chicago-based private equity real estate firm agreed in December to buy the struggling investment trust in a deal valued at $438 million.