Las Vegas Homes, Condos, Land and Commercial Real Estate Blog

General Growth Properties (GGP) has put up three of the better retail centers, the Fashion Show Mall, Venetian Grand Canal Shoppes, and the Shops at Palazzo. The reason for the sale is that General Growth has $900 million in loans due by the end of the next month and about $4 billion by the end of 2009, of which is a $900 million loan payment on both the Palazzo and Fashion Show Mall, due at the end of November and another $400 million for the Grand Canal Shoppes on May 1, 2009.

Experts point out that the reason for the current trouble of GGP is over leveraging and credit crunch. Pricing for these retail centers are computed using Net Operational Income NOI and The Grand Canal Shoppes sale price was computed based on a 6% cap rate for Net Operational Income of up to $38 million and 8% on NOI in excess of $38 million. If the NOI for these shops stayed steady or increased, GGP would have paid about $600 million dollars for the property over the next four years, this would make the price per square foot of the 490,862-square-foot Grand Canal Shoppes at over $1,100 per square foot. One of the more famous Grand Canal Shoppes tenants is Madame Tussaud’s.

The Fashion Show Mall was purchased by GGP is 1981 and underwent a one billion dollar expansion and renovation in 2003. This 1.9 million square feet shopping center includes some of the nation’s most famous retailers such as Macy’s, Nordstrom, Saks Fifth Avenue, Dillard’s, Neiman Marcus and Bloomingdale’s.

Again it is time to brag a bit, on August 12 I wrote that “I have read a few articles by other commercial real estate agents about the short term market conditions for commercial real estate in Las Vegas and believe them to be optimistic. I believe the price drops will be drastic.” And also that “As I have repeatedly mentioned, the first wave of commercial foreclosures is just hitting Las Vegas and there are many to come. In many instances, real estate prices will not become realistic with regard to present market conditions, until the third or fourth wave of commercial foreclosures hits Las Vegas and my guess is that it will happen in about six months.”

Well, BOOM, here is the first big wave, although GGP has declared that they are current on their loan payments. General Growth Properties’ stock has dropped by 96% over the last year, so a broke company hired another broke company, Goldman Sachs to sell their property. Too bad these guys are not as politically connected as Goldman Sachs or all of their problems would have been solved by a $5 billion dollar taxpayer bailout.

Now, I am looking for multibillion dollar investors, if you are out there, CALL ME.