wasn't hancock purchased in 06? if so, that would have been close to the top of the market and it would make sense for its sale price to be greatly reduced when it recently sold.
if you look at the four east coast properties ggp has offered for sale (faneuil hall, south street seaport, harborplace, and the gallery at harbor place), the total recorded encumbrances on those properties is 244,476,000 and if the reports of the offers are to be believed, ggp was offered as much as 400 million for them (considering high bid for each individual property). the rouse portfolio was purchased in 2004 and booked at cost. even with the subsequent two to two and one half year run up in valuation and the following downturn in which we now find ourselves, i don't believe those properties would fare as badly as the hancock building.
additionally, the homart portfolio which was purchased in 2007 has value in excess of encumbrances (on a cost basis) of greater than 1 billion dollars. ggp has some 60 acres of developable land in downtown honolulu for which they received redevelopment approval last november i believe (this is the ward centers acquisition). ggp was looking for this to be one of their crown jewels and it could still be if they can buy time to get through this mess.
bernake made some encouraging comments yesterday and talf financing may be able to be used in some way. if ggp can just bridge through for 12 to 18 months i believe they can be ok. it's not that their loans were nonperforming, it was just that they could not pay off the balloon mortgages. commercial real estate companies just roll over these types of balloon mortgages and wait until they ultimately sell to pay them off. forced sales would certainly queer the works.
news this past week about simon refinancing three or four properties. interesting that they refinanced each of these properties for more than they had previously carried. so, they were either underleveraged at the time they originally mortgaged them or the value has increased since the original mortgage went into place. in any event, they were able to take out equity as a result of the refinance.
granted, they were significantly less leveraged than ggp, but what they did with those mortgages is the essence of what commercial real estate companies do (in good times). that is why if ggp can bridge through this mess there should be good upside. if not, you will be glad you got out.
