Going Coastal

Baltimore developer David Cordish, the surprise front-runner in Maryland’s recent slot-machine bidding, is also the logical favorite to buy Harborplace and the Gallery from their pitiful and nearly bankrupt landlord.

He has the smarts to revive Baltimore’s waterfront centerpiece, owned by the giant General Growth Properties. He could probably get the financing, even in this miserable recession. He wants not just Harborplace but also its sister “festival” markets in Boston, New York and elsewhere.

“I’m most interested in Harborplace, because it’s here,” he said in an interview this week. “It’s the kind of thing we do. It interests us a great deal, and we’re talking to them.”

But like everything else in this constipated economy, any Harborplace deal is on hold.

You’d think a distressed seller and qualified buyer could make a bargain. Not in super-slo-mo 2009. General Growth and dozens of similarly situated companies need to suck it up, book losses and break up their bloated empires. Until they do, the recovery will be on hold.

Chicago-based General Growth got Harborplace in 2004 when it bought the Rouse Co., whose tourist-friendly shopping centers of the 1980s inspired urban revivals in dozens of cities. Like many of us recently, General Growth paid too much, put too little down and got what amounted to an adjustable mortgage.

Its results were no different than anybody else’s. Payments on more than $1billion in General Growth debt are overdue, the company said a few days ago. Bankruptcy lawyers are standing by. General Growth stock has fallen from $40 to pennies since last summer. Lenders could demand sped-up repayment of another $4billion, based on General Growth’s financial deterioration.

But they haven’t. Nor have they foreclosed. Nor has anybody agreed to refinance. The place is in limbo.

Cordish had been dealing with the Bucksbaums, General Growth’s founding family. But John Bucksbaum resigned as chief executive in October after the family made loans to General Growth executives, a breach of company policy. The family no longer has day-to-day control.

The company officially put Harborplace, Boston’s Faneuil Hall and New York’s South Street Seaport on sale in December. But nothing has happened. Has Cordish made an offer?

“Not a dollar figure,” he said. “I haven’t been able to get it that far. I haven’t been asked for it, to put it bluntly.”

In this respect General Growth looks like Citigroup, General Motors and any number of other zombie companies. It hasn’t gotten a government bailout, but its strategy is the same as at companies that have: Play for time and pray for a miracle.

General Growth spokesman Jim Graham declined to confirm the company is talking to Cordish.

“Any discussions we’re having with potential buyers are confidential,” he said.

Almost any new owner would improve Harborplace. General Growth has neglected it as well as Owings Mills Mall, The Village of Cross Keys and some other metro Baltimore properties it owns. And that was before it ran into financial trouble.

All General Growth’s festival marketplaces “could use some new thinking,” Cordish said. “We’re in a very good position, from a skills standpoint, to bring them into the 21st century.”

For example, he said, Harborplace could use a larger “anchor” attraction. Phillips Seafood, the popular restaurant, is a big draw, he added, “but basically, the projects are anchorless.”

Movies, theater and high-profile clubs are draws in other Cordish projects. One thing he probably wouldn’t put there are slots. By law Baltimore’s slots franchise must be south of M&T Bank Stadium, where the Ravens play.

As commercial real estate goes, the privately held Cordish Cos. are probably doing OK. But that’s a relative measure. The parent owes zero debt. All mortgages are attached to specific properties in Houston, Kansas City, St. Louis, Atlantic City and elsewhere, so problems at one development won’t contaminate the whole company.

Cordish projects focus on restaurants, movies, gambling and other entertainment, which may be to the 2000s recession what Judy Garland and Monopoly were in the 1930s – downturn-resistant cheap thrills.

But disappointing sales tax revenue at Cordish’s Kansas City Power & Light District means taxpayers have to pick up some of the mortgage payments, reports The Kansas City Star. (New tenants will boost the take this year, Cordish officials told the paper.)

Also, the company has a pretty full dance card. Cordish is bidding to buy Atlantic City’s Tropicana Casino and is developing Philly Live, an entertainment complex next to Philadelphia’s three pro sports stadiums.

But he still could make a serious play for the General Growth assets. That’s how recessions end. Liquid buyers get bargains from troubled sellers, remove excess supply and fix up the properties for the recovery.

It’s starting to happen with homes. It needs to happen with malls and waterfront pavilions. But first General Growth and its creditors need to recognize reality.

By Jay Hancock
Baltimore Sun