Monday, February 23, 2009

Learn from your Mistakes or Repeat Them

I often find myself wondering if there's anyone driving this bus.  First, in spite of completely failing to get Craig Mecham off the dime with his Sugar House pit, Salt Lake City has greenlighted Red Mountain Retail Group's mixed use redevelopment of the rest of that block and the one adjacent.  I'm no fan of the Granite Furniture Warehouse, but we don't exactly need another chain-linked hole in the ground on that block.  The City says this one is different because Red Mountain has all its financing in place.  Yeah, right.  Mecham said the same thing.  So did General Growth Properties with the Cottonwood Mall.  Show me the money.

Meanwhile, on the South End Sand Pile, R&B SunCrest has walked out of negotiations to take over the SunCrest development, claiming Draper is not acting in good faith.  What that really means is that Draper, to the shock of everyone, is not rolling over, taking R&B and Zions Bank off the hook, and agreeing to stick the already thoroughly ripped off citizens of Draper with the entire bill to fix that mess.  Bully for Draper.  Unfortunately, Draper has done little if anything to change the ordinances and procedures that made SunCrest possible in the first place, so it continues to permit time bombs and will be crisis hopping for awhile.

As an aside, I have to wonder about Zions Bank.  As a result of the SunCrest collapse, Zions ordered Draper to close its accounts and find another bank.  That's the sort of "take your ball and go home" behavior one expects on a playground, not from a major financial player.  It could be a blessing in disguise for Draper, though.  Zions has taken some serious hits in the last year, from having to pull off-book garbage back onto its books to having to take over busted banks at the FDIC's "request" to seizing crap collateral like SunCrest.  There's only so much that any business can absorb.  Maybe it's good that Draper moves on.

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At February 23, 2009 at 8:28 PM, Blogger MNlawyer said...


Just ran across your postings at the D Kos as I was doing some research re: GGP and the promise it was going to announce results after the bell today. Have not seen anything about 2008 results and wonder if this could indicate an imminent BKY. GGP has some properties here in MN, some of which have struggled for years, so I have to believe things are worse than GGP is letting on.

Given we've heard the commercial real estate loans were going to be a looming problem in 2009, I wonder if GGP could be the match that ignites the conflagration. What is your take on where this is heading?

At February 24, 2009 at 8:32 AM, Blogger Knute Rife said...

GGP is indeed playing its cards close to the vest. Given the way CMBSes are going, I don't see how mall creditors are going to avoid calling a pile of notes this year; their upstream money sources are going to insist. When that happens, we're looking at yet another Great Unwinding.

So what is GGP doing? I don't know, but I know what mall owners in general ought to be doing. They ought to be identifying the creditors that matter and then getting behind locked doors with them to hammer out prepackaged Chapter 11 plans. Any owner that does not get out in front like this is going to have blood in the water very soon, followed immediately by a feeding frenzy, which in turn would be a train wreck for tenants. Consequently, the tenants, not just the creditors, ought to be pushing owners to get their reorganization ducks in a row.

A group that ought to be involved but is silent is local government. Cottonwood Heights (and to a lesser extent Granite School District) will be the ones having to deal with dead commercial real estate if things go bad, but they're just sitting there with the same deer-in-the-headlights look they've had since the planning process started.

At April 8, 2009 at 11:06 PM, Blogger Solace said...

Just Zions still running Suncrest? Has Zions sold the development to another company?

At April 24, 2009 at 5:47 PM, Blogger Knute Rife said...

Zions is still stuck with it, one of the reasons Zions has now been downgraded to junk.


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