Cordish Says Harborplace "Up Our Alley"
Baltimore developer David Cordish has expressed interest in buying Harborplace and the Gallery, two of the Inner Harbor’s most visible retail properties, which were put on the block in December by mall owner General Growth Properties.
“We’re looking at it and think it would be right up our alley,” Cordish said in an emailed statement. “The problem is that General Growth has such enormous debt that it is difficult to extract an individual property.”
The properties were offered as part of GGP’s Festival Marketplace portfolio, which includes Boston’s Faneuil Hall and New York’s South Street Seaport. All three developments were inherited by Chicago based GGP, the nation’s second-largest mall owner, when it bought out Columbia’s Rouse Co. for $7.2 billion in 2004.
Earlier this month, wire services reported that GGP had received more than 10 offers, some as high as $400 million, for key properties including
Harborplace and the Gallery. Cordish did not go so far as to say that his company had made an offer, and neither he nor his spokeswoman responded to follow-up questions about an offer. GGP has been unloading assets all over the country to pay off massive debt service.
“Since the third quarter of 2008, liquidity has been our primary issue. As of December 31, 2008, we had approximately $169 million of cash on hand,” General Growth wrote in its last quarterly SEC filing. “As of February 26, 2009, we have $1.18 billion in past due debt and an additional $4.09 billion of debt that could be accelerated by our lenders.”
Acquiring Harborplace and the Gallery would make Cordish by far the biggest retail property owner in the Inner Harbor area.
The Cordish Cos. owns the 162,070 square-foot Power Plant, which houses an ESPNZone restaurant, a Barnes & Noble book store and other tenants, and the nearby Power Plant Live! entertainment center has 224,448 square feet of night clubs and restaurants. Pier 4, a nearby retail venue also owned by Cordish, is 128,057 square feet.
Combined, Harborplace and the Gallery are the biggest of the three properties GGP is
selling, with 284,683 square feet of retail space and 259,770 feet of office space. The retail portion is 85.6 percent occupied and has sales per square foot of $522, and the office space is 77.3 percent occupied, according to the sales brochure. The property generated $114 million in sales in the past year.
GGP officials did not return calls seeking comment Wednesday.
Thomas H. Maddux, president of Towson-based brokerage KLNB Retail, said Cordish is the perfect company to buy the two developments.
“If those properties were in some other city, and the city was trying to be proactive about finding a friendly developer to resurrect the properties and make them successful again, they’d probably call David Cordish,” he said. “The fact that he’s based here is coincidental.
“One of the Rouse Co.’s great talents was identifying and nurturing emerging trends and retailers,” Mad- dux said. “As soon as the Rouse Co. didn’t own those properties anymore, that same spirit and same talent wasn’t there. Part of the reason that those properties are incongruent with GGP is that they’re not regional malls.”
J. Kirby Fowler, head of the Downtown Partnership of Baltimore, also said that Cordish buying the downtown properties would be a plus for the city.
“I think it’s too early to speculate on the future of Harborplace and the Gallery, but the Cordish company has a strong track record in Baltimore and would no doubt be a good operator for them,” he said.
Fowler added that he was not worried about a retail property “monopoly,” and said GGP may not even sell its entire interest in the two developments.
“They have said to me that they are open to many different possibilities, including staying as a partner on the project,” he said. “Sale is an option, but so is joint partnership.”
Having one owner for nearly 800,000 square feet of commercial space in the Inner Harbor doesn’t bother Maddux, of KLNB, either.
“If one investor owned every Class A office building in downtown, that would suggest a monopoly and an uncompetitive environment, but retail is very, very different,” he said. “There’s only a certain number of retailers that are willing to come into a market. A single owner would never put competing retailers in the same project, to a certain extent. Every mall has only five shoe stores.”
At the close of trading Wednesday, GGP’s stock was down nearly 8.5 percent, to 65 cents a share.