In its press release on January 8, 2008, GGP released the following statement with respect to the financing of its debt liabilities due in 2008 and 2009 -

"The debt maturing in 2008 includes $1.816 billion of mortgage and other secured debt, $722 million of remaining bridge acquisition debt, and $83 million of notes. The Company estimates that property-level income, a measure used by lenders for financing purposes, will be approximately $365 million in the twelve months following the maturity date of the debt maturing in 2008. Using an average capitalization rate of 7.5% to determine loan capacity, the properties would have a value for financing purposes of $4.867 billion. Accordingly, the maturing 2008 mortgage debt of $1.816 billion represents approximately 37.3% of the financing value of the properties.

The debt maturing in 2009 includes $2.744 billion of mortgage and other secured debt and $600 million of notes. The Company estimates that property-level income will be approximately $415 million in the twelve months following the maturity date of the debt maturing in 2009. Using an average capitalization rate of 7.5% to determine loan capacity, the properties would have a value for financing purposes of $5.533 billion. Accordingly, the maturing 2009 mortgage debt of $2.744 billion represents approximately 49.6% of the financing value of the properties"

We analyzed GGP's financial position and its expected funds from operations (FFO) to check the company's ability to meet its debt obligations -

With GGP's optimistic assumptions of a cap rate of 7.5% and NOI of $365 mn and $415 mn for 2008 and 2009, respectively, (based on its historical growth rate of 5%) valuation for GGP's specific properties (on which debt is due for repayment in 2008 and 2009) comes to around $4.9 bn and $5.5 bn for 2008 and 2009, respectively. Based on LTV of 50% (which looks quite reasonable amid the current turbulence in the global credit markets) GGP should be able to raise $2.4 bn and $2.8 bn in 2008 and 2009, respectively. However, GGP's debt due for repayment in 2008 and 2009, respectively, is approximately $2.6 bn and $3.3 bn, translating into respective short-falls of about $188 mn and $577 mn (as shown below), even under the over-optimistic case presented by the company. Surprisingly, the company's financing requirement (as included in its press release) totally ignores the funding requirement for capital improvement and redevelopment programs required for sustained and long-term growth.