Commercial real-estate crash looms as mall firm goes under

This is the begining of a nasty time for commercial real estate (and anyone that owns the stocks or bonds associated). Soon we will be hearing the term "Ghost Malls" on the news.-Lou

General Growth: Is the other shoe dropping?

Commentary: Commercial real-estate crash looms as mall firm goes under

LOS ANGELES (MarketWatch) -- That sound you're hearing may just be the commercial real-estate market in freefall.
The potential first thud came from Chicago on Thursday, where the nation's second-largest mall operator, General Growth Properties Inc., filed for bankruptcy protection. It may be pure coincidence, but concerns are mounting among commercial real-estate observers that the market is about to go through its own subprime-like debacle.

It's not exactly clear whether General Growth's action is the tipping point for the market's troubles. The company dug itself in deep by buying its way into 44 states and toward the top in its market. The modus operandi was an aggressive acquisition strategy heavily funded with debt.

General Growth's demise was easily foreseen as the company kept asking creditors for loan extensions. Meanwhile, fewer consumers were showing up at its malls, making it difficult to charge higher prices from tenants.
But how many other commercial real-estate operators are in the same boat? The feeling is there may be plenty more like General Growth.

The market started showing signs of cracking last autumn, and recent reports from various brokerages and investors' ratings firms say, among other things, that property prices are expected to drop by one third to one half.

On top of that, more delinquencies are expected in the retail sector with lower consumer spending.

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