In a candid, poignant session at ULI’s Fall Meeting in Denver, attendees heard firsthand about tough lessons learned in commercial real estate from John L. Bucksbaum, former chair of retail developer General Growth Properties (GGP).
At its peak in 2007, GGP owned more than 200 regional malls and its stock was trading at $67.50 a share. But the virtual shutdown of the commercial mortgage–backed securities (CMBS) market in mid-2008 left the company with no way to refinance its debt, which had a relatively short maturity schedule.
“This was one of the biggest mistakes we made,” Bucksbaum said. “Don’t allow your loans to come due at basically the same time. We had about 22 percent of our debt coming due in one year.”
Bucksbaum also advised the audience, “trust your instincts.” He noted that he passed up many opportunities to raise money by selling equity but he allowed others to talk him out of it. “Debt was so plentiful it became a very appealing source of money. I kept asking, ‘Shouldn’t we issue equity,’ and I was told, ‘No, the stock is going to go higher.’”
“We treated our equity far too preciously. When the window is open to raise equity, you have to take advantage of it.” When GGP finally did raise equity, he said, it was at $36 per share and too late to prevent the firm’s eventual bankruptcy filing.
Bucksbaum also noted the great amount of support he got from industry groups such as ULI, the Young Presidents Organization, and others—as well as from people he hardly knew. “This experience has shown me that the world is an amazing place. I got support from places I never would have expected,” Bucksbaum said.