Feeling bullish long term, firm says Seaport project is # 1
If General Growth Properties could save only one of its dozens of development projects from the credit crunch chopping block, South St. Seaport would be that project, a firm executive told Downtown Express last Thursday.
“This is the biggest priority for our organization nationally. Period. Period,” said Michael McNaughton, vice president for asset management for G.G.P.’s Northeast region. “There is nothing more important in the 50 states, Brazil, Costa Rica, Turkey, internationally for G.G.P. This is it.”
McNaughton was responding to concerns that the firm’s debt and the recent Wall St. crisis could hamper General Growth’s planned overhaul of the Seaport. G.G.P. has put some projects on hold and cut $500 million from its development budget — but the Seaport project is safe, McNaughton said during a presentation of the firm’s plans to the Express.
G.G.P. plans to demolish the Pier 17 mall and build a 42-story condo and hotel tower just north of the pier. The proposal will have to run a gauntlet of government approvals.
Julie Menin, chairperson of Community Board 1, has many concerns about the plan, but she was glad to hear that General Growth is committed to the project despite the economy.
“What we certainly don’t want to happen is for construction to start and then stop midway,” Menin said. “That would be catastrophic.”
G.G.P.’s corporate office did not give the project the same preeminent status as McNaughton did, but spokesperson Jim Graham called the development “unquestionably one of G.G.P.’s most important undertakings.”
McNaughton said the tumbling economy is not affecting the Seaport project, which is years from breaking ground. G.G.P. plans to spend the next few years getting government approvals and then financing, so the company will be ready to start construction whenever the economy turns around.
“If we just tabled this now and picked it up again when everything looked rosy, it’s five years out now before we can even start,” McNaughton said. “Is the market going to be a mess in 2010 or 2011? We believe it’s not and that’s why we’re moving forward.”
General Growth looks more circumspect about their projects that are closer to opening. The company cut its $1 billion development budget in half this summer to delay several projects from coming online in such a bad economic climate. The $1 billion budget does not include projects like the Seaport that are still several years away from breaking ground.
General Growth won’t name the total cost of the Seaport project, but their Web site gives a hint by listing some of the project’s expenses: $103 million in extra costs for building on the waterfront, $109 million for rebuilding the pier, $62 million for open space and $32 million for community space. Add that to the $30 million the city is contributing to rebuild the pier and add open space, and the project’s price tag is already at $336 million, without even including the design and construction of the new buildings and the costly restoration of the Tin Building.
General Growth’s stock price has been dropping, forcing executives to sell some of their shares, according to The Wall Street Journal. The stock reached a record closing high of $67 a share in March 2007 and fell to $15.10 at the close on Tuesday. The Journal blamed the falling stock price on concerns over whether G.G.P. will be able to refinance its $27 billion debt.
In an August report, Merrill Lynch analysts thought General Growth’s stock was worth more than its current value. Merrill analysts thought the stock should have been going for $29 a share, not $24, as it was then. The stock price was lower than it should have been, the analysts said, because of fears about G.G.P.’s debt. Since the report, the credit crisis has worsened and General Growth’s stock has fallen further.
By Julie Shapiro