By Linda Lipp, Greater Fort Wayne Business Weekly
lindal@fwbusiness.com
The future of Allen County's two largest taxpayers is in doubt.
General Growth Properties, which owns Glenbrook Square Mall, pays more than $5 million in taxes each year on the shopping center property, which is valued for assessment purposes at $185 million.
General Motors Corp. pays about $4.6 million a year on its real estate and personal property, which actually has a higher total assessed value, $229.6 million. Both are current in their property tax payments, according to Allen County Treasurer Bob Lee. But both also are believed to be in danger of filing for bankruptcy, which could put a crimp in the county's future property tax collections.
Speculation that General Growth would file for bankruptcy increased Nov. 19 when it hired Sidley Austin as its bankruptcy counsel. The company is facing more than $900 million in mortgage payments due Nov. 28, along with additional corporate debtpayments Dec. 1. It is trying to sell three high-end Las Vegas properties to raise cash and was said to be in negotiations with its lenders for an extension.
Its stock has lost 99 percent of its value since September, it was booted out of the S&P 500 and it is in danger of being delisted if its share value stays below $1 for 30 days or more.
Hedge-fund manager Pershing Square Capital Management acquired a 20-percent interest in General Growth earlier in November, which prompted a surge in the company's stock price Nov. 25 when the purchase was disclosed in a Securities and Exchange Commission filing. On that day, the closing price for General Growth stock was $1.36.
General Growth has been fighting its tax assessment on Glenbrook since shortly after it bought the shopping center five years ago for $220 million.
The Chicago-based real-estate investment trust contended the regional mall was valued higher for tax purposes than other regional malls in the state. It argued it the value should be $60 million. The county has defended its assessment practices, which valued the shopping center at $114 million at the time it was purchased and raised it to $185 million in 2006.
That doesn't include the center's anchor tenants, Sears, Macy's and J.C. Penney, which are owned by their respective companies. General Growth bought the former Marshall Field's property, however, which has been vacant for two years.
The assessment challenge is being heard at the state level and isn't expected to go to trial for a year. The county already has won a summary judgment that backs up its assessment methodology, and plans to continue the fight, said Mark GiaQuinta, the county's assessor's attorney.
"The point is never to win just to win," GiaQuinta said. "If we give in when we're right, we're shifting that burden to other taxpayers."
Should the company file for Chapter 11, it would get some protection from the county's claim for additional taxes as they came due. The Glenbrook property couldn't be put up for sale at a tax auction, the way the former Southtown Mall was after it fell three payments behind on its taxes, Lee noted.
The county's tax claims would have a higher payment priority than those of unsecured creditors, however, as the bankruptcy process moved along. If General Growth should succeed in getting Glenbrook's assessment reduced, any tax refund it is owed would go into the funds used to pay its creditors.
Meanwhile, a proposed bailout for General Motors and other domestic automakers has been postponed to early December because lawmakers said the industry has yet to come up with a workable plan.
"The sad reality is that no one has come up with a plan that can pass the House and the Senate and be signed by the president," Senate Majority Leader Harry Reid, a Nevada Democrat, said at a Washington, D.C., press conference Nov. 20. He said automakers must submit a proposal that would persuade Congress taxpayer aid won't be wasted.
Failure to bail out the Big Three automakers this year may leave GM facing the prospect it could run out of cash before a new Congress can come to the rescue next year.
Automakers must submit their plan to Senate Banking Committee Chairman Christopher Dodd and House Financial Services Committee Chairman Barney Frank by Dec. 2, and Congress would come back into session the following week, the Democratic leaders said.
In addition to paying the county's second-largest tax bill, GM is the county's fourth-largest employer, with more than 2,900 workers. It also is supported by other automotive-related manufacturers in northeast Indiana, including Advance Assembly, a seating plant in Columbia City, and Integrated Manufacturing in Berne.
Other area automotive suppliers, such as Cooper Standard, Contech and Tower Automotive, do little business with GM.
General Growth, which owns or has interests in more than 200 shopping centers, is the second-largest mall owner/operator in the United States. Only Indianapolis-based Simon Property Group is larger.
Bloomberg News contributed to this story.