How close does, or will, commercial real estate mirror the banking and financial industry?

More specifically, we — meaning they, the powers that be within the Federal Government – saved Citi and AIG because they were purportedly too big to fail. So what do we do with commercial real estate firms like General Growth Properties (GGP’s).

Rarely a day goes by anymore without an article claiming that a bankruptcy filing by GGP is imminent. Despite several missed deadlines for renegotiating the terms of the debt held by its bondholders however, it still has not happened. But, why?

Perhaps it is because GGP is just too big to fail. Yesterday there was a blurb in a post on a blog called Credit Equity Correlation, written by a Wall Street guy named Jim Delaney. Here is some of what Jim said …

“General Growth Properties could stand as the poster child for the current commercial real estate environment as although they have stopped paying debt service on two of their key properties the lenders have not forced GGP into bankruptcy as they believe there is more to be gained by riding out the storm with a company whose tenants are happy with the way the Malls where they lease are maintained.”

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