Douglas Gooding and John Ventola on General Growth Properties Bankruptcy Case
| August 31, 2009
| Douglas Gooding and John Ventola
Douglas Gooding, chair of finance & restructuring, and John Ventola, partner in finance & restructuring, wrote “Lessons from General Growth Properties,” published in Law360’s Bankruptcy section. General Growth Properties is the largest real estate bankruptcy case ever filed, and at issue is a key principle of the commercial mortgage backed securities market – asset isolation of single purpose entities.
General Growth Properties consists of a collection of smaller, single purpose entities that own a sole property and conduct no other business than operating that property. While General Growth Properties filed for Chapter 11, many of its SPEs were financially sound. Creditors of the single purpose entities objected to the SPEs being included in the bankruptcy proceedings. The Bankruptcy Court dismissed the creditors’ objections, and if other courts take a similar position, the viability of the SPE as a vehicle for financing real estate is likely to diminish significantly.