A Bisnow Special Report: The Incredible Comeback of GGP's Founding Family

Publisher's Note: With the Bisnow editorial staff now covering 27 cities coast-to-coast, we're excited to launch—gasp—long-form reporting. Based on exclusive interviews, our Chicago colleague Lee Murphy has prepared this Bisnow Special Report on one of the iconic figures in American retail real estate. (And if you get hooked on these new offerings, a recent report on the remarkable Goldman family, by our NY colleague Billy Gray, can be found here.)

The view from the 21st floor of Bucksbaum Retail Properties looks down on the squat headquarters of General Growth Properties two blocks up Wacker in Chicago’s West Loop.

CEO John Bucksbaum insists that’s an accident of office leasing for his three­-year­-old firm, but the message is telling: Bucksbaum—unceremoniously dumped from his position as the chief executive at the nation’s second-­largest mall owner in 2008—is back in retail development, buying land, building stores and schmoozing merchants for lease deals.

The scale of his business today, of course, is entirely different. Bucksbaum has a staff of eight, while GGP at its peak a decade ago had 500 at its headquarters alone. The operating theater is changed, too. Since his father, Matthew Bucksbaum, and Matthew’s brothers Martin and Maurice, built their first mall in Cedar Rapids, IA, in 1955, the family has made careers out of building, buying and managing big malls in suburban America.

Instead of small town retail, Bucksbaum set his sights on urban mixed­-use development. And his signature project—perhaps a template for the future—is the New City development along the emerging Clybourn Corridor within Chicago’s prosperous Lincoln Park neighborhood. New City, developed in partnership with Chicago’s Structured Development, will encompass 360k SF of retail space, a 19­-story, 199­-unit apartment building, 40k SF of medical offices and a 1,100­-car garage when it opens this fall. The tenants will include Dick’s Sporting Goods, Mariano’s grocery, and a 14­screen ArcLight Cinema. There will be a bowling alley and lots of restaurants, too, all clustered around an outdoor plaza for concerts, public markets and outdoor dining.

This is like coming home for Bucksbaum. All the years he was investing in small town retail at GGP, he and his wife, Jackie, were raising their two sons in a big house not far from New City in Lincoln Park. His kids attend the elite Latin School, his family supports the opera and the symphony, and he’s been happy to take long bike rides, which can stretch 90 minutes and more in the pre­dawn darkness along the lakefront. Many real estate colleagues have long since escaped to the comforts of such swank North Shore suburbs as Lake Forest and Glencoe and Highland Park. But Bucksbaum, 58, has never been the train­-commuting type.

Man of Vision

In fact, he’s turned his back on the suburbs entirely, and his timing appears to be right. “Retailers are becoming interested in cities again,” says Bucksbaum, who still comes to the office dressed in a suit and tie every day. “People want to live in the city again. Employers are moving their headquarters to downtown Chicago.”

Friends and colleagues laud his nose for trends. “John thinks strategically, and he’s got great vision,” says Karen Case, executive managing director and president of commercial real estate lending at The Private Bank in Chicago, a Bucksbaum partner. “In the course of his long career he’s earned a lot of respect from his peers in the retail real estate industry.”

Few know just how far back that career stretches. John was 6 when his family was living in Bettendorf, IA, where they owned and managed their third center, the Duck Creek Plaza, anchored by Younker’s. His parents dropped him off each Saturday morning and his day was spent sweeping floors and mowing the grass. By the time he was  8, GGP’s headquarters shifted to Des Moines, and weekends were spent hanging around the drafting tables where new centers were being planned.

By the time he graduated from the University of Denver in 1978, he was prepared for his first post with the family business, in Grand Junction, CO, the site of a General Growth mall under development. It was a crucial period for learning the basics of real estate: Bucksbaum, the assistant project manager, alternated his time between the mayor and city council and the process of gaining entitlements with cold calls on local merchants he wanted to lure as tenants.

Two General Growths

Many people forget that there were two General Growths. The first company went public in 1970 and was sold by the family in 1984 to Equitable Real Estate and the IBM Retirement Fund for around $800M, a huge transaction at the time. Then the Bucksbaums, with John’s Uncle Martin as CEO and his father taking on operations responsibility, began building and acquiring malls all over again. John spent years in Southern California nurturing a development division there with a half-dozen centers. By 1993, a new General Growth was taken public with 21 properties; soon after the headquarters was moved to Chicago. Bucksbaum made the move as well, taking increasing responsibility, particularly when Martin died and his father was elevated to CEO.

Again, the young executive noticed a maturing industry unfolding in broad strokes around him. “We could see that the decades of mall development were coming to a close. The country had become built-out,” Bucksbaum says. “We could also see that many of the mall assets were owned by investors and institutional funds with finite lives that would eventually want to sell. We saw great opportunity to buy these assets. But we knew that we’d need the access to the capital that being a public company would provide us.”

And so the dealmaking began, with Bucksbaum playing key roles. First up in the ‘90s came the Center Cos, the portfolio of malls owned by May Department Stores, with Goldman Sachs & Co as finance partner. Then GGP paid out $1.9B for Homart Development, Sears’ mall development arm.

By 1999, Matthew, 73, was ready to hand over the title of CEO to his son John, 42. The family owned 30% of GGP’s stock and controlled the board, but family succession has always been frowned upon at most public companies. Not so at General Growth.

Debt Downfall

“At many companies where families are in control, the son doesn’t hold a candle to the father,” said Marvin Roffman, the president of Roffman Miller Associates in Philadelphia, a big GGP shareholder at the time. “In this case, though, John is one of the smartest guys I’ve ever met. The baton is being passed to the right person.”

Smart enough, it turned out, to engineer the biggest deal in the history of retailing up to that time with the $12.7B acquisition of the Rouse of Columbia, MD, which owned such prestigious shopping centers as Faneuil Hall in Boston and Harborplace in Baltimore. Some critics groused that the Bucksbaums were taking on too much debt, while defenders believed that the company, now with some 200 malls, could more effectively compete for tenants as a solid industry No. 2 to its bigger archrival, Indianapolis-based Simon Property Group.

That deal might be considered John Bucksbaum’s crowning achievement if the recession hadn’t come along. John admits he miscalculated the possibility of a downturn and its impact. His first mistake: instead of issuing new stock to help finance the bigger balance sheet, GGP took on debt—more than $25B at one point. The Bucksbaums, whose 20% GGP stake was worth more than $4B in 2007, when shares peaked at $67.50, figured the stock would keep going higher and interest rates would continue to decline, which made borrowing a better alternative than selling stock.

The second major mistake, John admits, is that the company took out separate mortgages on each mall and clustered too many maturities between 2008 and 2010. It was a catastrophic decision: as the mortgages came due, no banks were willing to refinance, even though the malls were all still throwing off positive cash flow. The lending spigot had suddenly gone dry, and GGP had nowhere to turn as its stock plummeted to a low of 26 cents in October 2008. The dividend was suspended and John was kicked out as CEO, though he remained as chairman. New management limped along for a few months by obtaining loan extensions and forbearance on some bond debt, but Chapter 11 bankruptcy eventually came in April 2009. The Bucksbaums’ stock by then was worth just $30M.

Life After GGP

John learned a lot through this arduous process—ladder debt over time and use stock to help finance the business. As chairman, he kept coming to the office every day and kept his head high while other similarly distressed executives became homebound. “The company wasn’t broken, it was the capital markets that were broken,” he says. He wasn’t a criminal, though the technical reason for pushing him out as CEO was that the Bucksbaum Trust (John wasn’t an officer of that) had made a loan to two top executives to cover margin calls on their GGP stock. He’d forgotten a company rule prohibiting lending money to executives for personal reasons, he says.

With investments from the Blackstone Group and Brookfield Asset Management and a sell-off of non-core assets, the company came out of bankruptcy late in 2010 and John lost his board seat and chairmanship. He reveals that a period of despondency, perhaps even depression, followed. “I loved what I did—the people, the properties, the industry. I had fully expected I would be running General Growth for the rest of my life,” he says. “Our family was so intertwined with the company that there was terrific pressure on every aspect of my life—wife and kids and so on.” His wife, Jackie, played a key role in helping him through this period. “She reminded me that my kids don’t love me because I’m the CEO of a company, but because I’m their dad.”

Yet he was itching to get back into the mix. His own capital situation has been buttressed by the fact General Growth has launched an impressive comeback. Its stock has zoomed back to $30 a share, making it one of the top performing stocks in terms of total appreciation over the past
five years. Bucksbaum is still a shareholder, though he won’t say how many shares he owns.

Bankers who wouldn’t lend to him when he was leading a public company are lining up to give him money for much smaller assets today. Tenants want to be in his new breed of mixed-use centers, too. “I’ve cultivated contacts in the banking and retail community over decades and I’ve still got those contacts today. People haven’t turned their backs on me,” Bucksbaum says. He’s doing it on his own now, too, since his father died in November 2013, at the age of 87.

Back in the Game

He’s making money already. Nearly three years ago the new Bucksbaum Properties spent some $23M, financed with an $18M construction loan from Private Bank, building a strip center in Chicago for the grocer Mariano’s, which signed a 20-year lease. Last year a New York-based venture headed by Melohn Properties paid Bucksbaum $40.5M for the 66k SF property. Nice ROI, Bucksbaum acknowledges.

He’s busy on other fronts. He’s part of a group picked to build a $300M mixed-use development on Chicago’s Near West side that will include 92k SF of retail space as well as a 225-room hotel. Bucksbaum has also been embarking on a mixed-used complex across from the Chicago Cubs ballpark, Wrigley Field, that will include 169k SF of retail as well as a 148-unit apartment building developed by Chicago’s M&R Development. In Cincinnati, his one out-of-town project, he’s building the Liberty Center, which will feature 800k SF of retail anchored by Dillard’s, 220 residential units and 75k SF of offices on a 64-acre site.

Does he miss the larger scale of General Growth? In truth, he doesn’t find things all that different. “I had a construction person I met with at General Growth who reported to me, and I have a construction person who I meet with at my current company,” he explains. The difference, of course, is that the General Growth construction exec headed a staff of hundreds. Today it’s just one or two.

He’s remarkably ego-free, and also a generous donor of his time and money. Cynthia McSherry, the executive director of the Urban Land Institute’s Chicago branch, reports that small towns around Chicago frequently ask the agency to conduct retail studies and provide consulting. She’s able to prevail upon Bucksbaum not just to send an employee over to help, but travel himself to a small town like Winnetka and spend days walking the streets and talking to shoppers to come up with a municipal retail plan.

John, who has long owned a second home in Aspen, has been a stalwart supporter of the Aspen Valley Ski & Snowboard Club. Club director Mark Cole recalls an invite to a New Year’s Eve party at the Bucksbaum home a few years ago where the guests included Steve Jobs of Apple, Queen Noor of Jordan and David Stern, the NBA commissioner. In such august company, John spent much of the night talking up plans with Cole to camp out overnight in the winter cold in a homemade igloo; three days later they did.

One summer day Cole planned a long bike ride in the Colorado mountains with Bucksbaum and S. Robson Walton, the chairman of Walmart. Bucksbaum showed up in leather sandals and discovered he’d forgotten his biking shoes. Instead of dropping out, he made the ride in the sandals—125 miles including a 6,000-foot vertical climb. He ended up having to wait at the top for others to catch up.

Tough guy, indeed, both in the mountains of Colorado and the urban neighborhoods of Chicago. And how many retail developers get to spend their spare time hanging with the chairman of Walmart?

With contacts like that, Bucksbaum Retail Properties ought to do just fine.