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Mall builder DeBartolo in cash crunch

A cash and credit squeeze is forcing Edward J. DeBartolo, the baron of the American regional mall industry, to restructure $4.04-billion in debt and sell assets to protect his family's vast empire, according to the Wall Street Journal.

A reclusive 82-year-old billionaire whose holdings range from the San Francisco 49ers to six of the biggest malls in Tampa Bay, DeBartolo has agreed with bankers to sell several of his 73 malls, three of his horse racing tracks and some of his office buildings, the Journal said Tuesday.

The Journal report, based largely on confidential bank documents, said DeBartolo has given the banks first and second mortgages on some of the assets he intends to keep. In return, the banks will let him suspend principal payments for 2{ years.

"We are not commenting on the Wall Street Journal article," said Marie Cartwright, DeBartolo spokeswoman at the company's headquarters near Youngstown, Ohio. DeBartolo's top executive in Florida, former Tampa Mayor Dick Greco, said he does not know if any DeBartolo properties in Tampa Bay are on the list.

JMB Retail Properties, DeBartolo's 50-50 joint venture partner in the proposed Brandon Town Center mall, said DeBartolo's current financial plight would not affect that project. JMB is looking for financing for a 1-million-square-foot mall to beat a state regulatory deadline requiring it be substantially complete by the end of 1993.

Meanwhile, Greco and other Florida shopping mall builders are lobbying the Legislature to give all developers holding similar permits a two-year extension.

Greco said mall builders whose projects met state requirements when permits were issued should not be subjected to new demands by government permitting agencies just because they cannot get financing.

"You cannot legislate market conditions," added Wayne Litzau, a JMB vice president.

Other major mall builders in the United States recently began selling assets and equity built up in their malls to finance more construction. Traditionally mall builders have borrowed against the equity in their projects to build new ones. But declining property values and tighter bank credit requirements now call for more cash up front to get deals bankrolled today.

"It is a structural change in the way we do business that is going to take two or three years just to stabilize," said Malcolm Riley, president of the International Council of Shopping Centers and a Los Angeles mall builder.

"But the credit crunch is only a symptom. The disease is overbuilding in the 1980s. I'd say only 5 percent of the people building malls two years ago are still in the business. The few left are refinancing or selling assets to keep going."

Some experts say that up to 10 percent of U.S. malls will be surplus by 2000. Even through the go-go 1980s, Americans spent less and less time in shopping malls and visited fewer stores when they did.

Long considered one of the nation's most financially secure mall builders, DeBartolo's problems are worse than they appear to outsiders but not fatal, the Journal said. About $2-billion of DeBartolo's outstanding $4-billion debt comes due in the next two years, the paper reported.

DeBartolo in the past year sold his interest in the Pittsburgh Penguins hockey franchise and a mall in Washington state.

DeBartolo put $480-million in Robert Campeau's ill-fated department store empire. He emerged from the subsequent bankruptcy proceedings with control of a highly profitable grocery chain. But last week he turned the stock over to his bankers.