Pricing leadership at General Growth Properties …

November 1, 2010

Bankruptcy is, by almost all accounts, a wrenching experience, at least for individuals. For property developers and managers, it seems to be slightly more unusual than signing a new commercial lease. And, of course, for the executives hired to lead a big company out of bankruptcy, it can be lucrative indeed.

We got the news last week that General Growth Properties (GGP), the real-estate investment trust that specializes in malls, had picked the man who would lead it out of bankruptcy court: former Vornado executive Sandeep Mathrani, who starts early next year. Now we learn just how handsomely he’s being paid to do it, courtesy of the 8-K and accompanying employment agreement filed by GGP this morning. (In fact, it looks like GGP filed the document at 10:50 p.m. on Friday night, but that puts it in the SEC’s Monday morning dump.)

To start with, Mathrani is getting $1.2 million in annual salary, along with a $1 million signing bonus. He’s also getting a minimum bonus of $1 million in each of the first two years, with the opportunity to take home another $500,000. After that, the entire bonus will be performance based, with a target of $1.5 million. He also gets up to $350,000 to relocate from New York to Chicago (which, frankly, is a lot less than some executives have been getting lately) and a company car, plus reimbursement for various expenses. There’s also this:

“During the Employment Period the Executive will receive a new car every three years or allowance depending upon Company’s policy at the time.”

The real money, however, is going to be in the equity awards: Mathrani is getting options on 2 million shares of GGP shares, with an exercise price of $10.25 a share, and 1.5 million shares of restricted stock. Right now, ahead of emergence from bankruptcy, the company’s shares are trading at $16.85. Of course, a lot will happen between now and when those options and restricted shares vest (over the course of the next four years and three years, respectively) — GGP will presumably emerge from bankruptcy, with losses apportioned among stockholders and creditors, and it will also split into two separate companies: the retail property manager headed by Mathrani, and a residential and development company dubbed Howard Hughes Corp.

Leading a company out of bankruptcy gives an executive something of a fresh start, but it’s still a challenge: Big companies have gone on to founder again, after all. But if he gets the boot or quits without good reason, he won’t be hurting too badly: He’ll get double his salary and bonus (with a minimum of $1 million on the bonus), health-care premiums for two years, and he gets to

“keep the Company-owned BlackBerry, Ipad, laptop computer and cell phone used by the Executive during the Employment Period, subject to the removal of all confidential and proprietary information of the Company.”

Which makes us wonder: Are people making a couple million a year, plus equity, really worrying about hanging on to a couple of sub-$1,000 gadgets when they’re shown the door? (And while we’re at it, what’s the business case for giving the CEO an iPad, or is it just another perk?)

In any case, we wish Mathrani the best of luck, and his shareholders too.

Image source: GGP website

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