Last week, Simon Properties Group Inc. ("Simon") made an unsolicited $10 billion bid to acquire General Growth Properties Inc. ("GGP") which equates to $9 per share. As reported in the Wall Street Journal's article "General Growth Plans Split-Up," it seems that Canadian real estate firm Brookfield Asset Management ("Brookfield") has made a bid for GGP. Brookfield's bid values GGP at $15 per share.
GGP plans to split itself into two entities upon emerging from bankruptcy by using financing provided by Brookfield. The plan was outlined as follows:
GGP Larger Entity
- The larger entity will (i) retain the General Growth Properties name and (ii) hold approximately 180 of GGP's 200 malls ("General Growth Properties")
- Brookfield has pledged to purchase 30% of General Growth Properties for $10 per share or roughly $2.5 billion
- General Growth Properties will remain encumbered with roughly $19 billion of mortgages
GGP Smaller Entity
- The smaller entity will (i) have the name General Growth Opportunities and (ii) hold GGP's less-valuable malls including 13 malls it intended to forfeit to lenders and the South Street Seaport mall in New York ("GGO")
- Brookfield will receive 7% of GGO after pledging $125 million or half of the $250 million that GGO plans to raise by selling shares at $5 a piece
- GGO will remain encumbered with roughly $1.2 billion of mortgages
Brookfield's bid values GGP's equity at $4.5 billion in comparison to the $3 billion offered by Simon. The challenge for GGP will be to raise $7 billion to repay its unsecured creditors. GGP has outlined the following plans to raise the necessary funds:
- $2.6 billion - from Brookfield
- $2.8 billion - from the sale of new stock in General Growth Properties
- $1.5 billion - from the issuance of new debt
- $1.0 billion - from the sale of stakes in some of its malls
The bidding is far from over. The Australian mall owner Westfield Group is deciding whether to enter the fray. They have signed GGP's nondisclosure agreement and may decide to bid. Brookfield and GGP announced their plan one week before GGP is to go before U.S. Bankruptcy Judge Allan Gropper, who will decide whether GGP's exclusive right to propose a reorganization plan should be extended by as much as six months. If GGP maintains this exclusive right its unsecured creditors will not get to voice their preference for a reorganization plan.
The Law Offices of Matthew L. Holden, LLC is a New Jersey real estate and general practice law firm representing clients throughout New York and New Jersey. Founded by Matthew L. Holden, The Law Offices of Matthew L. Holden, LLC is located in Hackensack, New Jersey.
