Simon Properties Makes Bid for Bankrupt Mall Owner General Growth
Shopping mall real estate investment trust (REIT) Simon Property Group (SPG) made a $10bn offer to acquire General Growth Properties (GGP) in a deal that would pull the rival mall REIT out of bankruptcy and would add more than 200 malls to Simon’s portfolio of 325 properties. Indianapolis-based Simon’s offer includes $7bn in cash or stock for 100% cash recovery of par value plus accrued interest and dividends to all of Chicago-based GGP’s unsecured creditors, the holders of its trust preferred securities, the lenders under its credit facility, the holders of its exchangeable senior notes and the holders of bonds issued when GGP acquired mall owner Rouse in 2004, Simon said. GGP shareholders would receive $6 cash per share as well as the equivalent of $3 per share for GGP’s ownership interests from its master plan community operations. Under the Simon deal, GGP shareholders would be offered cash of Simon stock and GGP’s existing secured debt on portfolio of assets would remain in place. Simon Property said it currently has the resources — cash on hand, equity co-investments from unnamed institutional investors and Simon's existing credit facilities — to execute the transaction and the deal has no financing contingency, but added the offer is not “open-ended.” "Simon's offer provides the best possible outcome for all General Growth stakeholders. Simon is in the unique position of being able to offer General Growth creditors and shareholders full, fair and immediate value,” Simon Property chairman and CEO David Simon said in a statement Tuesday. “Our offer provides much-needed certainty to conclude General Growth's protracted reorganization process. We are confident it is the best option for all General Growth constituencies and far superior to any other third-party proposal or stand-alone plan that could be completed,” Simon added. Simon said his firm decided to publicly announce the takeover offer after the company did not receive a “substantive response,” “nor any indication that you are prepared to enter into serious discussions so as to make our offer available to your shareholders and creditors” for more than one week, according to an open letter he sent to the GGP board of directors Tuesday. According to a Simon Property statement, the committee representing GGP’s creditors supports the offer and is encouraging GGP to enter negotiations. “Full cash payment to all unsecured creditors and the substantial recovery for equity holders that Simon has proposed would be a great result. We fully support and encourage prompt engagement by the company with Simon,” Michael Stamer, counsel for the Official Committee of General Growth's Unsecured Creditors, said in the statement. If the deal was consummated, it would make combine the country’s two largest mall owners. Simon, already the largest publicly traded real estate company in the US, would grow even larger and further expand its reach in the luxury shopping mall market. “This acquisition also offers a compelling value-creation opportunity for Simon shareholders. Simon's strong track record of successfully completing large acquisitions and our history of delivering superior property-level performance ideally position Simon to create additional value with General Growth's portfolio,” Simon said. But one hitch in Simon’s plans is Toronto-based Brookfield Properties (BPO). After GGP filed for Chapter 11 bankruptcy protection in April 2009, Brookfield, along with Simon, reportedly began purchasing GGP debt late last year and may be preparing a competing bid for GGP. As a debt holder, Brookfield will have a say in any takeover offer by Simon, along with a judge in the US Bankruptcy Court for the Southern District of New York, which is presiding over the GGP bankruptcy. GGP did not immediately respond to HousingWire's request for comment. Write to Austin Kilgore. The author held no relevant investments.