Brookfield Asset Management chief executive officer Bruce Flatt has defended his firm’s recapitalisation bid for bankrupt REIT General Growth Properties, calling the cost of warrants his firm would receive from bankrupt REIT General Growth “irrelevant” and “meaningless.”
Flatt refuted competitor Simon Property Group’s claim that the issuance of 120 million warrants in the Brookfield-led recapitalisation offer were grounds for rejection, insisting that the amount paid for the warrants “is irrelevant to the long term returns for shareholders.” The cost of the warrants, which Flatt estimated to be 2 percent to enterprise value, would be “meaningless” relative to the long term value of GGP, which he called a $30 billion company.
Speaking during a first quarter earnings conference call, he went even further in criticising Simon Property Group, saying the REIT’s alternative plan is “frankly, in one word, kind of absurd.” Flatt told analysts on the call GGP would emerge from bankruptcy with “strong cash flows” and “a good balance sheet” should it accept Brookfield’s offer. He also noted that seldom have shopping mall companies sold at cap rates above 6.5 percent.
GGP will reportedly decide Thursday whether to postpone a key hearing scheduled for Friday in light of the offers the company has received, according to a report by Reuters.
Simon has been actively trying to win over the bankrupt mall REIT since first offering $10 billion to take over GGP entirely in February. That initial offer was rejected by GGP and last month, Simon offered the same recapitalisation terms as the Brookfield-led plan but without the warrants.
This week, Simon also offered to pay $3.25 per share in cash and $10 per share in stock for core General Growth, according to Reuters. General Growth has asked Simon to come up with a better price for a deal, and the two companies have also been preparing merger documents in the event that they do reach an agreement, according to the report.