Brookfield Asset Management is reportedly in talks with embattled mall REIT General Growth Properties to take a 30 percent stake in the company and help it emerge from bankruptcy as a stand-alone entity.
The Toronto-based real estate investment firm and fund manager already owns almost $1 billion in GGP debt, according to people cited by Bloomberg. In a letter to shareholders on 19 February, Brookfield said it had acquired a “substantial amount of defaulted bank debt issued by General Growth Properties at a discount to par value”. That debt, the firm added, was currently trading at par value.
GGP is hoping to emerge from bankruptcy as a standalone entity rather than be taken over by a third-party. Rival shopping centre REIT Simon Property Group made an unsolicited $10 billion bid for GGP, which has already gained the backing of General Growth’s unsecured creditors. The bid involves $9 billion in cash, which Simon is funding from operations, credit facilities and co-investment capital.
Simon is reportedly in early stage talks with The Blackstone Group over the offer, according to Reuters. GGP has though rejected the offer saying the bid was “not sufficient to preempt the process we are undertaking to explore all avenues to emerge from Chapter 11 [bankruptcy protection] and maximise value for all [GGP] stakeholders”.
Brookfield last year closed its $5.5 billion real estate turnaround consortium, raising capital from a number of large name investors, reportedly including China’s CIC and Australia’s Future Fund.
In the 19 February investor letter, Brookfield added it had raised a total of $14 billion of third-party capital from public and private markets in 2009, which would allow the firm to “continue to acquire assets in the recovery phase of this market cycle while competitive bidding is still relatively restrained”.
“Simply stated, we believe that acquiring assets through distress situations offers one of the few ways to
acquire assets at meaningful discounts to their intrinsic value,” the letter said.