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Brookfield’s $14.8bn GGP bid could be syndicated to institutional investors

The alternatives investor proposed buying the remainder of the retailer’s shares in a privatization that could see further institutional buy-in.

Brookfield Property Partners (BPY) has made a $14.8 billion offer to take retail real estate investment trust GGP private.

BPY, Toronto-based Brookfield Asset Management’s publicly-listed real estate vehicle, owns about 34 percent of Chicago-based GGP’s stock from a 2013 investment. In an unsolicited proposal GGP received Saturday, BPP said it would buy the remaining portion of the REIT in a half-cash, half-equity deal. GGP owns 126 retail properties in 40 states, according to its website.

“The marriage between a Brookfield entity and GGP has long been anticipated – Brookfield has been likely waiting for the right time,” Newport Beach, California-based real estate research firm Green Street Advisors wrote in a Sunday note. “Perhaps the right time is now given the discounts to net asset values that have persisted for years and the big decline in mall share prices over the past year… A surprise in the BPY rumored bid is the absence of such institutional partners.”

A spokeswoman for BPY declined to comment. If the bid is accepted, capital would likely first come from BPY’s balance sheet and then be syndicated to institutional investors, PERE understands.

In the original 2013 deal, for example, Brookfield invested $2.5 billion for a 30 percent stake in GGP with the right to buy more stock in the years to come. The equity infusion was made through its Real Estate Turnaround Consortium, with investors including China’s sovereign wealth fund, the China Investment Corporation, and Australia’s Future Fund, PERE previously reported.

Despite negative headlines about the effects of e-commerce and other headwinds on retail, Brookfield executives have expressed optimism about the property type. On last week’s earnings call, BAM chief executive Bruce Flatt highlighted the company’s retail repositioning strategy, particularly in big cities and on the US coasts.

“There aren’t that many great malls available to be purchased but what’s there, we have been taking advantage of both in GGP and in our opportunity funds where we have other retail strategies,” Flatt said. “We’ve been buying retail centers which are really just forms of real estate being repurposed, and these take very long periods of time, but they can be extremely lucrative if you can repurpose apartments, multifamily, hotels, office buildings et cetera… But it takes a lot of skills, money, capital and vision to be able to do it so everyone isn’t capable of doing that.”

BAM oversees $269 billion in assets, including $152 billion in real estate, according to its website.