RREEF and ING Clarion have bolstered Simon Property Group’s revised recapitalisation plan for bankrupt REIT General Growth Properties. The two firms have joined forces with Simon and hedge funds Oak Hill Advisors and Taconic Capital Advisors in offering an additional $1.1 billion of capital to help bring GGP out of bankruptcy.
The additional cash comes on top of Simon’s previously announced $2.5 billion proposed investment and $1 billion co-investment from hedge fund Paulson & Co., made on 14 April. Simon’s chairman and chief executive officer David Simon said in a statement that the firm is “continuing to have productive discussions with additional parties interested in co-investing in GGP”.
The bid is intended to rival a $6.5 billion recapitalisation plan from Brookfield Asset Management, Pershing Square Capital and Fairholme Capital Management. Brookfield has offered to invest $2.63 billion of capital from its $5.5 billion pledge fund, the Real Estate Turnaround Consortium. In announcing its revised offer though, Simon has also filed an objection to GGP’s motion to enter into agreements with Brookfield, Pershing and Fairholme.
In addition to the new commitments announced by SPG, the firm is underscoring that their “superior” plan for GGP’s recapitalisation does not include any of the “dilutive warrants” required by Brookfield, which SPG submits could cost GGP’s shareholders $895 million. General Growth values the warrants, which would allow Brookfield to purchase 120 million shares of GGP stock at $15 per share, at $519 million.
Simon has also outlined additional “improvements” to the terms of its previous offer, such as backstopping an additional $1.5 billion to strengthen GGP’s balance sheet and waiving a $12.5 million fee that would be paid to Brookfield, Pershing and Fairholme. It has also proposed to name two directors to GGP’s board, rather than the three in Brookfield’s plan. Simon’s selections are former Ernst & Young partner Dale Anne Reiss and professor of real estate finance and public policy from the University of Pennsylvania’s Wharton School, Peter Linneman.
A hearing on Brookfield’s original offer is scheduled for 29 April. Spokespersons from Simon, RREEF and ING Clarion were not immediately available for comment.