Simon Property Group has withdrawn its acquisition and recapitalisation proposals for bankrupt mall REIT General Growth Properties, alleging the firm “hastily” decided to proceed with a transaction that transfers roughly $500 million of value to a consortium of investors led by Brookfield Asset Management.
Simon increased its $5.8 billion takeover bid for GGP to $6.5 billion, or $20 per share, late Thursday night. However, after Brookfield’s recapitalisation plan was approved in bankruptcy court Friday afternoon, Simon – the largest US shopping centre REIT – dropped all its bids for GGP.
“GGP’s decision to move forward with the latest Brookfield-sponsored change of control recapitalisation, without giving due consideration to Simon’s proposals, is a truly unfortunate result for all GGP stakeholders,” said Simon chief executive officer David Simon in a statement. He added that the Brookfield-led bid approved today values GGP at least $5 less per share than Simon’s $20 per share offer, factoring in what he called the “highly expensive and dilutive warrants” to be issued to Brookfield.
According to the terms of the Brookfield-led offer, GGP will give Brookfield and its co-investors warrants to buy 120 million shares of GGP, worth an estimated $500 million. Simon argued its bid was less expensive, as it did not call for the issuance of any warrants.
“A 'free' financing proposal would be better than one that includes the cost of the warrants. But all things are not equal here,” GGP said in its filing to bankruptcy court Monday.
Brookfield’s $6.5 billion recapitalisation plan includes co-investments from William Ackman’s Pershing Square Capital and Fairholme Capital Management. Simon’s recapitalisation offer included co-investment capital from RREEF, ING Clarion’s real estate securities arms and hedge funds Oak Hill Advisors and Taconic Capital Advisors. Simon was also reportedly in talks with The Blackstone Group over possible co-investment.
Speaking during a first quarter earnings conference call Thursday, Brookfield chief executive officer Bruce 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.
GGP will become the primary mall acquisition platform for Brookfield Asset Management if its stalking horse bid for the bankrupt REIT is ultimately approved by the courts. Additional bids for GGP are due on or before 2 June, a source told PERE.