The Teachers Retirement System of Texas will invest $500 million in a reorganised General Growth Properties as the mall REIT eyes exiting bankruptcy in October.
TRS, which has increasingly looked to make direct and co-investment real estate deals over the past 18 months, will pay $10.25 for shares in the GGP that emerges out of Chapter 11.
The deal has to be approved by bankruptcy court but will not give TRS a stake in the spun-out of GGP, which will include the REIT’s non-core assets, including buildings, land and redevelopment opportunities with little or no current income, and be known as General Growth Opportunities.
[This is a] unique opportunity to obtain a significant position in a large and diversified portfolio of high-quality assets with a solid capital structure. Steve LeBlanc, Texas TRS senior managing director, private markets
That reorganisation, which is set to go to bankruptcy court for final approval on 19 August, sees the Brookfield-led consortium investing $6.3 billion of equity capital into the new GGP and providing $250 million backstop equity commitment for GGO. The trio will also give GGP a $1.5 billion debt commitment and a $500 million backstop equity commitment.
GGP said in another statement this week that the equity infusions offered by the Brookfield-led consortium and Texas TRS could be replaced “with the proceeds of equity issuances at more advantageous pricing”, with GGP expected to “raise equity capital prior to or shortly after emergence from Chapter 11”.
Steve LeBlanc, Texas TRS senior managing director, private markets, said the investment was “significant” but added it provided the $96.7 billion pension with a “unique opportunity to obtain a significant position in a large and diversified portfolio of high-quality assets with a solid capital structure”.
[This is a] unique opportunity to obtain a significant position in a large and diversified portfolio of high-quality assets with a solid capital structure.
Steve LeBlanc, Texas TRS senior managing director, private markets
GGP chief executive officer Adam Metz said the REIT already had sufficient capital to emerge from bankruptcy with the Brookfield-led recapitalisation plan, but that the TRS investment “expands and diversifies our ownership base on attractive terms and preserves our ability to continue to seek more favourable equity investments”
GGP has restructured roughly $15 billion of its secured mortgage debt, reorganising a majority of its operating entities and obtaining confirmed plans for 262 properties and assets, court documents show.
In April last year, Texas TRS’ managing director of real assets Eric Lang told PERE the pension was actively increasing its exposure to real estate, with plans to invest billions of dollars in the asset class. The majority of the capital though would be invested more directly, through direct, co-investment and separately managed accounts, as opposed to commingled funds, Lang added. He said the pension would also target “distressed stable core real estate for our core portfolio where we’re under allocated”.
In September, LaSalle Investment Management won a separate account mandate from Texas TRS to invest $205 million into real estate, initially in the US and eventually on a global basis. The fund will co-invest in opportunities sourced by LaSalle and from existing partners of TRS.