Commercial Real Estate and Simon Property Group and Real Estate Investment Trust and Real estate deals and Real Estate & Retail

Simon exploring bid to purchase rival General Growth

November 18, 2009

Simon Property Group Inc. has hired a financial adviser and a law firm to help it explore making a bid for some or all of the assets of bankrupt rival General Growth Properties Inc.

Les Morris, spokesman for the Indianapolis-based mall owner, confirmed to Bloomberg News on Tuesday the decision to hire Lazard Ltd. and Wachtell, Lipton Rosen & Katz, both based in New York.

Morris declined to elaborate to Bloomberg on Simon’s plans, and he could not be reached for comment by IBJ Wednesday morning.

General Growth is the second-largest U.S. mall owner, trailing only Simon, with more than 200 regional malls in 44 states. Indianapolis-based Simon owns or has stakes in 387 properties worldwide and seems poised to grow its portfolio.

Simon this year conserved cash by paying most of its dividend in stock. At the same time, it’s used its clout to launch a capital-raising spree, rolling out stock and debt offerings at a time many real estate companies are begging for money.

The result: Simon now has $6 billion in “dry powder” it can use for acquisitions, according to a report by J.P. Morgan.

Simon executives have said malls owned by Chicago-based General Growth, which filed for bankruptcy protection in April, would be a good fit, according to Bloomberg.

“We’re a logical buyer,” Chairman and CEO David Simon said in a Sept. 15 interview on Bloomberg Television. “There’s a lot we could do with those properties.”

General Growth’s prized properties include Water Tower Place and Fashion Show, both in Chicago. The company filed for bankruptcy protection after failing to refinance debt accumulated to pay for acquisitions.

General Growth listed $29.5 billion in assets and about $27.3 billion of debts in its Chapter 11 filing.

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