General Growth backs new Brookfield plan over Simon offer, source says

Back to TopCommentsE-mailPrintBookmark and Share

General Growth Properties Inc. plans to back a revised bankruptcy exit plan proposed by Brookfield Asset Management Inc. over a competing offer by Simon Property Group Inc., said a person with knowledge of the decision.

Brookfield and its partners, Fairholme Capital Management LLC and Pershing Square Capital Management LP, proposed changing their bid to receive fewer stock warrants once the deal is approved by the bankruptcy court, said the person, who asked not to be named because the talks are private. That would make it less expensive for another bidder such as Simon to make a new offer for the company.

Brookfield and Simon, the largest U.S. shopping mall owner, have been competing since February, after General Growth turned down a $10 billion takeover offer from Simon. It instead backed an investment plan led by Brookfield that would keep the company independent. Simon last month countered with a proposal that matches Brookfield’s terms while omitting a provision that would require General Growth to issue stock warrants.

A bankruptcy court hearing on General Growth’s auction process is scheduled for May 5. The hearing was pushed back from last week while Chicago-based General Growth, the No. 2 U.S. mall owner, considered the competing proposals.

Under the revised plan, Brookfield and its partners would get 40 percent of the 120 million warrants they’re seeking once their proposal receives court approval. They would receive 20 percent more after 60 days, and the remainder over the course of a year, vesting daily, according to the person. Staggering the warrants would reduce the extra price Simon would have to pay should it make another offer for the company.

David Keating, a General Growth spokesman, said he had no immediate comment. Les Morris, a spokesman for Indianapolis-based Simon, also said he had no comment. Katherine Vyse, a spokeswoman for Brookfield in Toronto, didn’t immediately return a telephone call seeking comment.

Simon estimates the 120 million warrants could cost General Growth shareholders $895 million, while General Growth has put their value at about $519 million. Simon CEO David Simon said last week that the warrants would make General Growth “too expensive” to purchase.

“To the extent that the Brookfield plan gets done, and the warrants get implemented, we will not participate in the auction that the company is going to ultimately run in bankruptcy,” Simon said in an April 27 interview.

Under the revised plan, Brookfield and Pershing Square also are committing to a $500 million increase in their equity investment, should it be needed, said the person familiar with the plan. The Brookfield-led group also would provide a $1.5 billion debt commitment if it’s needed, the person said.

Brookfield and its partners also have their warrants replaced, once the deal is completed, with ones to buy shares of a newly formed General Growth Properties at $10.50 each, the person said. Under the previous plan, the price was $10 each.

General Growth filed the largest real estate bankruptcy in U.S. history in April 2009 after amassing $27 billion in debt making acquisitions. Its properties include New York’s South Street Seaport, Boston’s Faneuil Hall and the Grand Canal Shoppes and Fashion Show in Las Vegas.


Post a comment to this story

We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
You are legally responsible for what you post and your anonymity is not guaranteed.
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
Subscribe to IBJ
  1. With Pence running the ship good luck with a new government building on the site. He does everything on the cheap except unnecessary roads line a new beltway( like we need that). Things like state of the art office buildings and light rail will never be seen as an asset to these types. They don't get that these are the things that help a city prosper.

  2. Does the $100,000,000,000 include salaries for members of Congress?

  3. "But that doesn't change how the piece plays to most of the people who will see it." If it stands out so little during the day as you seem to suggest maybe most of the people who actually see it will be those present when it is dark enough to experience its full effects.

  4. That's the mentality of most retail marketers. In this case Leo was asked to build the brand. HHG then had a bad sales quarter and rather than stay the course, now want to go back to the schlock that Zimmerman provides (at a considerable cut in price.) And while HHG salesmen are, by far, the pushiest salesmen I have ever experienced, I believe they are NOT paid on commission. But that doesn't mean they aren't trained to be aggressive.

  5. The reason HHG's sales team hits you from the moment you walk through the door is the same reason car salesmen do the same thing: Commission. HHG's folks are paid by commission they and need to hit sales targets or get cut, while BB does not. The sales figures are aggressive, so turnover rate is high. Electronics are the largest commission earners along with non-needed warranties, service plans etc, known in the industry as 'cheese'. The wholesale base price is listed on the cryptic price tag in the string of numbers near the bar code. Know how to decipher it and you get things at cost, with little to no commission to the sales persons. Whether or not this is fair, is more of a moral question than a financial one.