General Growth's bankruptcy plan makes room for Simon

Back to TopCommentsE-mailPrintBookmark and Share

General Growth Properties Inc.’s proposal to exit bankruptcy with funding from Brookfield Asset Management Inc. has a clause that will give the company until the end of the year to complete a takeover deal with another party, according to two people with knowledge of the plan.

The proposal, filed with the bankruptcy court Wednesday, will compel Brookfield to stay as a backup investor until General Growth accepts and completes any superior offer it may receive, said the people, who asked not to be identified because the plan isn’t yet public. The Brookfield plan, which also includes Fairholme Capital Management LLC and Pershing Square Capital Management LP, would keep the mall owner independent.

The provision would give General Growth time to explore a takeover bid from Simon Property Group Inc., whose $10 billion offer was turned down by its rival in February. Simon, the largest U.S. mall owner, is preparing a new bid, according to a person with knowledge of that plan. Brookfield’s proposal is subject to approval by U.S. Bankruptcy Judge Allan Gropper, who gave General Growth an Aug. 26 deadline to control its case.

The provision likely “was specifically designed to take care of the antitrust concerns” from a Simon takeover, said Jim Sullivan, an analyst with Green Street Advisors in Newport Beach, Calif. A probe by regulators into a combination could “defer a closing or prevent a closing,” he said. “General Growth and its board want certainty.”

The proposal by Brookfield, Fairholme and Pershing Square calls for a combined $6.55 billion investment to bring Chicago-based General Growth out of bankruptcy. The mall owner said last month that it would seek court approval for the group to be a “stalking horse,” or the first bidder that puts an initial value on the company. That status wouldn’t have required Brookfield to remain a back-up investor should General Growth accept another offer that fails to go through.

Denis Couture, a Brookfield spokesman, declined to comment. David Keating, a spokesman for General Growth, said he had no immediate comment. Les Morris, a spokesman for Simon Property, declined to comment.

Brookfield’s offer would limit the Toronto-based company to selecting three General Growth board members, one of the people familiar with the proposal said. Pershing Square would select one, and the remaining five would be independent of the investors. A majority of the other shareholders would have to approve any future Brookfield offer to buy General Growth, the person said.

“Governance concerns here are significant, and I think they’ve taken a significant step toward alleviating some of those concerns,” said Sullivan of Green Street Advisors.

Simon may submit a new takeover bid to try to stop Brookfield and its partners from being given stalking-horse status and granted warrants to purchase 120 million General Growth shares at $15 each, Sullivan said.

Bruce Berkowitz’s Miami-based Fairholme and William Ackman’s Pershing Square of New York earlier this month offered to jointly invest $3.93 billion in General Growth in addition to $2.63 billion pledged earlier by Brookfield.

Pershing Square is General Growth’s biggest equity investor, with a 25-percent economic interest, including 7.5 percent of its shares. Fairholme is the largest creditor, with about $1.83 billion of General Growth’s unsecured debt, Berkowitz and Ackman said in a letter filed March 9 with the U.S. Securities & Exchange Commission. Pershing Square also owns about $434 million of unsecured debt, according to the letter.

The Brookfield group’s plan would give equity holders about $15 a share and pay unsecured creditors fully in cash. Simon’s bid called for stock investors to receive about $9 a share and also paid unsecured creditors in full.

General Growth shares have climbed past Brookfield’s offer, indicating investors expect a higher bid. They fell 13 cents, to $16.09 each, Wednesday afternoon.

Current General Growth investors would own at least 34 percent of the company that emerges from bankruptcy and 87 percent of a new entity, General Growth Opportunities, under the plan by Brookfield and its partners, said the person familiar with the proposal. Stockholders would get one new General Growth share with an initial value of $10, plus one share of the new company, with an initial value of $5, for each share they own.

General Growth would be able to cut the $3.93 billion investment by Fairholme and Pershing Square by $1.9 billion should it be able to sell shares at better terms, the person said. Of any money General Growth is able to raise at better terms, 80 percent of the additional capital could be used for liabilities assumed by General Growth Opportunities, including about $300 million in tax liabilities associated with master- planned communities.

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

Simon CEO David Simon has dismissed concerns that U.S. regulators might block a purchase of General Growth, the owner or manager of more than 200 malls in 43 U.S. states. Indianapolis-based Simon Property isn’t at risk of having too large a share or a monopoly in any market, he said in a Feb. 5 conference call with analysts and investors.

“We certainly would argue strenuously that neither of those occur with or without GGP or anybody else,” he said. “There’s a lot of retail real estate out there.”


  • US owner?
    It is nice when US real estate is owned by a US company. Would prefer Indpls based Simon as owner rather than Canadian investment group.

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. Good Day I am Mr (Victoria Wright) from United state of America, i stayed in NEW YORK, and i have a broke up business, until i found this company email who help me to gain a loan for business,, and now i want to used this short medium to congratulate the below company for the fast and safe money they loan to me without any form of collateral, i loan 500,000USD from the company to save my business and lots more, i saw their mail on the internet, everyone always give testimony for what they did, so i quickly contacted them and they all did everything for me without stress and my money was sent to my account just 3 days later, i was surprise and i feel so glad, now i have a standard business control agent who help me, now i will advice those who need urgent loan to contact him at the bellow email:zenithfirm12@gmail.com

  2. NOTICE:This is to inform the general public that Vampires are real. My name is James Franklyn.,am an agent of vampire,am here to introduce our new world trend to you,a world of vampire where life get easier,we have made so many persons vampires and have turned them rich,you will be assured long life and prosperity,you shall be made to be very sensitive to mental alertness,stronger and also very fast,you will not be restricted to walking at night only even at the very middle of broad day light you will be made to walk.In case you are wildly oppressed by some unscrupulous persons we can still help you fight them.Your protection is assured immediately you join.Just contact the bellow email if you are interested we are here to attend to you anytime you want us. Contact the bellow email for more details. Email:vampirescreed@hotmail.com Sincerely: James Franklyn.

  3. Bravo! Someone else that is willing to speak the truth! Bravo!_____NBCSN is available in almost 2 MILLION more homes than just a few years ago, but Indycar STILL gets less total viewers than it did just a few years ago when NBC took over Versus. Attendance and ratings cratered with the end of season races (just when the title battle got "interesting" HAH!__________And now...new race in Basilia, where Miles celebrated the "rich history" of Indycar racing there. Rich history? What, 7 events in the 100 years of AOW? Yep, some history. Well, at least its an oval. It's not??? Are you kidding me??? Gosh darn road racin furriners.

  4. PURITY RAY LOAN OFFER........ Have you been denied by your banks,or are you in need of of an urgent loan to pay of your bills we are capable of giving loans @ cheaper rate to interested individuals, student, companies and members of the public in need of finance to settle bills, we do offer considerable loans which you can count on. For more information on our various types of loan,then you will have to contact PURITY RAY LOAN FIRM, to help you achieve your desire LOAN APPLICATION FORM TO BE FILLED BORROWERS INFORMATION * Full name:………………………. * SEX * ……………………………. * Country………………………….. * State:……………………………. * Land:…………………………….. * Occupation:…………………….. * phone number:…………………. * Telephone: ………………………….. * Age:………………………………. * Amount needed as loan:……… * Loan Duration:………………….. * Propose of Loan:……………….. * Annual revenue:………………… * Monthly Income:……………….. * Guarantee:………………………. * Payment: monthly or annually Email.....purityrayloanfirm@gmail.com Thank you and God bless Mr Purity Ray PURITY RAY LOAN FIRM we tend to serve you better

  5. Problem: most of the people responding to this article don't know about this service AT ALL! Why? Lack of awareness. This isn't IndyGo. This is CIRTA: might as well be the mattress company because they are asleep at the wheel - something like 3 directors over the last year? Playing with federal grant money is great! This "region" wants commuter rail service, has spent MILLIONS on Transportation studies yet can't even support a commuter bus line? This is largely for suburban riders to get to downtown - not for "service people to work in our hotels and restaurants" ! Get your head out of your backside!! These are professionals, students etc. that don't want to fight traffic, save some money on parking, gas, stress.... if CIRTA would put their federal money into widely promoting the sevive to Greenwood, Fishers & Carmel instead of finding directors and studies - this would be a successful service. Our family uses(d) it daily for the last several years - but the recent uncertainty & now unreliability due to cuts from Carmel has been a problem. Now, costs us an additional $350/month for gas & parking ( $4200/year) plus vehicle wear, service, environmental impact ... YES - this REGION needs this this type of service in order to keep growing and getting the people it needs to fill skilled positions in downtown Indianapolis. Think outside of your own car !!!