IBJNews

Simon buying General Growth debt for possible takeover

Back to TopCommentsE-mailPrintBookmark and Share

Simon Property Group Inc. has been buying the unsecured debt of bankrupt rival General Growth Properties Inc. in preparation for a bid on the entire company, The Wall Street Journal reported Friday morning.

The newspaper, citing unnamed sources, said the Indianapolis-based shopping mall owner is facing competition for General Growth from Toronto-based Brookfield Asset Management Inc., which also has been buying up General Growth's debt.

Simon, the largest U.S. mall operator, hired a financial adviser and a law firm in mid-November to help it explore making a bid for some or all of the assets of General Growth, which filed for bankruptcy protection in April. General Growth is the second-largest U.S. mall operator, with more than 200 properties.

Many of General Growth's properties are well-positioned and healthy, but the firm had to file for Chapter 11 after it failed to refinance some of $27 billion in debt as it came due. The company already has renegotiated mortgages on more than 90 of its properties.

But General Growth's reorganization plan comes at one of the most challenging times in commercial real estate history. And while General Growth has been mired in bankruptcy, its rivals took advantage of thawing equity and debt markets to raise cash. REITs raised about $20 billion this year, after the capital markets virtually shut down in 2008.

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.

Now players like Simon hope to use the opportunity to pick up General Growth and shopping mall gems like Faneuil Hall in Boston and Fashion Show in Las Vegas on the cheap.

It wasn't clear how much of General Growth's debt Simon has purchased, the Journal reported. But Brookfield, which in 2007 bid on Mills Corp. before the chain went to Simon and a partner, has bought close to $1 billion of unsecured debt.

Simon executives have said malls owned by 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.”

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
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
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. to mention the rest of Molly's experience- she served as Communications Director for the Indianapolis Department of Public Works and also did communications for the state. She's incredibly qualified for this role and has a real love for Indianapolis and Indiana. Best of luck to her!

  2. Shall we not demand the same scrutiny for law schools, med schools, heaven forbid, business schools, etc.? How many law school grads are servers? How many business start ups fail and how many business grads get low paying jobs because there are so few high paying positions available? Why does our legislature continue to demean public schools and give taxpayer dollars to charters and private schools, ($171 million last year), rather than investing in our community schools? We are on a course of disaster regarding our public school attitudes unless we change our thinking in a short time.

  3. I agree with the other reader's comment about the chunky tomato soup. I found myself wanting a breadstick to dip into it. It tasted more like a marinara sauce; I couldn't eat it as a soup. In general, I liked the place... but doubt that I'll frequent it once the novelty wears off.

  4. The Indiana toll road used to have some of the cleanest bathrooms you could find on the road. After the lease they went downhill quickly. While not the grossest you'll see, they hover a bit below average. Am not sure if this is indicative of the entire deal or merely a portion of it. But the goals of anyone taking over the lease will always be at odds. The fewer repairs they make, the more money they earn since they have a virtual monopoly on travel from Cleveland to Chicago. So they only comply to satisfy the rules. It's hard to hand public works over to private enterprise. The incentives are misaligned. In true competition, you'd have multiple roads, each build by different companies motivated to make theirs more attractive. Working to attract customers is very different than working to maximize profit on people who have no choice but to choose your road. Of course, we all know two roads would be even more ridiculous.

  5. The State is in a perfect position. The consortium overpaid for leasing the toll road. Good for the State. The money they paid is being used across the State to upgrade roads and bridges and employ people at at time most of the country is scrambling to fund basic repairs. Good for the State. Indiana taxpayers are no longer subsidizing the toll roads to the tune of millions a year as we had for the last 20 years because the legislature did not have the guts to raise tolls. Good for the State. If the consortium fails, they either find another operator, acceptable to the State, to buy them out or the road gets turned back over to the State and we keep the Billions. Good for the State. Pat Bauer is no longer the Majority or Minority Leader of the House. Good for the State. Anyway you look at this, the State received billions of dollars for an assett the taxpayers were subsidizing, the State does not have to pay to maintain the road for 70 years. I am having trouble seeing the downside.

ADVERTISEMENT