Brookfield Property to buy Simon Property rival for $9.25 billion

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Brookfield Property Partners LP has reached a deal to buy the rest of GGP Inc. it doesn’t own for $9.25 billion, gaining full control of the Chicago-based mall company amid tumult in the retail industry.

GGP, known as General Growth Properties until changing the name a year ago, is the second-largest U.S. shopping mall owner behind Indianapolis-based Simon Property Group.

GGP shareholders will receive either $23.50 a share in cash, one Brookfield unit or shares of a new real estate investment trust, the companies said Monday in a statement. The deal marks a raised bid from Brookfield’s November offer of $23 a share.

Brookfield, the real estate unit of Toronto-based Brookfield Asset Management Inc., is pouncing as shares of mall companies take a beating with e-commerce putting a squeeze on brick-and-mortar retailers. As store closures accelerate, landlords including Brookfield have been focusing on buying and revamping shopping centers to take advantage of the land they occupy in urban areas. GGP chief executive Sandeep Mathrani is among those looking for ways to repurpose struggling malls.

Mathrani said last May that GGP was exploring strategic alternatives, and that all options were on the table. In August, he changed course and said the REIT would instead look to diversify its holdings by adding hotels, apartments and other alternative uses to its properties. The company formed a special committee after Brookfield’s initial offer in November. Brookfield owned 34 percent of Chicago-based GGP as of the end of last year.

The new proposal was attractive because of the increased cash portion of the deal and the ability to receive shares in a newly listed REIT, Daniel Hurwitz, GGP’s lead director and chairman of the special committee, said in Monday’s statement.

The offer “provides GGP shareholders certainity of value, as well as upside potential through ownership in a globally diversified real estate company,” he said.

The $23.50-a-share cash portion of the deal marks a 24 percent premium over the stock’s closing price on Nov. 6, the day before Bloomberg reported talks between the companies. GGP shares closed Monday at $21.21.

It’s unlikely another bidder will step in with a higher price, said Alexander Goldfarb, managing director at Sandler O’Neill & Partners LP.

“Brookfield had no one to bid against,” he said in a phone interview. “They weren’t just going to bid against themselves. At the same time, they were just wearing the market out.”

Shares in Simon Property rose 1 percent Monday, to $153.32 each.

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