Brookfield Property makes $14B bid for mall owner GGP

Brookfield Property Partners L.P. (BPY.UN-T) announced Monday morning it is bidding to purchase all remaining shares of Chicago-based shopping mall owner GGP (GGP-N).

Brookfield and GGP logos.Brookfield currently owns about 34 per cent of the company. The acquisition, if completed, will take GGP private.

Brookfield is offering $23 per share, about a 21% premium on GGP’s closing price on Nov. 6, or 0.9656 of a limited partnership unit of BPY for each share.

GGP’s share prices immediately jumped on news of the offer, trading above $24 by mid-afternoon. They had declined 11 per cent during 2017 after peaking at about $26 early in January. The stock hadn’t traded above $22 since early August and had tumbled as low as 19.01 in recent days.

Brookfield Property was off more than four per cent at about $22.59 Monday afternoon.

GGP owns and operates more than 120 properties in the U.S., virtually all retail although it does own a few office buildings. They comprise about 125 million square feet.

“Brookfield’s access to large-scale capital and deep operating expertise across multiple real estate sectors combined with GGP’s high-quality retail asset base will allow us to maximize the value of these irreplaceable assets,” said Brian Kingston, Brookfield Property Partners CEO in a release announcing the bid.

“We are excited about the opportunity to leverage our expertise to grow, transform or reposition GGP’s shopping centres, creating long-term value in a way that would not otherwise be possible.

“This transaction will provide GGP shareholders the option to immediately realize value for their shares at a 21 per cent premium in cash and the opportunity to continue to participate in the growth of a leading, globally diversified real estate company that will be able to grow faster and create more value than either could on a stand-alone basis.”

Brookfield Property to hold almost $100B in assets

Brookfield Property Partners is the listed real estate company of Toronto-based Brookfield Asset Management (BAM.A-T), a leading global alternative asset manager with more than $265 billion in assets under management. 

The transaction will create, in BPY, one of the largest listed property companies in the world, with an ownership interest in almost $100 billion of premier real estate assets globally and annual net operating income of approximately $5 billion.

Brookfield Property currently holds approximately $68 billion in total assets, including 146 office properties and 126 retail malls around the world. It is a leading owner, operator and investor in commercial real estate, with a diversified portfolio which also contains interests in multi-family, triple net lease, industrial, hospitality, self-storage, student housing and manufactured housing assets.

Despite well-documented struggles in some sectors of retail, Kingston was upbeat about the asset class during his Q3 conference call last week.

“While many retailers continue to face significant challenges in growing their businesses, those retailers that are focused on the intersection between bricks and mortar retail and online sales channels continue to expand and grow,” Kingston told analysts and investors (the full transcript is available here).

“And this growth is evident from the nearly 10 million square feet of leasing we’ve completed so far in 2017, which is up from 9.5 million square feet for the entire 2016.

“In our opportunistic investing strategy, we have continued to put capital to work this quarter through new acquisitions.”

The move was not a major surprise, with reports surfacing last week by Bloomberg News that Brookfield was poised to make an offer. Brookfield also announced in its Q3 report it had exercised all its outstanding options during the quarter, purchasing 68 million GGP shares for US$462 million. That brought its ownership stake to 34 per cent.

Brookfield previously owned 29 per cent after investing in GGP in 2010 as part of a deal to rescue the company from bankruptcy protection.

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