The Real Deal Chicago

As analysts scoff, GGP shareholders approve $15B Brookfield buyout

Shopping mall giant accepted improved cash and stock offer
By Alex Nitkin | July 26, 2018 01:00PM

Brookfield Chairman Ric Clark and GGP mall

Shareholders of the Chicago-based shopping mall giant General Growth Properties voted Thursday to accept a buyout offer from Brookfield Property Partners, sealing one of the largest real estate deals in recent memory over a chorus of analysts who say the deal lowballs GGP’s value.

The real estate arm of Toronto-based Brookfield Asset Management had already owned a roughly 34 percent stake in GGP before November, when Brookfield made a $14.8 billion bid to buy out the mall developer. That deal, which offered $23 per share, was rejected.

Brookfield returned in March with an offer to pay up to $9.5 billion in cash, at $23.50 per share, and the remainder in equity. As part of the deal, Brookfield announced it would creating a new real estate investment trust, dubbed BPY U.S. REIT. GGP shareholders would be able to buy shares in the new REIT, which could in turn be exchanged for units in Brookfield Property Partners, as an alternative to cash.

The deal was panned by some observers like BTIG analyst Jim Sullivan, who on Thursday called Brookfield’s final offer “very inadequate relative to the underlying value of the real estate.”

“The view of most analysts on the street is that this transaction does not represent fair value of GGP’s holdings,” Sullivan told The Real Deal.

BTIG published a report late last year that estimated the value of GGP’s assets between $28 and $33 per share. Sullivan added the deal stands in dramatic contrast to Unibail-Rodamco’s $15.7 billion takeover in December of Westfield, the last comparably-sized real estate merger, which analysts said represented a fair price for the shopping mall giant’s assets.

(It should be noted that REITs have generally been trading below net asset value, with some mall REITs trading as much as 30 percent below NAV.)

Thursday’s merger gives Brookfield an interest in roughly $100 billion worth of real estate assets around the world and a net operating income of about $5 billion, according to an estimate published by the investment firm in March.

A May report from GGP said CEO Sandeep Mathrani stood to walk away from the deal with a golden parachute worth $189 million.