Brookfield property to buy rest of US mall owner GGP

[NEW YORK] Brookfield Property Partners LP reached a deal to buy the rest of GGP Inc it doesn't own, gaining full control of the second-largest US mall owner amid tumult in the retail industry.

GGP shareholders will receive US$23.50 a share in cash, or either one Brookfield unit or one share of a new real estate investment trust for each share they own, the companies said Monday in a statement. The deal, increased from a November proposal, is valued at almost US$15 billion, according to data compiled by Bloomberg.

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 Officer Sandeep Mathrani is among those looking for ways to repurpose struggling malls.

Mr 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 per cent of Chicago-based GGP as of the end of last year.

The deal consists of US$9.25 billion in cash and about 254 million shares in Brookfield Property and the new REIT, for a 61 per cent cash consideration and 39 per cent in equity.

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 certainty of value, as well as upside potential through ownership in a globally diversified real estate company," he said.

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

BLOOMBERG