Brookfield Property Partners and the special committee of the board of directors of GGP on Tuesday said they had entered into a definitive agreement for Brookfield to acquire all of the outstanding stock of GGP than it doesn’t already own – around 66 percent.

The cash-and-stock deal is valued at $9.25 billion and entitles GGP shareholders to elect to receive for each GGP common share, either $23.50 in cash or one unit of Brookfield Property Group stock or one share of a new REIT that will be established once the deal closes. 

Brookfield in November made an initial overture to acquire GGP’s outstanding shares, offering $23 a share or $7.4 billion. Brookfield was rebuffed, but the talks with GGP talks continued, and Brookfield ultimately sweetened the deal.

With an ownership interest in about $90 billion in total assets and annual net operating income of more than $4 billion, the combined company will be one of the world’s largest commercial real estate enterprises.

As a result of the deal, GGP shareholders who receive equity consideration will be entitled to receive the same amount as Brookfield Property Group’s current distribution on existing units, or shares of a new Brookfield U.S. REIT, which is over 40 percent higher than GGP’s dividend. Brookfield Property Group’s annual distribution of $1.26 per unit compares with GGP dividend of 88 cents a share.

Daniel Hurwitz, lead director and chairman of the GGP special committee, said, “Brookfield’s improved proposal, which includes an increase in the cash portion of the consideration and the ability to receive shares in a newly listed REIT, provides GGP shareholders with certainty of value, as well as upside potential through ownership in a globally diversified real estate company.”

Brookfield took its initial stake in GGP in 2009 as part of an agreement to bring the REIT out of bankruptcy in 2010. Chicago-based GGP has had difficulty adapting to the new retail realities, where e-commerce continues to gain traction and driving foot traffic to shopping centers is challenging.

On GGP’s Q1 conference call last May, chief executive officer Sandeep Mathrani revealed that the company was exploring strategic options. “All options are on the table,” he said. “The breakup value [of GGP] is far in excess of where we trade today. We’re evaluating all alternatives. We’ll pick a path in the near term. We’re looking at assets on both ends of the quality spectrum. There is no sacred cow. We could sell assets and dividend cash. We could sell assets and buy back our shares. We’ll get value to our shareholders. The breakup value is more than the current market capitalization.”

GGP reduced its exposure to apparel tenants, which accounted for half the in-line space and had decreased by 1.8 percent, and wasn’t prepared for all the department store closures.

Brookfield, which now has about $68 billion in total assets, including retail, industrial, office and hospitality, is a diversified global real estate company. It’s well-versed in densifying shopping centers by building single or multi-family units and even student housing. Brookfield Place is the company’s jewel in lower Manhattan. Brookfield is listed on the New York and Toronto stock exchanges.

In addition to key addresses on New York’s Fifth Avenue and 57th Street, as well as Chicago’s North Michigan Avenue, GGP, which is based in Chicago, owns, manages, leases and redevelops shopping center properties in the U.S. such as Fashion Show in Las Vegas; Oakbrook Center, Oak Brook, Ill.; the Shops at Merrick Parkin Coral Gables, Fla., and Tysons Galleria in McLean, Va.

 

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