Mall operator Simon Property Group, Inc. (SPG) is expected to sweeten its $10 billion bid for bankrupt rival General Growth Properties, Inc. (GGP) by the end of this week or early next week in order to top other rival offers or plans, according to reports Tuesday. Simon Growth revealed in a letter Monday that it would offer a new proposal in the next few days.
Earlier, Canadian property owner Brookfield Asset Management Inc. (BAM) as well as Fairholme Capital Management, LLC, and Pershing Square Capital Management jointly proposed recapitalization plans for General Growth Properties or GGP.
Meanwhile, the Bankruptcy Court has approved an extension of the exclusivity period during which GGP has the right to file a plan of reorganization through July 15, 2010, and an extension of the period to solicit acceptances of a plan of reorganization through September 15, 2010. During the exclusivity period, no other party is permitted to file a competing plan of reorganization.
Simon Growth's new proposal is also reportedly expected to allay concerns about antitrust issues and financing. Meanwhile, Brookfield agreed to invest $2.63 billion and arrange a $1.5 billion loan, while two of GGP's largest investors, Fairholme Capital Management and Pershing Square Capital Management, have together proposed to invest an additional $3.93 billion, in a plan whereby GGP would be split in to two, one a healthy mall operator and the other a containing all the other troubled assets.
Earlier, GGP has reportedly been negotiating with Brookfield for funding its emergence from bankruptcy, which recently purchased $1 billion of GGP's debt in a move that suggests that it is jockeying for control.
Indianapolis, Indiana-based Simon Property had in mid-February offered to acquire GGP in a fully financed transaction valued at about $10 billion. The offer included about $9 billion in cash, with $7 billion for GGP's unsecured creditors. GGP rejected the offer as it was deemed not large enough to prompt it to drop its bankruptcy restructuring.
Currently, GGP's restructuring plan, along with its investors, is valued at a minimum of $15 per share, while Simon Property's $10 billion offer is valued at $9 per share. However, Simon Property is already scouting for potential partners, and was reportedly in talks with Blackstone Group L.P.(BX) and other sovereign wealth funds in case it would have to sweeten the offer.
Simon Property had earlier proposed to finance the $10 billion deal through cash on hand and through equity co-investments in the acquisition by strategic institutional investors, with the balance coming from its existing credit facilities.
The proposed move by Simon Property would merge two of the largest mall operators in the U.S., and would also end one of the largest bankruptcies filed in the U.S. Simon Property would also end up owning at least a third of the U.S. market's share of shopping malls.
Chicago, Illinois-based GGP, the owner of more than 200 regional shopping malls in 44 states, is the second-largest mall operator in the U.S. after Simon Property Group by number of properties. GGP sought Chapter 11 bankruptcy protection in April after failing to refinance portions of its $27 billion debt as they came due, filing the biggest real-estate bankruptcy in U.S. history.
In mid-December, the bankruptcy court approved GGP's plans of reorganization for about $10.25 billion of secured mortgage loans. The loans are associated with 194 debtors owning 85 regional shopping centers, including Ala Moana in Honolulu and St. Louis Galleria in St. Louis, 15 office properties and 3 community centers.
Earlier, Simon Property has hired investment adviser Lazard Ltd. (LAZ) and law firm Wachtell, Lipton, Rosen & Katz in mid-November to help come up with a plan to possibly bid for all or part of GGP. The move would merge two of the largest mall operators in the U.S., and would also end one of the largest bankruptcies filed in the U.S.
Mall owners and real estate investment trust or REITs in the U.S. are facing multiple economic headwinds amid the recession. The market for commercial mortgage-backed securities has taken a hit, while rents and occupancies have weakened. Also, property values have declined, while delinquencies and defaults have risen. However, an acquisition of GGP, which owns 200 malls, may be too tempting for mall owners to resist.
SPG closed Tuesday's regular trading session at $84.18, up $2.30 or 2.81% on a volume of 3.13 million shares, lower than the three-month average volume of 3.41 million shares. GGP closed at $15.10, up $0.35 or 2.37% on a volume of 4.23 million shares.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.