Simon adds $1.1 billion to General Growth proposal
Simon Property Group Inc. added four backers to its proposal to help rival mall owner General Growth Properties Inc. emerge from bankruptcy, increasing the plan's total investment by $1.1 billion.
ING Clarion Real Estate Securities, Taconic Capital Advisors, Oak Hill Advisors LP and Deutsche Bank AG's RREEF unit will join the plan, Simon said yesterday. The investments would be on top of the $2.5 billion pledged by Indianapolis-based Simon and $1 billion from New York hedge fund Paulson & Co.
Simon, spurned in a February bid to buy General Growth outright, said a week ago it would match the terms of a bankruptcy exit proposal led by Brookfield Asset Management Inc. Chief Executive Officer David Simon is scheduled to meet with General Growth officials in Chicago today.
Simon said today it revised its bid to include the right to name two directors for General Growth's board, rather than the three in Brookfield's proposal. The company's selections are Dale Anne Reiss, a former senior partner at Ernst & Young LLP, and Peter D. Linneman, a professor of real estate finance and public policy at the Wharton School at the University of Pennsylvania, both of whom are unaffiliated with Simon.
Simon also said it would backstop a $1.5 billion credit line that General Growth needs to emerge from bankruptcy. Under the competing plan, Brookfield would raise that debt. Simon also said it will waive a $12.5 million fee that's in the Brookfield- led proposal, pay any default or compound interest owed to creditors, and sell, distribute or put into a trust any interests in General Growth in excess of a 45 percent stake.
No WarrantsSimon said its offer is better for General Growth shareholders because, unlike Brookfield's plan, it doesn't include warrants that may dilute stock value. General Growth, based in Chicago, backed the Brookfield plan in February after turning down a $10 billion takeover offer by Simon."Our amended proposal delivers significantly higher value and substantially greater certainty of closing to GGP and all of its stakeholders than the transaction proposed by Brookfield Asset Management," David Simon said in a letter to General Growth CEO Adam Metz dated yesterday. The letter was included in Simon Property's statement today.James Graham, a spokesman for General Growth, said he had no immediate comment.Antitrust ConcernsBrookfield CEO J. Bruce Flatt said in an April 19 letter to General Growth that Simon's plan raises antitrust concerns that would hurt the mall owner after it reorganizes. Brookfield and its partners, Fairholme Capital Management LLC and Pershing Square Capital Management LP, have proposed a $6.55 billion investment in General Growth to bring it out of Chapter 11 bankruptcy. A hearing on the plans is scheduled for April 29."How can it make any sense for General Growth's largest competitor to own a negative control block in GGP, ensuring that GGP will not be able to function effectively, and eventually be sold to Simon and no one else?" Cyrus Madon, Brookfield's senior managing partner responsible for restructuring and lending, said today in an e-mailed statement.Brookfield won't proceed without receiving warrants, Flatt said in his April 19 letter.General Growth filed the largest real estate bankruptcy in U.S. history a year ago after amassing $27 billion in debt making acquisitions. Its properties include New York's South Street Seaport, Boston's Faneuil Hall and the Grand Canal Shoppes and Fashion Show in Las Vegas.Turned DownSimon's $10 billion takeover offer for General Growth was turned down as too low in February. The company said last week it's still interested in buying its rival outright.Brookfield plans to name Flatt, Madon and Ric Clark, CEO of its U.S. affiliate, to General Growth's board should its proposed investment be approved, according to a person with knowledge of the plans. Brookfield has the right to name three directors if a bankruptcy court judge approves the company's plan for General Growth."We haven't made any determinations at this stage, but we expect these three representatives would be board representatives," Katherine Vyse, a Brookfield spokeswoman, said yesterday.