Exterior of mall

NEW YORK CITY—Brookfield Property Partners (BPY) said Thursday that its offer to buy the shares of GGP Inc. that it doesn't already own still stands, although GGP's board reportedly rejected the original bid this past December. The original cash-and-stock deal was valued at $23 per share, or approximately $14.8 billion.

“We continue to believe that this transaction is in the best long-term interests of both BPY and GGP shareholders, and hope to come to an agreement in the near future with the special committee of GGP's board of directors that is currently considering the proposal,” BPY said Thursday in its fourth-quarter 2017 earnings release. On Wednesday's GGP earnings call, Sandeep Mathrani, CEO of the Chicago-based mall REIT, acknowledged BPY's initial bid but declined to address any questions about the proposal, “because the offer is in the hands of the special committee and Brookfield.”

GGP's apparent rejection of the initial bid for the 66% of outstanding shares not under BPY control was never formally announced. Nor did Mathrani mention the rejection on Wednesday's call. BPY and its parent, Brookfield Asset Management (BAM), reportedly have gone back to the drawing board on the proposal.

“These are processes that everyone goes through,” BAM CEO Bruce Flatt told Bloomberg Television's Erik Schatzkler in December. “We think we have a fair offer on the table. We have a great board of independent directors and they're going to consider it. There'll be lots of stories between now and when the process ends, and I think they'll see it as a fair offer.”

When GGP acknowledged BPY's unsolicited takeover proposal this past November, Mizuho Securities analysts weren't wholly enthusiastic about the bid. “While the offer is encouraging, cementing BPY's rumored interest and the recent M&A euphoria, it falls short of GGP private market value estimates and investor expectations,” they wrote.

On Thursday, BTIG REITs analyst Jim Sullivan expressed similar concerns. “Since the potential for a BPY offer was first reported in the press, GGP shares have risen from $19.01 to the current $21.97, while BPY shares have slid from $23.68 to the current $20.49,” Sulivan wrote in a report. “We estimate the value of the BPY offer to be $21.75 at the current quote for BPY shares. The consensus Street NAV/share estimate for GGP shares is $28.60. Our NAV estimate is $32.26, using a cap rate of 4.4%.”

BPY said in November that acquisition of GGP would create one of the world's largest listed property companies. The combined company would have an ownership interest in almost $100 billion of real estate assets globally and annual NOI of approximately $5 billion. With a 34% stake currently, BPY has been an investor in GGP since the company—then known as General Growth Properties—chose it as a co-investor when it emerged from bankruptcy in 2010.

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.