Simon Offers $10 Billion for General Growth Properties

February 16, 2010 by · Leave a Comment
Filed under: Real Estate News 

The people at Simon are pretty smart and they have done due diligence on the books for General Growth but I am wondering is this is a good deal for the amount of retail and residential exposure Simon is now opened up to now.  With us still being in the woods and it is not clear if we are in recovery or bear market rally, I hope this was not a little premature on their part.  Hopefully they have a large cash reserve setup for this just in case the recovery takes longer than they are projecting.

Wall Street Journal – Mall giant Simon Properties Group Inc. on Tuesday announced it has offered $10 billion to acquire bankrupt rival General Growth Properties Inc., potentially creating the largest U.S. owner of high-end malls.

General Growth also has been negotiating with Canadian real-estate concern Brookfield Asset Management Inc. about Brookfield providing General Growth billions of dollars in capital, perhaps as part of a larger sale of new General Growth stock, to emerge from bankruptcy.

The decision of whether to go with Simon or to remain a standalone company with Brookfield as a major shareholder will be up to General Growth’s board, but the company’s creditors and the judge overseeing its bankruptcy proceedings will get a say in the matter.

Indianapolis-based Simon, which owns 321 U.S. malls, said it has offered to pay General Growth’s $7 billion in unsecured debt in cash or stock. Simon also would pay $6 a share to General Growth’s shareholders and the equivalent of $3 a share when it spins off General Growth’s residential-development division, including the massive Summerlin development in Las Vegas, as a separate company.

Simon landed a chief ally for its bid in gaining support late Monday from the committee representing General Growth’s unsecured creditors representing $7 billion of debt that Simon would pay in cash. General Growth has considered paying those creditors either with the cash generated by selling new stock or by issuing new shares to replace that debt.

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