By RACHELLE YOUNGLAI
Tuesday, November 14, 2017
Brookfield Property Partners is betting on shopping centres at a time when malls are under pressure from online retailers, and big departments stores are overhauling their businesses.
The Canadian property owner announced on Monday an unsolicited $14.8-billion (U.S.) cash-andstock bid to buy the rest of U.S. retail real estate company GGP Inc. it does not own - an acquisition that would give Brookfield "an ownership interest in almost $100billion of premier real estate assets globally," the company said.
The proposal comes amid a shakeout in the bricks-and-mortar retail industry, particularly in the United States, where malls have been hit by the rise of e-commerce.
Canada's retail scene is also changing rapidly; Sears Canada Inc. was recently forced into liquidation and fellow department-store chain Hudson's Bay Co. is working to reinvent itself.
The acquisition would give Brookfield control over what it called GGP's "irreplaceable assets" and a "high-quality retail asset base." The Chicago-based company owns malls in nearly every U.S. state, including several in New York, Florida, Texas, Georgia and California.
Brookfield, which owns 257 properties in the Americas, Asia, Australia and Europe, said the combination of its experience and access to capital would allow it to "maximize" the value of GGP's shopping centres by expanding or transforming the malls.
"While many retailers continue to face significant challenges in growing their businesses, those retailers that are focused on the intersection between bricks-and-mortar retail and online sales channels continue to expand and grow," Brookfield chief executive officer Brian Kingston said last week on a call to discuss quarterly results.
Brookfield is offering GGP stockholders the option of receiving either $23 cash for each share, or 0.9656 of a limited-partnership unit of the Canadian company.
Brookfield said its cash proposal represents a 21-per-cent premium over GGP's Nov. 6 closing price of $19.01, the day before news of the going-private transaction became public.
After Brookfield confirmed the bid on Monday, GGP stock climbed above the offer price and ended the day at $24.05 a share in New York, suggesting shareholders expected a higher offer to emerge. Brookfield units fell 5 per cent to $22.50 apiece.
Brookfield and its affiliates already control about 34 per cent of the outstanding stock.
If the proposal succeeds, GGP shareholders would own about onethird of the combined company.
Brookfield Property and its parent company currently hold three of the nine GGP board seats.
Brookfield presented the offer to GGP's board of directors over the weekend. GGP said on its website that its board would review and consider the proposal. Both companies separately said there were no assurances that a deal would be consummated.
This is the latest going-private transaction for Brookfield. Earlier this year, the company took Brookfield Canada Office Properties private in a deal that was achieved after Brookfield Property sweetened the offer.
Brookfield has been gobbling up stakes in malls as well as large spaces vacated by retailers such as Sears.
This is the company's first attempt to significantly expand beyond office towers and multifamily buildings into shopping centres.
"Well-located, high-quality retail real estate in the United States continues to perform well despite negative perception in the public markets," Brookfield's Mr. Kingston said on last week's conference call.
Many shopping centres are struggling to fill empty spaces as they compete with online retailer Amazon and discount stores.
In Canada, mall owners are bracing for a flood of empty retail space from Sears Canada's liquidation. Hudson's Bay recently brokered a deal to sell a prime Manhattan department store building to office-sharing company WeWork and plans to lease some of its space in key HBC locations in Toronto and Vancouver.
Brookfield has capped the cash offering at $7.4-billion and the number of Brookfield shares at 309 million, which it said was worth roughly the same amount.
Brookfield Property Partners (BPY)
Close: $22.50 (U.S.), down $1.18
Close: $24.05 (U.S.), up $1.85
Brookfield says acquiring Chicago-based real estate company GGP Inc.'s remaining shares would give it control over the U.S. firm's 'irreplaceable assets,' such as this retail space on Fifth Avenue in New York.
If Brookfield Property Partners' proposal succeeds, GGP shareholders would own about one-third of the combined company.
BETH J. HARPAZ/ASSOCIATED PRESS