By Barbra Murray
Less than a month after entering into an agreement to acquire retail property owner GGP Inc., Brookfield Property Partners LP has secured a handful of investors to help finance the $15.2 billion transaction, according to Bloomberg. The California Public Employees’ Retirement System, an entity of CBRE Group Inc., Future Fund and TIAA affiliate TH Real Estate have all committed to investing in certain shopping malls in GGP’s portfolio.
Brookfield, which already owns 34 percent of GGP’s outstanding shares, approached GGP with a non-binding proposal to acquire the company’s remaining common stock in November 2017. In March 2017, Brookfield increased the cash-stock offer to $23.50 per GGP share at a fixed cash consideration of $9.2 billion, and the issuing of approximately 254 million Brookfield units or shares in the resulting U.S. REIT. The transaction boils down to a total consideration of roughly 61 percent cash and approximately 39 percent shares or units.
“This is a compelling transaction that enables GGP shareholders to receive premium value for their shares and gives them the ability to participate in the long-term upside of their investment,” Brian Kingston, CEO of Brookfield Property Partners LP, said in a prepared statement announcing the agreement in March. The deal, Kingston added, would unite “Brookfield’s access to large-scale capital and deep operating expertise across multiple real estate sectors with GGP’s portfolio of irreplaceable retail assets.”
GGP’s portfolio of fully and partially owned retail assets consisted of 125 locations totaling 122 million square feet at the close of 2017. The collection of Class A properties runs the gamut and spans the U.S., with such shopping centers as the 205,400-square-foot Bayside Marketplace in Miami, and the Fashion Show Mall in Las Vegas, a 1.9 million-square-foot property GGP acquired in a joint venture with TIAA Global Asset Management for $1.2 billion in 2016.
Brookfield had noted upon announcing the acquisition deal with GGP that it would finance the purchase with proceeds from loans through a consortium of lenders and roughly $4 billion from joint venture equity partners; however, Brookfield did not name the partners at the time.
Per Brookfield’s March announcement, the acquisition of GGP is scheduled to reach completion in the third quarter of 2018. The newly combined company will hold the distinction of being one of the largest commercial real estate entities in the world, with the sole or partial ownership of assets valued at an aggregate $90 billion, and an annual net operating income totaling more than $4 billion.
Brookfield and partners’ planned acquisition of GGP comes on the heels of another mega-mall merger. In late 2017, Unibail-Rodamco SE, the largest listed commercial property company in Europe, announced an agreement to acquire Sydney-based shopping center group Westfield Corp. in a $25 billion transaction. More such deals may very well be on the horizon.
According to a fourth quarter report by commercial real estate services firm Cushman & Wakefield, M&A activity will skyrocket in 2018. “Smart players are looking at the stock values of companies that are in great shape but are undervalued,” per the report. “We already saw this on the landlord side with Unibail-Rodamco acquiring rival Westfield Mall.”
Image courtesy of Zyscovich Architects