Economy Watch: Brookfield Aims to be GGP Stalking Horse

Festival Bay Mall. Courtesy Flickr Creative Commons user LancerE

By Dees Stribling, Contributing Writer

General Growth Properties Inc. has filed documents with the U.S. Bankruptcy Court for the Southern District of New York describing its proposed deal with Brookfield Asset Management, Pershing Square Capital Management and Fairholme Capital Management. According to that documentation, the three will pony up $6.55 billion in new equity at $15 a share, which will amount to a Get Out of Jail Free card for GGP–or rather, get out of bankruptcy.

What would the Brookfield trio get for their big bucks? Shares amounting to two-thirds of GGP’s outstanding total. Also, they would receive 120 million warrants, allowing them to buy even more stock at $15 a share.

The Brookfield trio wants “stalking horse” status from the bankruptcy judge, who will decide the matter officially on April 28. That means other suitors (that means you, Simon) will have to top the offer to have any hope of walking away with GGP and its sweet portfolio of 200 or so regional malls. In a statement, Brookfield CEO Bruce Flatt called the chance to acquire control of GGP “one of the great real estate value opportunities currently available in the capital market.”

First CMBS of 2010 in the Wings

The Wall Street Journal reported on Wednesday that the Royal Bank of Scotland Group is preparing a $500 million CMBS offering, with the top slice priced 0.95 percentage points over swaps. It would be the first CMBS to hit the market since December.

Word of the deal came on the last day of the legacy CMBS program through the Term Asset-Backed Securities Loan Facility, or TALF. In its last month of operation, the Federal Reserve Bank of New York settled $857 million worth of CMBS. The Fed has settled about $12 billion in legacy loans throughout the course of the program, which kicked off last summer.

Meanwhile, according to Trepp, CMBS delinquencies were up in March by 89 basis points, to 7.61 percent, the highest bump since last summer. About 40 basis points of that figure was caused by the technical foreclosure of Stuyvesant Town/Peter Cooper Village, however.

Jobs Optimism Not Justified?

Data from payroll processor Automatic Data Processing Inc. reported on Wednesday that its number-crunching showed a loss of 23,000 jobs in the private sector in March, contrary to the prevailing attitude of optimism about job creation among economists. Still, ADP’s numbers have been known to be at odds with the U.S. Department of Labor’s official unemployment numbers, which will be released on Friday.

According to ADP, manufacturing and construction took the hardest hits,  overshadowing a modest increase in service-sector employment. 

Wall Street had a down day to end the first quarter of 2010. The Dow Jones Industrial Average dipped 50.79 points, or 0.47 percent. The S&P 500 dropped 0.33 percent and the Nasdaq lost 0.53 percent.