Economy Watch: More Maneuvering by Simon in Quest for GGP

April 29, 2010
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user LancerE

General Growth Properties is on the balcony on a moonlit night while suitor Simon Property Group Inc. tries to serenade GGP with ever-sweeter melodies. As of Wednesday, the new verse in that sweeter song was about Simon agreeing to accept a lower percentage voting stake in its erstwhile mall rival, according to unnamed sources cited by Reuters.

Just last week, NG Clarion, Taconic Capital, Oak Hill and RREEF joined Simon in its effort to acquire GGP, with the four bringing another $1.1 billion to the table. That’s on top of Simon’s pledge of $2.5 billion and another $1 billion by Paulson. Will Blackstone also join in next? The private-equity giant has taken a shine to malls lately, but is keeping mum what it might do in this case.

Meanwhile, Brookfield Asset Management Inc., which has a plan in place to take GGP out of bankruptcy and into its arms, continues to cast aspersions on Simon’s plans. Bloomberg quoted an e-mail on Wednesday from Cyrus Madon, Brookfield’s senior managing partner for restructuring and lending, as claiming that a Simon investment in GGP would mean that GGP “will not be able to function effectively and eventually be sold to Simon and no one else.”

CBRE Cuts Losses, Promises ‘Offensive Posture’

CB Richard Ellis Group Inc. posted a loss during the first quarter of 2010 of $6.6 million, or 2 cents a share, compared with a loss of $36.7 million, of 14 cents a share, during the same period in 2009. Revenue for 1Q10 totaled $1 billion, up 15 percent from 1Q09.

Various parts of the world contributed variously to the mega-brokerage’s fortunes during the quarter. The Asia-Pacific Region, driven up strong improvements in Australia and New Zealand, turned in sales revenue increases of 123 percent compared with 1Q09, noted CBRE. Europe–with the UK and France leading the way–posted an increase in leasing revenues of 25 percent over the same period.

“We are realizing significant benefits from these efforts now that market conditions have begun to recover in more parts of the world, and as we transition back to a more offensive posture,” said CBRE CEO Brett White. “… we are very well positioned to benefit disproportionately in top- and bottom-line growth as the recovery continues to unfold.”

Interest Rate Status Quo Remains Intact

As expected, the Federal Reserve didn’t fiddle with the federal funds rate during its Federal Open Market Committee meeting this week. In a statement on Wednesday, the committee reaffirmed that it will keep rates low as a limbo pole–zero to 0.25 percent–for “an extended period.”

But that doesn’t mean the central bank is pessimistic. It also said that “economic activity has continued to strengthen,” and that “the labor market is beginning to improve.” Just not strengthening or improving enough for even a hint from the Fed of the interest-rate increases that will have to come someday.

Wall Street calmed down a bit on Wednesday after the previous day’s Greek-inspired drop, gaining some of the lost territory. The Dow Jones Industrial Average ended up 53.28 points, or 0.48 percent, and is once again above 11,000. The S&P 500 gained 0.65 percent, but the Nasdaq barely eked out a gain at all, ending up 0.01 percent.