Brookfield Property Partners LP agreed to acquire $1.4 billion of shares and warrants in General Growth Properties Inc., boosting its stake in the No. 2 U.S. mall owner to 32 percent.
“This transaction provides Brookfield Property Partners with the opportunity to increase its exposure to one of the highest-quality shopping center portfolios in the world at an attractive valuation,” Ric Clark, chief executive officer of Brookfield Property, said today in a statement.
Brookfield Property, spun off this year from Toronto-based Brookfield Asset Management Inc., is consolidating its holdings to create one of the largest commercial real estate owners. In September, the Hamilton, Bermuda-based company offered to buy the shares of Brookfield Office Properties Inc. that it didn’t already own. The acquisition would form a landlord with 330 million square feet (31 million square meters) of office, retail and industrial space, according to a statement at the time.
The acquisition of additional shares of Chicago-based General Growth will be funded partly through the issuance of $435 million of equity in Brookfield Property to the Investment Corporation of Dubai and other institutional investors. The company will also issue $995 million of units in a subsidiary of Brookfield Property to Brookfield Asset Management.
The return on the investment may exceed the 15 percent target that Brookfield Property has estimated, Clark said in the statement.
As part of the deal, Brookfield will also boost its ownership stake in Rouse Properties Inc., a New York-based retail landlord spun off from General Growth last year, to about 39 percent.
Brookfield Asset Management acquired its stake in General Growth, the largest U.S. mall owner after Simon Property Group Inc., after helping to finance the company’s exit from bankruptcy in 2010. The interest was transferred to Brookfield Property upon its formation in April.
Brookfield Property owned 25 percent of General Growth prior to the purchase announced today, Melissa Coley, a spokeswoman, said in an e-mail.
The 32 percent stake assumes the exercise of all outstanding warrants. Brookfield Property’s interest is 28 percent on an undiluted basis.