Simon Adds $1.1 Billion to General Growth Proposal With Four New Backers
Simon Property Group Inc. added four backers including Deutsche Bank AG’s RREEF unit and ING Clarion Real Estate Securities to its plan for bringing rival General Growth Properties Inc. out of bankruptcy.
The new group, which also includes Taconic Capital Advisors and Oak Hill Advisors LP, will add $1.1 billion to the proposal, Indianapolis-based Simon said today in a statement. The investments would be on top of the $2.5 billion pledged by Simon and $1 billion from hedge fund Paulson & Co.
Simon, the only U.S. mall owner larger than General Growth, said a week ago it would match the terms of a bankruptcy exit plan led by Brookfield Asset Management Inc. Simon executives including Chief Executive Officer David Simon are scheduled to meet with General Growth officials in Chicago tomorrow, said two people familiar with plan.
Simon will revise its bid to include the rights to name two directors for General Growth’s board, rather than the three it had first proposed, one of the people said. The change is the result of discussions between the two companies over the past week, said the person, who asked not to be named because the proposal isn’t public.
Simon’s nominees are Dale Anne Reiss, a former senior partner at Ernst & Young LLP, and Peter D. Linneman, a professor of real estate finance and public policy at the Wharton School at the University of Pennsylvania, the person said. Both people are unaffiliated with Simon Property, the person said.
David Keating, a spokesman for General Growth, said he had no immediate comment.
Simon said its offer is better for General Growth shareholders because, unlike Brookfield’s plan, it doesn’t include issuing warrants that may dilute stock value.
The addition of partners to the Simon plan “underscores the fact that dilutive warrants required by Brookfield, which could cost GGP shareholders $895 million, are unnecessary and unfair to GGP’s current shareholders,” David Simon said in today’s statement.
General Growth estimates the warrants’ value at about $519 million.
Brookfield CEO J. Bruce Flatt said in an April 19 letter to General Growth that Simon’s proposal raises antitrust concerns that would hurt the Chicago-based mall owner after it reorganizes. The Brookfield group, which includes Fairholme Capital Management LLC and Pershing Square Capital Management LP, won’t proceed without receiving warrants, Flatt said.
“How can it make any sense for General Growth’s largest competitor to own a negative control block in GGP, ensuring that GGP will not be able to function effectively, and eventually be sold to Simon and no one else?” Cyrus Madon, Brookfield’s senior managing partner responsible for restructuring and lending, said in an e-mailed statement today. “Would Pepsi allow Coke to become its largest shareholder?”
A bankruptcy court hearing on the plans is scheduled for April 29.
Simon, which made a $10 billion takeover offer for General Growth that was turned down as too low in February, said last week it’s still interested in buying its rival outright.
General Growth filed the largest real estate bankruptcy in U.S. history a year ago after amassing $27 billion in debt making acquisitions. Its properties include New York’s South Street Seaport, Boston’s Faneuil Hall and the Grand Canal Shoppes and Fashion Show in Las Vegas.
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