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Shareholders of U.S. mall owner GGP Inc. are upset with Brookfield Property Partners’ deal to buy their company, but they face an uphill battle if they hope to derail the acquisition.

“We think the price is dramatically low,” said Jeffrey Olin, chief executive with Vision Capital Corp., who says his real estate investment company has a position in GGP and will not support the current offer.

Brookfield, which, along with its affiliates, controls about 34 per cent of GGP, recently sweetened its bid to about US$15-billion for the remainder of the company it does not already own.

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The deal is occurring as the retail landscape is being overhauled amid stiff competition from e-commerce and discount stores. Some department chains, big-box stores and shopping centres in undesirable areas are suffering. Meanwhile, malls in high-density areas such as Yorkdale Shopping Centre and the Eaton Centre in Toronto are thriving.

As one of the largest property owners in the world, Brookfield wants to capitalize on GGP’s suite of malls. The bulk of GGP shopping centres are considered top-performing malls in prime locations in the United States.

A long-time real estate investor, Mr. Olin is not only unhappy with the price, he believes the structure of the transaction is a problem. The deal reduces GGP shareholders’ exposure to prime U.S. malls and gives them a minority stake in Brookfield Property’s vast portfolio of global properties or a stake in a newly created Brookfield investment trust.

Under the latest deal terms, GGP stockholders can elect to receive for every common share US$23.50 or one Brookfield Property unit or one share of a synthetic Brookfield U.S. Real Estate Investment Trust, which qualifies as a REIT for tax purposes, but is designed to mirror Brookfield Property units’s economic returns.

Some of GGP’s analysts, whose firms were not tapped by Brookfield to provide funding or advice, called the acquisition a bad deal for GGP stock owners.

“It’s unfortunate for shareholders,” said Alexander Goldfarb, analyst with Sandler O’Neill. “The bid does not reflect what the malls are worth.”

For the deal to succeed, the majority of GGP’s non-Brookfield shareholders have to vote in favour of the acquisition.

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Research and brokerage firm Boenning & Scattergood is advising GGP shareholders to reject the deal. “It does not offer sufficient value,” Floris van Dijkum, the firm’s real estate analyst, said in a note to clients. Mr. van Dijkum said the bid is below Brookfield’s own internal valuation of US$27.33 a share.

“Investors have expressed their disappointment at the transaction,” he said, noting that GGP has been underperforming its peers over the past week.

The problem for GGP’s non-Brookfield shareholders is that Brookfield owns one-third of the stock and has three board seats. Even if enough GGP shareholders vote against the deal, Brookfield will still hold the stake and have a say on the board.

Shareholders could try to replace management and the board. But even if they were successful in doing so, new executives and directors would still have to contend with Brookfield as a major stock owner.

“Let’s say you kick out management, whoever comes in knows they are still working for Brookfield. If you only replace management and not the board, you are not solving anything. The board is the one that accepted the undervalued price,” Mr. Goldfarb said.

GGP stock is currently trading around US$20.35.

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Brookfield and GGP did not immediately respond to a request for comment on what would occur if shareholders reject the proposal.

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