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Shoppers stroll through Faneuil Hall Marketplace in Boston, a property owned by General Growth Properties. (Michael Dwyer/Michael Dwyer/AP)
Shoppers stroll through Faneuil Hall Marketplace in Boston, a property owned by General Growth Properties. (Michael Dwyer/Michael Dwyer/AP)

Brookfield lead bidder for General Growth Add to ...

Brookfield Asset Management Inc. has emerged as the lead bidder for shopping mall giant General Growth Properties Inc. after a U.S. Bankruptcy Judge approved the terms of the Toronto company's recapitalization plan.

The court decision appears to end a three-month rivalry with Simon Property Group Inc. , the largest mall operator in the United States, which announced late Friday that it is withdrawing a $33.5-billion (U.S.) offer to acquire its closest rival.

Although Brookfield is the only bidder still standing, the court-supervised auction of General Growth moves into a second stage that expires June 2. Simon Property is still eligible to submit another offer before the deadline.

Simon Property said the terms of Brookfield's recapitalization make it prohibitively expensive for competing offers. If Brookfield's offer is trumped by another suitor, General Growth has agreed to award the Toronto company hundreds of millions of dollars worth of warrants.

In a statement Friday, Simon Property chief executive officer David Simon said General Growth's "decision to proceed with a transaction that transfers hundreds of millions of dollars in value to the Brookfield consortium has caused us to conclude that that we cannot reach a mutually beneficial transaction."

Brookfield's $6.5-billion recapitalization plan calls for the company to buy warrants and shares that would give it a 30-per-cent stake in a Chicago-based mall operator, which ranks as the second-largest in the United States with 204 malls.. Brookfield is the largest commercial real estate operator in North America and the planned investment in General Growth marks its first move into shopping mall operations.

Cyrus Madon, a senior managing partner at Brookfield that is overseeing the General Growth proposal, said the company is "very pleased" with the court decision and the support from the company's board and management.

In a letter to issued to Brookfield shareholders Thursday, chief executive officer Bruce Flatt said General Growth was "great restructuring" with long-term potential and its shareholders stand to benefit more from a recapitalization than a sale to Simon Properties.

"The idea of an investment in General Growth by its largest competitor is absurd," he said.

Brookfield's offer is backed by General Growth shareholders Pershing Square Capital Management LP and Fairholme Capital Management. Under terms of their plan, debt holders and shareholders of General Growth would emerge with a stake in the restructured company, an offer General Growth's board supported as being the fairest to all stakeholders.

General Growth filed for bankruptcy protection in April, 2009, after it failed to refinance some of its $27-billion debt.

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