Water Tower Place-owner General Growth Properties Inc.’s April 2009 bankruptcy was the biggest real estate bankruptcy in U.S. history. (Alex Garcia/Chicago Tribune)
| By Sandra M. Jones | Simon Property Group Inc., the nation’s largest mall operator, offered to buy Chicago-based General Growth Properties Inc. out of Chapter 11 for more than $10 billion in a deal that would give shareholders – typically left empty handed in bankruptcy reorganization — $9 a share.
The Indianapolis-based company said it sent an offer letter to acquire No. 2 General Growth on Feb. 8 and a follow up letter on Tuesday, but has yet to receive a response. About $9 billion of the bid is in cash.
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See also • Greg Burns: The battle may just be getting started • Read Simon’s letter to General Growth board |
The offer calls for Simon to repay in full all unsecured creditors along with some bondholders and lenders holding a combined $7 billion in debt, Simon said. Shareholders, for their part, would receive $6 a share in cash and $3 a share in certain General Growth assets.
The official committee of General Growth’s unsecured creditors has advised Simon that they support the offer, Simon said in a press release.
The deal follows overtures from Brookfield Asset Management which bought almost $1 billion in unsecured debt in the past year, giving it a say in the reorganization’s outcome.
Hedge fund investor William Ackman, whose Pershing Square Capital Management LP has a 25 percent economic interest in General Growth, said in December that he viewed the company’s shares as undervalued and that they could be worth $23 to $43 a share, according to Bloomberg News. Ackman joined General Growth’s board last summer.
Chicago-based General Growth filed the biggest real estate bankruptcy reorganization in history in April after an acquisition spree left the shopping center company with $27 billion in debt.
General Growth counts Ala Moana Center in Honolulu and the Grand Canal Shoppes at The Venetian in Las Vegas — where sales per square foot are estimated to be more than $1,000, or more than double a healthy mall — among its two dozen top-performing properties. The firm also owns Water Tower Place in Chicago.
General Growth shares climbed 21 percent to $11.40 in late morning trading. Simon Property shares rose 2.5 percent to $73.85.
General Growth had no immediate comment. But in December, General Growth CEO Adam Metz told the Chicago Tribune in an interview, “We’re open-minded in terms of what’s going to be best for our stakeholders. If selling turns out to be the best plan for all of our stakeholders, then that’s the course our board will pursue.”
It had been widely anticipated for months that Simon would make a run at part or all of its rival General Growth.
“Simon’s offer provides the best possible outcome for all General Growth stakeholders,” said David Simon, chairman and CEO of Simon Property in a press release. “Simon is in the unique position of being able to offer General Growth creditors and shareholders full, fair and immediate value. Our offer provides much-needed certainty to conclude General Growth’s protracted reorganization process.”
Lazard Ltd., J.P. Morgan and Morgan Stanley are acting as financial advisors to Simon. Wachtell, Lipton, Rosen & Katz is legal advisor.
John Bucksbaum, a second-generation member of the founding family, stepped down as chief executive in late 2008 in the wake of the company’s escalating financial crises. He remains chairman. The Bucksbaums, a prominent Chicago family, founded General Growth as a grocery store in Iowa in 1954. They hold more than a 20 percent stake in the company.
General Growth owns or has interest in 200 malls nationwide, including Oakbrook Center in Oak Brook and Northbrook Court in Northbrook.
Simon Properties counts 382 properties, including Chicago Premium Outlets in Aurora, Gurnee Mills in Gurnee.
Combining the two entities would create a shopping center behemoth that would hold great sway over setting retail rents for major chain stores from the Gap to Pottery Barn.
Let’s hope that Simon relocates from Indy to GGC’s Wacker Drive HQ. It would be sad to lose another corporate HQ including, most of all, the Chicago jobs that go with it.
“It would be sad to lose another corporate HQ including, most of all, the Chicago jobs that go with it.” Yes, it would, even if a normal course of business. It is nice to see that some people understand how much of the city operations really get paid for. Besides those paychecks and tax payments, GGP has been a good corporate citizen. Under the previous family control, many significant contributions were made to local arts organizations for everyone to enjoy. They brought a disused Wacker Drive building back to life also.
There nary a chance that the Mel / Herb / David Simon legacy will relocate from Indy to Chicago . . . none. They might keep a Chicago presence of some sort, but their ties to Indy run too deep (e.g., Pacers) and their interest in relocating to the old and decrepit Morton Salt headquarters is nil. Also, remember that GGP was a good benefactor to their founding City of Des Moines before they decided to go “big time” and move to Chicago a decade or two ago. Des Moines survived their departure then; Chicago will survive if they end up leaving here, too. Less certain, however, if how malls will fare when 75% of them are controlled by a monopoly, or what leverage department stores or tenants will have going forward when all the rent checks go to Indianapolis.
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