Tiffany Haney
In 2018, BPY announced its acquisition of GGP, a deal that was considered a theft due to the low price of $23.50/share, which was significantly lower than the market value of the merger. This move was attributed to the 'death of malls' and BPY's position as the controlling shareholder of GGP. The transaction included a US REIT (BPR) qualifying for tax purposes, with GGP shareholders having the option to receive cash or BPY unit or BPR share. Despite concerns about the value of the offer, the Special Committee of GGP unanimously recommended the transaction, expecting it to be immediately accretive to FFO/unit for BPY unitholders. The deal highlighted the challenges faced by GGP owners in a sector facing negative headlines and the potential flood of BPY/BPR sales after closing.
| Characteristics | Values |
|---|---|
| BPY's acquisition price per GGP share | $23.50 |
| BPY's share price | $20.55 |
| GGP's share price | $21.04 |
| BPY's per-unit distribution | >40% higher than GGP's per-share dividend |
| BPY's offer for GGP's cap rate | 6% |
| BPY's association with property types | Office and retail |
| GGP's position | Healthy class A retail real estate |
Explore related products
$34.99
What You'll Learn
BPY acquiring ~66% of GGP for $23.50/share
BPY is acquiring the remaining ~66% of GGP for a headline price of $23.50 per share. This deal was announced on March 26, 2018, with Brookfield Property Partners L.P. ("BPY") and the Special Committee of the Board of Directors of GGP Inc. ("GGP") reaching an agreement.
The transaction allows GGP shareholders to elect to receive for each GGP common share either $23.50 in cash or one BPY unit or one BPR share, subject to proration. This aggregate cash/equity consideration ratio is approximately 61%/39%. The cash portion of the deal will be funded by a combination of approximately $4 billion from joint venture equity partners and financings from a syndicate of lenders, including Deutsche Bank, Morgan Stanley, and Wells Fargo Bank.
The combined company will be one of the world's largest commercial real estate enterprises, with a diverse portfolio of property and a strong financial profile. GGP shareholders will own approximately 26% of the combined company and will benefit from an enhanced dividend if they elect to receive BPY units.
Some analysts view the deal price as low, suggesting it reflects negatively on the sector. However, others argue that BPY is taking advantage of negative sector headlines and its position as the controlling shareholder of GGP.
Unwarping Stainless Steel: DIY Guide
You may want to see also
Explore related products
The market value of the merger is lower than the headline price
BPY is acquiring the remaining ~66% of GGP that it doesn't already own. The headline price is $23.50 per share, but the market value of the merger is lower. GGP shareholders can elect to receive either $23.50 in cash or one "BPY unit or BPR share", prorated to a total consideration of 61% cash and 39% equity. With BPY shares currently trading at $20.55, the transaction value is closer to $22.35 per share. This discrepancy between the headline price and the market value could be due to negative sector headlines and BPY's position as the controlling shareholder of GGP.
The acquisition of GGP by BPY has been referred to as "the theft of GGP", with some speculation that BPY is taking advantage of the death of malls narrative to acquire GGP at a low price. GGP shareholders may be concerned that they are giving up too much for what they are being offered, as GGP holds a significant amount of valuable Class A retail real estate. Additionally, BPY is associated with out-of-fashion property types, such as office and retail spaces, which may impact the market value of the merger.
The transaction includes a U.S. REIT ("BPR") that will qualify for tax purposes and issue shares. These BPR shares are designed to provide an economic return equivalent to BPY units, with identical distributions. The acquisition is expected to be immediately accretive to FFO/unit for BPY unitholders, as BPY's current per-unit distribution is over 40% higher than the per-share dividend received by GGP shareholders.
Following the closing of the transaction, BAM, which provides management services to BPY, has agreed to waive management fees for one year to facilitate synergies and cost savings between BPY and GGP. The deal is subject to approval by GGP shareholders, with at least two-thirds of the outstanding GGP common stock required for the transaction to proceed.
Where to Find Pan Corn Flour: Albertsons Edition
You may want to see also
Explore related products
GGP shareholders can choose between cash or BPY unit/BPR share
BPR shareholders will have the right to exchange each BPR share for one BPY unit or the cash equivalent of one BPY unit. Brookfield Asset Management (BAM) has agreed to guarantee this right for BPR shareholders for at least 20 years. This flexibility in the agreement provides GGP shareholders with certainty of value and upside potential through ownership in a globally diversified real estate company.
GGP shareholders who receive equity consideration will be entitled to receive BPY's current distribution on the BPY units or BPR shares they receive, which is over 40% higher than GGP's dividend. This increase in the cash consideration and the ability to receive shares in a newly listed REIT entity provide GGP shareholders with a compelling transaction that enables them to receive premium value for their shares.
Following the completion of the transaction, GGP shareholders will own approximately 26% of the combined company, which will possess one of the most diverse portfolios of property globally. The introduction of the new BPR shares will allow GGP shareholders to efficiently participate in the transaction and benefit from the synergies and cost savings between BPY and GGP.
Stop Bread Sticking: Tips for Perfect Pan Baking
You may want to see also
Explore related products
The transaction is worth ~$22.35/share
BPY is acquiring the remaining ~66% of GGP it doesn't already own. The headline price is $23.50 per share, but with BPY shares currently trading for $20.55, the transaction is worth closer to $22.35 per share. GGP shareholders can elect to receive either $23.50 in cash or one "BPY unit or BPR share", prorated so that the total consideration is 61% cash and 39% equity.
The deal is subject to approval from GGP shareholders representing at least two-thirds of the outstanding GGP common stock, as well as a majority of the outstanding GGP common stock not owned by BPY and its affiliates.
The transaction has been framed as a theft by some, who argue that BPY is taking advantage of negative sector headlines and its position as the controlling shareholder of GGP to acquire the company at a low price. However, others see the deal as an opportunity, particularly given GGP's healthy class A retail real estate and ongoing redevelopments of class B real estate.
The transaction is expected to be immediately accretive to FFO/unit for BPY unitholders, with BPY's current per-unit distribution more than 40% higher than the per-share dividend currently received by GGP shareholders.
Medicare Part A: Does It Cover Prescriptions?
You may want to see also
Explore related products
BPY is associated with out-of-fashion property types
The deal between BPY and GGP raised concerns among GGP owners about whether they were giving up too much for the offered price. GGP had a significant amount of healthy Class A retail real estate and was also redeveloping Class B real estate. The perception of BPY being associated with out-of-fashion property types may have impacted the dynamics of the acquisition.
The transaction between BPY and GGP included a U.S. REIT ("BPR") that would qualify for tax purposes and issue shares. These BPR shares were designed to provide an economic return equivalent to BPY units, with identical distributions. The deal also involved BAM, which provides management services to BPY and agreed to waive certain management fees for one year following the closing of the transaction.
While BPY's shares were trading at around $20.55, GGP's shares were trading at approximately $21.04, making the deal price attractive. However, some analysts viewed the low deal price as a negative indicator for the sector. The acquisition of GGP by BPY highlights the perception of the company being associated with out-of-fashion property types, and the potential impact on their acquisitions and share value.
Cleaning Pans: Removing the Glaze the Right Way
You may want to see also
Frequently asked questions
BPY and GGP have entered into a definitive agreement for BPY to acquire all outstanding shares of GGP common stock that it doesn't already own. The deal is subject to approval from GGP shareholders.
BPY is offering $23.50 per share for GGP, which GGP shareholders can choose to receive in cash or one "BPY unit or BPR share". This price is lower than the market value of the merger consideration.
One reason could be the death of malls and the negative sector headlines associated with it. Additionally, BPY may be using its position as the controlling shareholder of GGP to its advantage in this deal.
