Simon Fires First Shot for GGP

Simon Property Group finally did what many expected, making a $10-billion bid for General Growth Properties. The move would make the REIT…enormous, upping its portfolio of 320 US malls and outlet centers to 520.

But this deal is far from over. General Growth shareholders don’t seem to be biting as of yet, and Simon could have some problems with General Growth’s creditors.

Additionally, there could be other players that will step and make offers. Westfield Group, Brookfield Asset Management and Vornado Realty Trust are also named as candidates to attempt to make a General Growth purchase. Then there is anti-trust talk surrounding the deal.

Do you think Simon will come out the winner? And if it does, would that be good for the industry?

ALSO: Panera, Chipotle, Buffalo Wild Wings Hunger for Growth


11 Responses to “Simon Fires First Shot for GGP”

  1. 1 Brian February 17, 2010 at 9:52 am

    This is far from over. I would be surprised if anyone but Simon walked away with GGP but it will take a lot of effort to finally get this thing closed. Creditors, stockholders and competitors will make this deal much more difficult. If this deal gets finalized it will represent a significant benchmark for the entire industry… Ultimately, the 500 pound gorilla will become King Kong.

  2. 2 Doug February 17, 2010 at 10:21 am

    I believe Simon will win but with a smaller GGP portfolio. GGP will be parted out with Simon taking the heap of the crop, followed by Brookfield, Westfield, etc. THe shareholders, Nordstrom and Macy’s…no one wants to have a single master, and the Government most likely will have issues with Simon controlling an entire State’s major retail hubs, thus my scenario for parting out GGP. My hope is the various winners retain the best and stop kicking good real estate people to the unemployment lines.

  3. 3 dealmaker February 17, 2010 at 11:01 am

    If our goverment allows this to happen to Mall ownership, alongside Walmart conrolling a vast majority of “Provisional Shopping”, with Macy’s and a mere handful of remaining (surviving) retail entites controlling the the majority of remaining Brick & Mortar retail markets …without forcing a split as Doug duly notes above, or the formation of Baby Simons….Then we truly do need to reelect the government that is supposed to represent us.

  4. 4 Jeff February 17, 2010 at 4:46 pm

    I can’t imagine that Simon will get the entire portfolio. Allowing Simon to control another 200 malls would be a disaster for all parties, including consumers. Giving them that much power would create more unemployment and less diversity in our industry notwithstanding that Simon does nothing for the shopping center industry. They virtually ignore ICSC and have stopped participating in most industry functions.

  5. 5 dealmaker February 18, 2010 at 9:38 am

    Jeff Makes a good point.

    The enclosed mall, outlet, and now presumably the power strip side of the industry have been and are being “Simonized” to the point where most retailers have few if any choices for premium locations and little negotiating room for rents. While a deal for GGP may help out it’s stockholders and creditors (especially the unsecured ones), it may well do so at the expense of the country’s retailers and business communities that thrive centered around malls.

    Is anyone interested in having less in the way of choices??? Do we really need another mammoth Walmart like entity controlling investment grade brick & mortar distribution channels? Will it force more retail online as a way to preserve diversity? What happens to these centers that over the years have become social and cultural gathering places of the communities they service?

  6. 6 Sid February 18, 2010 at 12:43 pm

    they should close with SPG ASAP. when was the last time you heard of unsecured creditors being paid 100%. also this would put 10 billion into the economy NOW. the trickle effect would be enormous. this good be a quick deal.Delays might increase the price but it could also increase all the costs.
    do you really want more of our real estate in the hands of Foreigners.

  7. 7 Jeff February 18, 2010 at 7:51 pm

    Sid I am afraid I am not able to agree with you. First of all the 10 billion would not flow into the economy most of it will be assumed debt and transfer of stock, all paper. Yes the unsecured creditors would be able to get paid off but they will get paid off no matter who makes the acquitionsion. The problem with this deal is that Simon would basically wind up controlling several regional markets and that is not healthy for anyone. Retailers would be squeezed for higher rents and be closed out of certain deals without recourse. Jobs would be cut from the merger of the firms, and trust me the good folks at General Growth would not benefit. It would much more beneficial to everyone if the portfolio gets split up and gives more than the big boy on the block the whole pie.

    I am pretty sure that the government, as stated by another commentor, is not going to allow Simon swallow the whole thing up anyway. For a change I would agree with them.

  8. 8 CatchAFallingKnife February 23, 2010 at 1:38 pm

    Simon needs to go back to the drawing board and take another look at all of their assumptions for this acquisition. They have been notorious for assuming that they can squeeze another fifty cents out of their rent rolls. Having more overvalued properties on their books is not going to guarantee them success, longterm. Leveraging and loading up on properties is a passe strategic objective that worked for commercial real estate execs for the last 50 years, similar to residential’s “buying more house than you can afford” approach, and waiting for it to appreciate, in the long run. The waters are now much more turbulent than before and these tried and true formulas may no longer make sense.
    Additionally, Simon has benefitted in the past by pressuring tenants to open a store in a C mall in exchange for their opening a store into an A mall. These tie-ins will be more greatly scrutinized in the future by those regulating unfair trade practices and monopolistic behavior (ie the FTC).

  9. 9 Jeff February 23, 2010 at 2:05 pm

    The latest comment hits on what I had mentioned previously. Simon acquiring GGP’s portfolio will force retailers to take locations that will drain their cash flow so that they can get leases on the must have locations. This will just create bigger holes in everyone’s debt. I have to believe that this would also force banks to do deals on less than desirable centers owned by Simon in order to get the deals for the A grade centers.

  10. 10 GGPFiresBack February 24, 2010 at 3:22 pm

    Looks like GGP has their own ideas about what to do with their company and how to rebuild their financials via recapitalization rather than recapitulation.

  11. 11 NobodyLearns February 27, 2010 at 1:41 pm

    James Hanson’s commentary that a GGP acquisition is good for the industry is nonsense. That was the argument for the Rouse acquisition by GGP, and look where that got them …. BANKRUPTCY. Or, maybe Simon just wants to position themselves for a “Too Big to Fail Bailout” that will save them from their own present financial position.

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