GGP Announces Split

General Growth Properties (GGP) of Chicago announced on Feb. 24 that it plans to split into two companies and enter into a $2.65 billion investment agreement with Brookfield Asset Management of Toronto, one of the world's largest real estate investors and asset managers.
The proposed equity commitment from Brookfield is not subject to due diligence or financing conditions and is expected to allow GGP to raise additional equity. The plan is subject to approval of the Bankruptcy Court and higher and better offers pursuant to a bidding process to be approved by the Bankruptcy Court.
The proposed plan is designed to enable a restructured GGP to emerge from bankruptcy on a standalone basis and comes only days after a hostile takeover bid mounted by Simon Properties Group, the nation's largest real estate company.
Adam Metz, CEO of GGP, said the plan is designed to allow GGP to deliver a minimum of $15 per share in value to existing common shareholders, while providing unsecured creditors with par plus accrued interest.
Under terms of the proposal, Brookfield will invest $2.5 billion in cash in GGP in exchange for GGP common stock. Brookfield will own approximately 30% of GGP and have the right to nominate three directors.
The investment will provide flexibility for GGP to pursue additional capital-raising alternatives up to a total of $5.8 billion, including the issuance of new equity, asset sales and limited new debt issuance.
Brookfield has agreed to assist GGP in raising the balance of this capital using its relationships with global institutional capital sources. As part of the restructuring, GGP intends to distribute to GGP shareholders shares in General Growth Opportunities (GGO), a new company that will own certain non-core assets, such as all of the company's master planned communities and landmark developments.
GGO plans to raise $250 million through a rights offering at $5 per share, with Brookfield backstopping $125 million of such offering.
"We are excited about the opportunities this recapitalization creates for our company and all of our stakeholders," said Thomas Nolan, Jr., president and COO of GGP. "GGP has an extremely strong portfolio of successful properties, while GGO will have a large portfolio of opportunistic assets that have substantial long-term value, as well as certain assets where we believe value can be created through restructuring.
"By creating two separate companies," Nolan said, "we enable both companies to manage their core strengths, take advantage of different market opportunities and appeal to distinct groups of investors with their own investment criteria. Our shareholders will be able to participate in the expected future value creation of both of these companies."