Shopping center developer GGP has declined a $14.8 billion offer from Brookfield Property Partners (its largest shareholder with 34% ownership) sources familiar with the matter told Reuters on Sunday. A Brookfield spokesperson declined to comment to Retail Dive on the report, and an email to GGP wasn't immediately returned.
Brookfield Property Partners said last month that it made a non-binding proposal to acquire GGP for that amount, according to press releases from both companies. A tie-up of the two companies would create one of the world’s largest publicly traded property companies, according to Reuters
GGP’s board of directors has formed a special committee of its non-executive, independent directors which, in consultation with its financial and legal advisors, will review and consider the proposal, the company said.
GGP’s retail portfolio includes mostly top malls like Chicago's Water Tower Place, where it has established immersive shopping experiences, including project "In Real Life," which rotates pop-up shops for digital brands. Such shopping centers are doing well even amid a generally downbeat buzz about shopping malls, which has increased as foot traffic falls and more high-profile retailers file for bankruptcy.
Negotiations over the proposed Brookfield-GGP deal are ongoing, according to Reuters's report, which also quoted sources saying that the companies won't make an announcement until talks have officially concluded. The relative strength of GGP's portfolio could raise Brookfield's bid. In fact, Boenning & Scattergood analyst Floris van Dijkum, who called the offer "too low," said that it's likely a floor considering Brookfield's history of low-balling initial bids, and last month he told CNBC he expects something closer to $30 per share.
GGP in August reported second quarter net income of $126 million, down from $186 million in the prior-year period. On a conference call with analysts following the report, Mathrani said the company will stay the course when it comes to leases, but plans to add more non-retail tenants and to "prune the lower quality assets."
Many shopping centers and malls are increasingly looking to diversify their portfolios as longstanding anchors like Macy’s, J.C. Penney and Sears close stores and leave gaping holes at their properties. Those closures are exacerbated by a growing number of specialty retailers that have filed for bankruptcy this year — including The Limited, Wet Seal, Payless, Rue21 and Payless. Some property executives see opportunity in those empty spaces, but many have taken pay cuts in the interim as their holdings falter. About a year ago, GGP acquired five anchor boxes from Macy’s for approximately $48 million, part of the department store chain's previously-announced plan to unload 100 stores by early this year.
The actual retail in malls is in need of attention. Earlier this year Simon Property Group CEO David Simon urged retailers to invest in their stores, insisting that e-commerce isn’t the sole reason for their plight. "I'm hopeful that they're going to reinvest in their stores, improve their inventory mix and service their customer better," he said. "And, by the way, we've got to have the same pressure on us to do that. So, it's a two-way street. We are up for the challenge. We have the conviction in our business to do that as you know if you go through our properties by and large, they look, they feel great. We're going to redevelop a lot of opportunities."