by David Bodamer April 14th, 2010
Updated at 10:28 AM
That didn’t take long. After all the “Will they or won’t they?” speculation surrounding Simon Property Group’s bid for General Growth Properties that’s been circulating around the last couple of days, the REIT has made its intentions clear.
Simon now wants to supplant Brookfield’s place in GGP’s recapitalization. It claims its offer is superior to Brookfield’s for several reasons including that it would not seek any warrants. It would also agree to limits on its governance rights. It says it would welcome working with Fairholme and Pershing Square if those investors too would forego any claims on warrants.
The other nugget here is that Paulson & Co. has officially entered the fray as it is willing to provide a $1 billion co-investment as part of Simon’s offer.
However, at the end of the letter, Simon does add that, “If you are interested, we remain prepared to discuss with you instead an acquisition of GGP in a fully-financed transaction.”
Update: The Wall Street Journal does a good job explaining the implications of dropping the warrants.
Thus, the Simon offer is a gamble that the Brookfield group will walk away from the deal absent the warrants.
The warrants are critical because they represent a significant cost for any acquirer of General Growth later in the process. The warrants are guaranteed to the Brookfield group if U.S. Bankruptcy Judge Allan Gropper grants the Brookfield bid “stalking horse” status, making it the bid that others must top. He is slated to make that determination at an April 29 hearing.
Thereafter, any company that subsequently buys General Growth and unseats the Brookfield group must pay an estimated hundreds of millions of dollars to retire the warrants.
Simon’s representatives have said Simon is unlikely to continue to participate in the bidding process if the Brookfield group, rather than Simon, wins the stalking-horse designation.
Here’s the text of Simon’s release. Read the rest of this entry »
Related Topics: News, REITs, Retail Real Estate, Trends |
by David Bodamer April 8th, 2010
A confluence of factors–weak year-over-year comparisons, pent-up demand and the “Easter shift”–all helped to make March a huge month for retailers.
ICSC, Retail Forward, Retail Metrics and RetailSails have all crunched the numbers from the publicly-traded retailers that report same-stores sales and the figures show that the post-holiday shopping period went well for most firms. Retail Forward and RetailSails recorded the gain as 9.2 percent. ICSC said sales rose 9.0 percent. Retail Metrics said same-store sales rose 8.7 percent.
However, the big swings in the date of Easter from year to year create a lot of noise in the March/April figures. We will have a much better picture of the true state of things in another month when we can view the two-month period in its totality. And on that front ICSC is projecting April sales will be flat to down 3.0 percent.
There are a number of good write-ups putting the numbers into perspective. Even if the results are explainable, they did exceed expectations. Nevertheless, it’s easy to get swept up in the idea that retailers are now soaring when there remain a ton of difficulties for consumers including depressed housing prices, declining availability of credit, stagnating wages and high unemployment.
The Big Picture blog points to some additional reasons why consumers have climbed out of their bunkers, but cautions against putting too much stock in the same-store sales figures. But Mike Shedlock argues that consumers face a litany of challenges, including the imbalances in the distribution of financial wealth. Shedlock argues, for example, that the bottom 90 percent having little wealth outside the value of their houses and high debts due to large mortgages mean that any boosts to consumer spending will be short lived.
ICSC’s tally shows that same-store sales rose 9.0 percent in March. Read the rest of this entry »
Related Topics: News, Research, Retail, Trends |
by David Bodamer April 1st, 2010
This had been teased over the weekend and General Growth has now filed the papers to seek approval of the proposed plan to recapitalize and split the company. The text of the motion is here.
Update: The Wall Street Journal has a nice analysis of the offer and what it means in the broader struggle over General Growth’s future.
The offer will be available to General Growth through year end if the Brookfield-led team is granted “stalking horse” status by a bankruptcy judge at an April 28 hearing, meaning the Brookfield offer would be the one other bids must beat, people familiar with the matter said.
That means General Growth still could pursue a competing offer prior to Dec. 31. If the rival bid doesn’t pan out, General Growth then could return to the Brookfield offer on the same terms, these people say.
…
If Simon opts to sweeten its bid, it must do so within the next three weeks to be considered before the April 28 court hearing, people familiar with Simon’s strategy say.
…
Aside from the Dec. 31 deadline, the documents outlining the Brookfield-led offer include no significant changes from the general terms disclosed earlier this month. Brookfield has pledged to provide $2.6 billion and Pershing and Fairholme a combined $3.9 billion to help General Growth. The mall owner would use that money to eliminate much of its $7 billion of unsecured debt and finance its emergence from bankruptcy.
In return, Brookfield, Pershing and Fairholme would collectively receive 630 million General Growth shares, or roughly 66% of the company’s shares outstanding upon its exit from bankruptcy, not counting warrants that would be granted to the trio.
If the judge approves the Brookfield offer as the stalking horse, the Brookfield team also would receive 120 million warrants—60 million for Brookfield and 60 million for Fairholme and Pershing—allowing them to buy General Growth stock at $15 a share.
Text of General Growth’s release below: Read the rest of this entry »
Related Topics: Finance, News, REITs, Retail Real Estate |
Barneys Looks for CEO, Leaves Bankruptcy Talk Behind
by Elaine Misonzhnik April 19th, 2010
After months of will they/won’t they speculation on whether luxury department store chain Barneys New York will be forced to file for bankruptcy protection, it appears the retailer may be turning a corner. This week, The New York Post ran a story saying the chain’s owner, the Dubai-based investment firm Istithmar, is once again looking for a new CEO. Barneys has remained without a CEO for some time, as Istithmar struggled with falling sales, a $500 million debt load and takeover attempts by noted investor Ron Burkle, who already owns a large stake in the company.
The firm’s renewed interest in retail operations signals that Barneys is back from the edge, with a 20 percent increase in March same-store sales. Luxury retailers, in general, seem to be experiencing a moderate renaissance, as high net worth consumers start to feel better about their balance sheets. In fact, many consumer experts say shoppers from high income households will likely return to their pre-recession levels of spending relatively soon, while the average middle-income consumer will remain shell-shocked by the downturn for some time to come.
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