Brookfield/ GGP Merger
Since the merger has recently has been finalized, I think we should discuss what this means for the industry and how Brookfield will benefit from this deal.
How was this beneficial for Brookfield? Who will be managing these new assets? Is this an economies of scale play as in addition to believing in retail?
Whats the future of retail REITS?
What lies ahead for GGP? Typically after a merger, what happens to the executives at the company that has been acquired?
Benefits of the stock/cash purchase?
i saw the news. don't have any answers for you. i do wonder what it does to the pension fund advisors and their valuations. I know my shop had most of our class a malls at 4.5ish caps. What was the implied cap rate of the ggp/brookfield deal? Wouldn't be surprised to see a good bit of write downs in the industry.
4.50% cap rate?!
I thought the same
An article from WSJ said that, "Brookfield's price amounts to a 6.0% cap rate". Which is an extremely low basis, and only a $0.50/share increase from their initial bid in November. So, yeah definitely interested in how this will affect retail investments going forward.
class a malls dude, there hadn't been a trade in awhile. i might be off but the cap rates on true class a malls is lower than i first expected. looked at buying a 49% stake in a GGP mall right before the brookfield offer came thru, the ask was 4.75 and it was an ok mall, probably more b+/a- in my opinion.
Fixed
So you think Brookfield, one of the pre-eminent real estate investors/developers in the world, didn't think this one through?
Please feel free to read the earnings call transcripts for both of these companies for the last 2 or 3 quarters. General consensus is that the street is not exactly gung-ho….
Who do you think will lease these properties? Will Brookfield hand their portfolio to the GGP guys? Hand it to their current Rouse/Brookfield team? or a combination?
I wonder what is Mathrani's future. Hopefully, he stays on-board.
Also wonder what will happen to him. Typically in a merger, what tends to happen to the CEO and senior excitives of the targeted company?
Deal is at 15-20% discount to NAV so I wouldn't be surprised if Brookfield found a way to make a little money off of it. Some interesting articles out there about why their relatively low offer is tough to beat. https://finance.yahoo.com/news/brookfields-bid-ggp-seen-undercutting-21…
No secret that it is difficult for public companies to undergo signifcant changes so I imagine Brookfield is going to allow GGP to execute on redevelopments and maximize long-term value of their assets.
Someone mentioned it above, but will be interesting to see what if any impact the mid-5 cap price on this deal has on private market valuations of class-a fortress malls.
Bloomberg article below has some takes on the last point. Curious what everyone's thoughts are on the subject.
https://www.bloomberg.com/news/articles/2018-03-28/brookfield-s-deal-fo…
Brookfield has nearly all product types in house as of now, following their acquisition of Oliver McMillan (multifamily). GGP owns A malls with big box stores that are struggling and in certain cases going dark. GGP preciously was taking these deals to market in attempts to revive shareholder confidence (and reinvigorate their malls with mixed uses) however the pressure from Brookfield stalled talks with redevelopment partners and none of the deals came to fruition. The end game for Brookfield (subsidiary of Brookfield Asset Management, I.e. $$$) is the acquisition of A+ malls that are thriving, but need help in certain weak spots—these weaknesses can be backfilled by Brookfield Office and/or their new multifamily platform, who now has exclusive access to primo development sites adjacent successful retail. Excellent basis as well.
Now that’s a remarkable point. You’re right - they can leverage their other uses which they’re specialized in to backfill the weak retail spots. Genius.
Main question from today's earnings call:
Sheila McGrath
Yes, I was wondering if you could just remind as of the strategic reasons why the GGP acquisition make sense for BPY in terms of the opportunities you see there? Have you had great success with Rouse that you want to -- I know it's a completely different portfolio. Just talk about why it makes sense from BPY's standpoint. And if you could comment on the FFO and NAV accretion or dilution you're expecting.
Brian Kingston
Sure, so I will preface this by referring back to Matt's earlier comments, which is we have the S-4 out there, and so I would encourage people to read that in its entirety because that will give you a more fulsome answer to all these things. And I'll keep my comments largely consistent with what's in there. But look, from a strategic perspective, we really think about it in two main ways. One is from an operational perspective. I think having the ability to bring to bear all of our various operating platforms in a much more coordinated way that you can in two separate companies is going to have a huge strategic benefit. And we're seeing this in all of our projects, whether it's Manhattan West here in New York or Ala Moana in Honolulu. These very large retail projects are increasingly becoming mixed use. It's not only retail, it's not only office, but it's office, retail, multifamily, hotel uses, et cetera.
And so having an ability for us to be able to bring all of those internal resources together in a more efficient way, we think is going to have huge operational benefits in terms of speed of execution. The other big advantage I think for us in particular again comes back to the balance sheet flexibility. And so owning 34% of a separately listed publicly traded company, we had a very substantial investment in a portfolio of listed -- of shares. This will now give us a much more direct access to the underlying cash flows and asset themselves and will give us a lot more flexibility, as we have been doing with Brookfield Office Properties since we privatized that business. So those are the two strategic benefits. As we've mentioned, it has the advantage that it will be FFO accretive immediately and on any per share basis, it should be roughly neutral.
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