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Report: Simon Looking at General Growth

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This just came over the wires from the Wall Street Journal. It appears Simon Property Group has hired an adviser and is evaluating General Growth Properties. Meanwhile, Westfield Group also has cash it could use as part of an acquisition. Could a bidding war be afoot? Or could the firms be looking to divvy up General Growth's assets? In the mean time, it appears General Growth is very close to restructuring its debt.

There's a ton of history here. Years ago Simon and Westfield teamed with Rouse Co. to buy Rodamco North America for $5.3 billion, snatching the company right from under General Growth's nose. General Growth shortly before that deal had issued 8 million shares as it presumably prepped to take over Rodamco. General Growth eventually used the funds in a series of buys that culminated in its takeover of Rouse--a bit of sweet revenge for the firm. At the end of that spree, General Growth nearly rivaled Simon in size. (Our May 2005 cover story recounted how the firms emerged as the industry's two titans.)

However, the Rouse deal, along with some of the others GGP had undertaken, left it saddled with a ton of debt, which is what triggered its bankruptcy filing earlier this year. Simon, for its part, also has a history of buying distressed firms. In early 2007 it purchased troubled Mills Corp. It will be interesting to track how all of this shakes out.

Mall giant Simon Property Group Inc. has hired investment adviser Lazard Ltd. and law firm Wachtell, Lipton, Rosen & Katz to help it formulate a strategy for possibly bidding for all or part of rival General Growth Properties Inc., which is operating under Chapter 11 protection.

The moves set the stage for what could be a takeover struggle as General Growth readies a plan to reorganize and exit from bankruptcy. General Growth, the country's second-largest mall operator, after Simon, by number of properties, is close to a deal with lenders to restructure its $11.5 billion in securitized mortgages with the intent of filing a reorganization plan by February, people familiar with the talks say.

...

Another big rival, Australian mall owner Westfield Group, has $6.8 billion of cash and equivalents, much of it raised in the past year. Westfield, which owns 55 malls in the U.S., is monitoring General Growth's bankruptcy but hasn't hired advisers to study it, a person familiar with the matter said. Westfield and General Growth representatives declined to comment on the matter. A Simon representative confirmed that the company has hired the advisers.

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Elaine Misonzhnik

Senior associate editor Elaine Misonzhnik has been writing for National Real Estate Investor since June 2006 and has covered commercial real estate for more than 12 years. She first became...
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