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Simon Writes Back to GGP

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Another day, another letter in the GGP/Simon saga. Things are getting a bit testy. There are some pointed barbs in here. Clearly Simon is hoping public pressure can get a deal done quickly at the price its suggesting. It's interesting that so much of this is getting aired publicly, which rarely seems to happen with potential mergers like this.

Simon Property Group, Inc. (NYSE: SPG) today sent a letter to General Growth Properties, Inc. (OTC: GGWPQ.PK) in response to General Growth's letter on February 16, 2010 regarding Simon's $10 billion offer to acquire General Growth.

Following is the text of Simon's letter to General Growth:

February 17, 2010

Mr. Adam Metz

Chief Executive Officer

General Growth Properties, Inc.

110 North Wacker Drive

Chicago, Illinois 60606

Dear Adam,

We appreciate that you have responded to the written offer we made to you on February 8, 2010, but we are concerned by your letter of February 16, 2010.

It is simply wrong to characterize our offer as an "indication of interest." As you well know, we have made a firm, fully financed $10 billion offer that provides immediate 100% cash recovery of par value plus accrued interest and dividends to all unsecured creditors, plus more than $9.00 per share in value to shareholders. Our offer has no financing contingency and can be completed quickly. The credibility of Simon Property Group as an acquiror speaks for itself, no one has completed more mergers and acquisitions in the retail real estate industry.

Importantly, this is the only offer for General Growth which provides a full cash recovery for unsecured creditors while reducing risk and providing potential upside. It is far superior to any third-party proposal or stand-alone plan that would result from your "process." Proceeding expeditiously to complete our transaction would prevent an extended period of market risk for your stakeholders. In addition, our offer would remove the serious downside risks associated with a recapitalization, the value of which would be inherently uncertain and subject to future market conditions, even if a recapitalization could be secured.

Given the clear risks of pursuing an alternative plan, the current state of the retail industry and your company's past history of risky financial choices, your lack of urgency should deeply concern creditors and shareholders. Time is passing and General Growth is inappropriately speculating with creditors' money - the company's high leverage means not only that equity value could be destroyed by relatively small market movements, but that the value of the unsecured debt is also at risk. Accordingly, it is not surprising that the Official Committee of General Growth's Unsecured Creditors has publicly stated that it supports our offer and encourages you to engage with us promptly to allow our offer to be considered by your creditors and shareholders.

We have tried for many months to explore a transaction with you that would give creditors and shareholders an attractive and expeditious exit from your bankruptcy process and have been repeatedly put off. Time and again, serious engagement with us has been pushed off into some indefinite future when you might start to begin to commence a "process."

While you pay lip service to time being of the essence, the "process" outlined in your letter will take many months before a transaction could be agreed and made available to stakeholders. Our offer is fully financed and we are prepared to complete confirmatory due diligence within 30 days, during which time we are also prepared to negotiate and enter into a definitive agreement that will bring certainty to the closing of a transaction. We will promptly provide you a draft of such a definitive agreement and are prepared to meet with your advisors to complete its negotiation.

With respect to your equity holders, we do not believe there is any other party which can offer the value creation of a Simon-General Growth transaction. As you know, we are prepared to discuss offering Simon common equity instead of cash to those General Growth shareholders or unsecured creditors who would prefer to participate in the upside of owning Simon stock. While Simon equity is subject to market conditions, Simon is today -- and would be following any transaction -- a fortress of stability.

We are unwilling to waste our time and resources in a process not conducted on a level playing field, that is dragged out to provide an unfair advantage to any party, or that will serve any agenda other than maximizing return for General Growth's stakeholders -- while also minimizing the risk and uncertainty of needlessly extending the bankruptcy proceedings. Accordingly, we urge you not to pursue another proposal that you might receive, whether before or after the commencement of your process - as you threaten in your letter - without also substantively engaging with us. Regarding access to the data necessary for us to perform our confirmatory diligence, we are willing to agree to customary undertakings to preserve the confidentiality of such information. However, in light of your conduct to date, and for the reasons outlined above, we are not willing to agree to any restriction on our right to make proposals at any time or to otherwise speak freely, including to all of General Growth's stakeholders, or to agree to any other standstill or similar provision.

I want to reiterate that our offer is not open-ended, and we have a number of other opportunities under consideration. We sincerely hope you will engage seriously with us without further delay.

Very truly yours,

David Simon

Chairman of the Board and

Chief Executive Officer

cc: Official Committee of Unsecured Creditors

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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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