Mall deal creates industry behemoth

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Brookfield Property Partners LP and GGP Inc. have reached an agreement for Brookfield to buy the remaining shares of the mall owner it doesn't already own, a deal that would create one of the world's largest retail real-estate companies.

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The deal is a sweetened version of the offer that Brookfield made for the roughly 66% stake in November.

Brookfield currently owns about 34% of the company, formerly known as General Growth Properties.

Under the agreement announced Monday, and unanimously endorsed by a special committee of GGP's board, GGP investors could choose either $23.50 a share in cash or stock in either Brookfield Property or a new real-estate investment trust being formed. The offer is subject to proration based on aggregate cash consideration of $9.25 billion.

Earlier, Brookfield had offered $23 a share in cash for an aggregate cash consideration of $7.4 billion.

The offer went from about 50% cash and 50% shares to about 61% cash and 39% shares. The previous offer valued one share of GGP with 0.9656 of Brookfield. The new offer values the two shares equally.

The deal values GGP at $15.3 billion based on the value of Brookfield Property when the company first announced its offer to buy the company in November. In an interview Monday evening, Brian Kingston, chief executive of Brookfield Property, predicted GGP would vote on the deal "sometime in the third quarter."

The Brookfield deal marks the latest chapter in the saga of GGP, which went through a high-profile bankruptcy reorganization after the 2008 financial crash. It comes as the retail real-estate world is being rocked by investor unease caused by the growth of online shopping.

Matt Kopsky, an analyst at Edward Jones, said Brookfield's price reflects a weak appetite for portfolios of malls in the current environment. He called the price "a disappointment" given that GGP owns top-quality malls that have relatively high occupancy and rents compared with the rest of the sector.

"The market has sniffed this out given the weakness in mall REITs," Mr. Kopsky said in an email. "I think this deal is confirmation that a new reality/pricing has set in, even to high-quality centers."

Mr. Kopsky added: "I would expect some downward pressure on mall REITs" in the stock market on Tuesday "given the low price."

Mr. Kingston said that Brookfield has been in "pretty regular dialogue" with the GGP special committee since November. For the past four months, Brookfield "has been firming up our offer," he said.

GGP shareholders will have the option of either exchanging GGP shares for Brookfield shares or shares in the new REIT because a large number of the GGP shareholders are U.S. shareholders who don't want to own partnership units, Mr. Kingston said.

"It will be a different security, but it's not a different company," he added. "GGP shareholders "get an ability to participate in our global business."

Esther Fung contributed to this article.

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