Brookfield Property Partners reaches US $22.57B privatization agreement with GGP

Brookfield Property Partners L.P. (NASDAQ: BPY; TSX:BPY.UN) and GGP Inc. (NYSE: GGP) have reached an agreement that BPY will acquire all of the outstanding shares of common stock of GGP other than those shares currently held by BPY and its affiliates, at US $23.50 per GGP share (all figures in US dollars).

As of February 19, 2018, GGP had 957,017,459 shares of common stock outstanding. BPY beneficially owns 327,053,880 GGP shares. BPY’s new proposal values GGP at $22.57 billion on fully diluted basis or $14.89 billion to minority shareholders.

On November 13, 107, BPY announced a non-binding proposal to acquire all the outstanding shares of common stock of GGP, other than those shares currently held by BPY and its affiliates (representing approximately 34% of the outstanding shares), at either $23.00 in cash or 0.9656 of a limited partnership unit of BPY.

GGP shareholders will be entitled to elect to receive, for each GGP common share, either $23.50 in cash or either one BPY unit or one share of a new BPY U.S. REIT security, subject to proration based on aggregate cash consideration of $9.25 billion.

The new offering represents an increase of cash consideration from $7.4 billion to $9.25 billion and exchange ration from 0.9656 to 1.

The creation of a new BPY U.S. REIT (BPR) that will qualify as a REIT for tax purposes and issue shares in the transaction. Shares in BPR are structured with the intention of providing an economic return equivalent to BPY units, including identical distributions. BPR shareholders will have the right to exchange each BPR share for one BPY unit, or the cash equivalent of one BPY unit, at the election of BPY. Brookfield Asset Management (NYSE: BAM; TSX: BAM.A; Euronext: BAMA) has agreed that, for a period of at least 20 years, it will guarantee the BPR shareholders’ right to exchange a BPR share for a BPY unit or the cash equivalent of a BPY unit, as described above.

photo credit: GGP

News Release

BROOKFIELD AND GGP REACH AGREEMENT ON BPY’S ACQUISITION OF GGP


GGP shareholders can elect to receive for each GGP share either $23.50 in cash, or either one BPY unit or one share of a newly created U.S. REIT, subject to proration, for an aggregate cash / equity consideration ratio of approximately 61% / 39%

Transaction expected to be immediately accretive to FFO/unit for BPY unitholders; BPY’s current per unit distribution is more than 40% higher than the per share dividend currently received by GGP shareholders

Special Committee of GGP unanimously recommends the transaction

Brookfield News, March 26, 2018 – Brookfield Property Partners L.P. (“BPY”) (NASDAQ: BPY; TSX: BPY.UN) and the Special Committee of the Board of Directors of GGP Inc. (the “Special Committee”) today announced that BPY and GGP Inc. (“GGP”) (NYSE: GGP) have entered into a definitive agreement for BPY to acquire all of the outstanding shares of common stock of GGP other than those shares currently held by BPY and its affiliates.

In the transaction, GGP shareholders will be entitled to elect to receive, for each GGP common share, either $23.50 in cash or either one BPY unit or one share of a new BPY U.S. REIT security, subject to proration based on aggregate cash consideration of $9.25 billion.

As compared to the offer to acquire GGP that BPY publicly announced on November 13, 2017, the transaction includes:
i. An increase in the cash consideration from $23.00 to $23.50 per GGP share;
ii. A $1.85 billion increase in the aggregate cash consideration, from $7.4 billion to $9.25 billion;
iii. An increase in the exchange ratio from 0.9656 to 1.0000; and
iv. The creation of a new BPY U.S. REIT (“BPR”) that will qualify as a REIT for tax purposes and issue shares in the transaction. Shares in BPR are structured with the intention of providing an economic return equivalent to BPY units, including identical distributions. BPR shareholders will have the right to exchange each BPR share for one BPY unit, or the cash equivalent of one BPY unit, at the election of BPY. Brookfield Asset Management (“BAM”) (NYSE: BAM; TSX: BAM.A; Euronext: BAMA) has agreed that, for a period of at least 20 years, it will guarantee the BPR shareholders’ right to exchange a BPR share for a BPY unit or the cash equivalent of a BPY unit, as described above.

The Special Committee, comprised of non-executive, independent directors, has unanimously recommended that GGP shareholders approve the transaction. The Special Committee believes the transaction is fair to and in the best interests of GGP shareholders.

As a result of the transaction, GGP shareholders who receive equity consideration will be entitled to receive the same amount as BPY’s current distribution on the BPY units or BPR shares they receive, which is over 40% higher than GGP’s dividend (BPY annual distribution of $1.26 per unit vs. GGP dividend of $0.88 per share).

Brian Kingston, CEO of Brookfield Property Partners, said, “This is a compelling transaction that enables GGP shareholders to receive premium value for their shares and gives them the ability to participate in the long-term upside of their investment. We are pleased to have reached an agreement and are excited about combining Brookfield’s access to large-scale capital and deep operating expertise across multiple real estate sectors with GGP’s portfolio of irreplaceable retail assets.”

He continued, “The introduction of the new BPR shares will allow GGP shareholders to efficiently participate in the transaction.”

Daniel Hurwitz, Lead Director and Chairman of the Special Committee, said, “Since receiving Brookfield’s initial proposal in November, the Special Committee has conducted extensive due diligence, specifically evaluating the optimal consideration structure for GGP’s shareholders. After careful consideration, assisted by our independent advisors, the Special Committee determined that Brookfield’s improved proposal, which includes an increase in the cash portion of the consideration and the ability to receive shares in a newly listed REIT entity, provides GGP shareholders with certainty of value, as well as upside potential through ownership in a globally diversified real estate company. We are pleased to have reached this agreement, which we believe is in the best interests of GGP and our shareholders.”

With an ownership interest in approximately $90 billion in total assets and annual net operating income of more than $4 billion, the combined company will be one of the world’s largest commercial real estate enterprises. Following completion of the transaction, GGP shareholders will own approximately 26% of the combined company (calculated based on all BPR shares having been exchanged for BPY units and pro forma for the proposed BAM preferred share conversion as described below), which will possess one of the highest quality and most diverse portfolios of property globally, with a fortress balance sheet and strong overall financial profile.

Transaction Details

GGP shareholders will be entitled to elect to receive, for each GGP common share, either $23.50 in cash or either one BPY unit or one BPR share. Elections are subject to proration which will be based on aggregate consideration in the transaction of (1) a fixed amount of $9.25 billion in cash and (2) approximately 254 million BPY units / BPR shares, which represents aggregate consideration of approximately 61% cash and approximately 39% of BPY or BPR equity.

The consideration in the transaction will be structured as (1) a dividend by GGP paid in cash and equity (subject to proration) and (2) merger consideration paid in cash. As a result, all GGP shareholders will receive a portion of the consideration in cash (regardless of their election).

The cash portion of the consideration will be funded by a combination of approximately $4 billion from joint venture equity partners, and financings from a syndicate of lenders led by Deutsche Bank, Morgan Stanley, RBC Capital Markets and Wells Fargo Bank, National Association, with additional commitments from Bank of America Merrill Lynch, Barclays, HSBC, SMBC, and The Toronto-Dominion Bank.

In conjunction with and in support of the proposed transaction, BAM has stated its intention to convert $500 million currently held in BPY Class C Junior Preferred Shares into BPY units at a price of $23.50 per unit, resulting in BAM’s acquisition of approximately 21.3 million BPY units.

In addition, to allow for synergies and cost savings between BPY and GGP to be effectuated following closing of the transaction, BAM, which provides management services to BPY and will also provide services to BPR following closing, has agreed to waive, for one year, the management fees payable by BPR and the incremental management fees BPY would otherwise be required to pay in respect of the units issued in exchange for GGP shares.

The transaction is subject to the approval of (1) GGP shareholders representing at least two-thirds of the outstanding GGP common stock and (2) GGP shareholders representing a majority of the outstanding GGP common stock not owned by BPY and its affiliates. BPY and its affiliates have agreed to vote in favor of the transaction. The transaction is also subject to other customary closing conditions and is expected to close early in the third quarter of 2018.

GGP shareholders will receive a second quarter dividend of up to $0.22 per share (final amount to be prorated in the event the transaction closes prior to June 30).
Weil, Gotshal & Manges LLP, Goodwin Procter LLP and Torys LLP are serving as legal counsel to BPY and PwC is serving as tax advisor to BPY.

Goldman Sachs & Co. LLC is serving as financial advisor and Simpson Thacher & Bartlett LLP is serving as legal counsel to GGP’s Special Committee. Citigroup Global Markets Inc. is serving as financial advisor and Sullivan & Cromwell LLP is serving as legal counsel to GGP.

All dollar references are in U.S. dollars, unless noted otherwise.

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Brookfield Property Partners

Brookfield Property Partners is one of the world’s largest commercial real estate companies, with approximately $68 billion in total assets. We are leading owners, operators and investors in commercial real estate, with a diversified portfolio of premier office and retail assets, as well as interests in multifamily, triple net lease, industrial, hospitality, self-storage, student housing and manufactured housing assets. Brookfield Property Partners is listed on the New York and Toronto stock exchanges. Further information is available at bpy.brookfield.com.

Brookfield Property Partners is the flagship listed real estate company of Brookfield Asset Management, a leading global alternative asset manager with over $285 billion in assets under management.

GGP Inc.

GGP Inc. is an S&P 500 company focused exclusively on owning, managing, leasing and redeveloping high-quality retail properties throughout the United States. GGP is headquartered in Chicago, Illinois, and publicly traded on the NYSE under the symbol GGP.

Brookfield Contacts:
Suzanne Fleming
Managing Partner, Communications
O: (212) 417-2421
suzanne.fleming@brookfield.com

Matt Cherry
SVP, Investor Relations & Communications
O: (212) 417-7488
matthew.cherry@brookfield.com

GGP Inc. Contact:
Kevin Berry
SVP, Investor & Public Relations
O: (312) 960-5529
M: (708) 308-5999
kevin.berry@ggp.com