INDIANAPOLIS, April 14 /PRNewswire-FirstCall/ -- Simon Property
Group, Inc. (NYSE: SPG) ("SPG") today sent a letter to General
Growth Properties, Inc. (NYSE: GGP) ("GGP") offering to invest
$2.5 billion in a General Growth
reorganization at the same per share price as the plan of
reorganization sponsored by Brookfield Asset Management.
SPG's proposal is substantially more favorable to GGP and its
equityholders than the currently proposed plan of reorganization
because it would eliminate the highly dilutive warrants that GGP
proposes to issue to Brookfield,
Pershing Square and Fairholme Capital. SPG's proposal also
includes a $1 billion co-investment
commitment by Paulson & Co.
Following is the text of the letter sent today by Simon Property
Group to General Growth:
April 14, 2010
Mr. Adam Metz
Chief Executive Officer
General Growth Properties, Inc.
110 North Wacker Drive
Chicago, Illinois
60606
Dear Adam:
This will formally confirm that Simon Property Group is prepared
to participate in the recapitalization of General Growth Properties
in the same format as the proposed plan of reorganization sponsored
by Brookfield Asset Management, but on a basis very substantially
more favorable to GGP and its equityholders, as outlined below.
Consideration. Simon would acquire
250,000,000 shares of common stock in GGP for $2.5 billion in the aggregate, or $10.00 per share, the same amount as Brookfield would acquire, at the same price,
pursuant to its Cornerstone Investment Agreement. Simon would
also backstop the GGO rights offering as contemplated in the
Brookfield sponsored
recapitalization, and would otherwise enter into agreements on the
same basis as Brookfield with
respect to the recapitalization of GGP and the spin-off of GGO,
subject to the adjustments for the benefit of GGP outlined
herein.
Warrants. Simon would not receive any
warrants or similar payment or fees in respect of its commitment to
invest in GGP, either on an interim basis, or as part of the
post-reorganization consideration to be issued to Simon in respect
of its investment. GGP's equityholders would accordingly not
suffer the dilution contemplated by the Brookfield investment, and their ongoing
interest in GGP would be substantially more valuable. We
estimate that this benefit could be at least $895 million, or $2.75 per share based on today's share count.
Governance. In order to ensure that
GGP remains an independent company for all regulatory purposes and
avoid the interposition of any challenge to the proposed
transaction, Simon is prepared to agree to the limits on its
governance rights described in Annex A. These governance
mechanisms – which you and your counsel should find familiar from
other similar situations – will obviate any possible concern about
Simon exercising inappropriate or unreasonable influence over the
reorganized GGP. Our counsel are of course prepared to
discuss these matters with yours.
Co-Investors. If Pershing Square and
Fairholme will agree to amend their investment agreements with GGP
to forego the warrants currently contemplated by those agreements,
Simon would welcome them as co-investors in GGP's recapitalization.
However, a number of alternative sources of capital are
interested in co-investing in GGP with Simon, on such terms, in
their stead. Pursuant to the attached letter from Paulson
& Co. Inc., Paulson is prepared to co-invest at least
$1 billion with Simon in connection
with a Simon sponsored recapitalization of GGP. In order to
ensure the success of GGP's recapitalization, in addition to
working with GGP to negotiate and finalize the revised Pershing
Square and Fairholme co-investment commitments or replacements
thereof, Simon will itself fully backstop the entire amount of such
co-investment commitments, without any warrants, as well as
backstopping an additional $125
million investment in GGO as Pershing Square and Fairholme
are currently contemplated to do. However, it is not Simon's
intent to gain control of GGP pursuant to this backstop obligation,
and, as set forth on Annex A, Simon would agree not only to seek
the disposition of any shares issued with respect to its backup
commitment as promptly as practicable, but also to the effective
sterilization of such interest for voting and control purposes
prior to such disposition. Simon's voting interest in GGP
would generally be limited to 20% of the outstanding shares.
No Financing or Other Contingencies. There
will be no financing condition whatsoever to Simon's obligations to
close the transaction. Simon, which has an equity market
capitalization in excess of $27
billion, $3.5 billion of
available cash on its balance sheet, and $3.3 billion of available borrowing capacity
under its revolving credit facility, and would be fully and
immediately responsible for its commitment and backstop
obligations, in distinction to Brookfield, which does not seem to have yet
delivered an equity commitment to the shell subsidiary with which
GGP contracted and seems to be entirely free to walk away from the
agreed deal. Simon's investment would not be contingent on
any vote of Simon shareholders, and Simon will not require any
commitment or other fee in respect of its equity investment
commitment in the recapitalization of GGP.
Improvement to Brookfield Terms. Except as
specified herein, the terms of Simon's commitment to invest in GGP
would be substantially identical to Brookfield's obligations pursuant to the
Brookfield investment agreement
and the other agreements contemplated thereby. Our proposed
form of investment agreement is attached, along with a comparison
to the Brookfield agreement.
If you are interested, we remain prepared to discuss with you
instead an acquisition of GGP in a fully-financed transaction.
We look forward to hearing from you and to working together to
consummate a transaction.
Very truly yours,
David Simon
Chairman of the Board and
Chief Executive Officer
cc: Board of Directors, General Growth Properties, Inc.
Official Committee of Equity Security Holders
Official Committee of Unsecured Creditors
Jackson Hsieh, UBS Investment
Bank
About Simon Property Group
Simon Property Group, Inc. is an S&P 500 company and the
largest real estate company in the U.S. The Company currently
owns or has an interest in 381 properties comprising 260 million
square feet of gross leasable area in North America, Europe and Asia. Simon Property Group is
headquartered in Indianapolis,
Indiana and employs more than 5,000 people worldwide.
The Company's common stock is publicly traded on the NYSE
under the symbol SPG. For further information, visit the
Simon Property Group website at www.simon.com.
About Paulson & Co. Inc.
Paulson & Co. Inc. is a New
York-based investment management firm with approximately
$32 billion under management across
merger, event and credit strategies. One of Paulson & Co’s core
strategies is providing capital to companies as they emerge from
bankruptcy so that they can operate with a deleveraged balance
sheet allowing them to prosper in the future.
Forward-Looking Statements
Certain statements made in this press release may be deemed
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Although the Company
believes the expectations reflected in any forward-looking
statements are based on reasonable assumptions, the Company can
give no assurance that our expectations will be attained, and it is
possible that actual results may differ materially from those
indicated by these forward-looking statements due to a variety of
risks, uncertainties and other factors. Such factors include, but
are not limited to: the Company's ability to meet debt service
requirements, the availability and terms of financing, changes in
the Company's credit rating, changes in market rates of interest
and foreign exchange rates for foreign currencies, changes in value
of investments in foreign entities, the ability to hedge interest
rate risk, risks associated with the acquisition, development,
expansion, leasing and management of properties, general risks
related to retail real estate, the liquidity of real estate
investments, environmental liabilities, international, national,
regional and local economic climates, changes in market rental
rates, trends in the retail industry, relationships with anchor
tenants, the inability to collect rent due to the bankruptcy or
insolvency of tenants or otherwise, risks relating to joint venture
properties, costs of common area maintenance, competitive market
forces, risks related to international activities, insurance costs
and coverage, terrorist activities, changes in economic and market
conditions and maintenance of our status as a real estate
investment trust. The Company discusses these and other risks and
uncertainties under the heading "Risk Factors" in its annual and
quarterly periodic reports filed with the SEC. The Company may
update that discussion in its periodic reports, but otherwise the
Company undertakes no duty or obligation to update or revise these
forward-looking statements, whether as a result of new information,
future developments, or otherwise.
SOURCE Simon Property Group, Inc.