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New Offer Extended by Brookfield Property to Acquire GGP

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Asset manager, Brookfield Property Partners made a revised acquisition offer to GGP Inc. GGP, according to a report by Reuters. Per people familiar with the matter, the revised offer boasts of an elevated cash component.

In November 2017, Brookfield offered $14.8 billion or $23 per share in a cash-and-stock offer to acquire the remaining 66% stake in GGP. However, GGP’s special board committee rejected the offer.

The negotiations between the companies are ongoing and the exact value of the new offer is not known. The special board committee has yet to accept the offer.

Brookfield wants to buy the remaining stake in GGP, one of the largest owners of shopping centers in the United States, to take the company private.

This move of acquiring GGP by Brookfield comes as a surprise as the U.S. retail real estate market has been plagued with issues like downsizing and bankruptcies of retailers. This is because mall traffic continues to suffer amid a rapid shift in customers’ shopping preferences and patterns with online purchases growing by leaps and bounds.

This has emerged as a pressing concern for retail REITs like GGP, as the trend is curtailing demand for the retail real estate space considerably and curbing the landlord’s pricing power and occupancy level of properties. Moreover, such a choppy environment has led to tenants demanding substantial lease concessions but mall landlords are finding these unjustified.

However, the combination of GGP and Brookfield will make the combined company one of the largest companies in the world and, in turn, help them in negotiating better with the tenants.

Shares of GGP outperformed its industry in the past six months. During this time, the stock gained 3.2% compared with industry’s decline of 7.8%.


 

GGP currently has a Zacks Rank #3 (Hold).

Stocks Worth a Look

A few better-ranked stocks from the real estate industry include Arbor Realty Trust ABR, Extra Space Storage Inc. EXR and Sotherly Hotels Inc. SOHO. All three stocks carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Arbor Realty Trust’s Zacks Consensus Estimate for 2018 FFO per share has been revised 2.3% upward to 90 cents over the past month. Its share price rose 10.2% in six months’ time.

Extra Space Storage’s FFO per share estimates for the current year have moved up 2% to $4.57 in a month’s time. Its shares gained 8.5% over the past six months.

Sotherly Hotels’ FFO per share estimates for 2018 have been revised approximately 1.9% upward to $1.05 over the past month. The stock gained 5.6% during the past six months.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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