General Growth Properties President and COO Tom Nolan appeared on CNBC yesterday to explain General Growth's plans and defend the deal it is proposing with Brookfield Asset Management. Then, later that night, John Bucksbaum made a rare public appearance at an industry dinner. Crain's Chicago Business reported on his appearance.
Meanwhile, in another potential huge development in the process, the Wall Street Journal reported that Westfield Group may be entering the fray.
“A lot of people point to that,” he said at a real estate industry dinner in downtown Chicago. “I don't think that was the problem. The problem was the credit markets disappeared.”
The remarks, at a gathering of the Real Estate Investment Assn., marked a rare public appearance for Mr. Bucksbaum, who has let others speak for General Growth since he stepped down as CEO in October 2008, at the peak of the financial crisis.
But he chose an unusual time to make them, just hours after the Chicago-based real estate investment trust (REIT) rolled out a much-anticipated proposal to recapitalize and exit from bankruptcy protection.
He made a case for the plan, which calls for a $2.6-billion equity infusion from Toronto-based Brookfield Asset Management, and dismissed a competing $10-billion takeover proposal from rival Simon Property Group Inc. In response to a question from a member of the audience, Mr. Bucksbaum didn't address the merits of the Simon proposal, but said it didn't constitute an offer, just “an expression of interest.”
Yet at other times, Mr. Bucksbaum seemed unwittingly to back up one of Simon's key arguments. The Indianapolis-based mall owner contends that its offer is superior to the recapitalization because it will pay off unsecured creditors and shareholders in cash, a key element given the uncertainty of the financial markets.
Though General Growth values its plan at $15 a share, vs. Simon's estimated $9, the company would need to raise additional capital in a variety of ways, including asset sales and new debt. It's “a highly speculative and risky plan” based on the future performance of the financial markets, Simon said Wednesday.
Mr. Bucksbaum acknowledged that property and debt markets still look risky, saying that looming commercial real estate loan maturities over the next few years amount to a “very scary proposition.”
“In a situation like this, you never know what's going to happen next,” he said. “You have to hope that you've seen the worst.”