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Critics Fear Brookfield-GGP Takeover Could Lead To The Undervaluing Of Class-A Malls

Some experts foresee a bidding war breaking out on the heels of the Brookfield Property Partners deal to acquire the remaining 66% of GGP for $9.25B in cash.

Augusta Mall in Augusta, Ga., one of the properties Brookfield acquired when it bought GGP

The deal has sparked controversy and caused many to question whether or not it will lead to the undervaluing of Class-A malls. GGP rejected an earlier offer from Brookfield because it was deemed too low, but according to Brookfield, the new offer increases the cash consideration from $7.4B to $9.25B.

Bullish real estate investor and Seeking Alpha contributor Julian Lin said this controversy could lead GGP rival Simon Property Group to put in a bid.

The theory behind this is the assumption that Simon Property, led by CEO David Simon, will offer to buy GGP for between $26 and $28 a share instead of the current $23.50/a share to prove that prime malls are still valuable.

This would not be the first time a REIT bidding war of this kind broke out. In 2006, Blackstone and Vornado went head to head for Equity Office Properties. After several months of back-and-forth maneuvers, Blackstone came out on top with a $23B all cash bid, or $55.50 per share. Vornado ended up withdrawing its $56 per share cash and stock proposal, citing its shareholders' interests as the reason for pulling out, Reuters reports.