01/19/2016 | by
Article Author(s)

Retail REIT Rouse Properties, Inc. (NYSE: RSE) said Jan. 19 it has received an unsolicited takeover offer from Canadian firm Brookfield Asset Management Inc.

Brookfield already owns roughly one-third of Rouse and is offering to acquire the remaining 67 percent of the company.

Brookfield made the all-cash offer of $17 per share of Rouse’s outstanding common stock on behalf of a real estate fund managed by the company. The proposed price represents a premium of 26 percent to the $13.49 closing price of Rouse shares on Jan. 15. Rouse shares surged on the announcement, trading at $17.70 as of mid-afternoon on Jan. 19.

“Our offer provides an attractive opportunity for Rouse shareholders to realize a significant premium to recent public market pricing,” said Brian Kingston, CEO of Brookfield Property Group, Brookfield’s largest investment platform.

Rouse has formed a special committee to consider the proposal and said it plans to conclude its review “promptly.”

New York-based Rouse was formed in 2012, when it was spun off from General Growth Properties, Inc. (NYSE: GGP). GGP retained its class-A assets following the reorganization, while Rouse took control of what were previously GGP’s class-B malls. Rouse currently owns 35 regional malls in 21 states.

Rich Moore, an analyst at RBC Capital Markets, LLC, said that given the broad lack of investor interest in the class-B malls, “we were caught off guard” by the announcement that Brookfield had made an offer for Rouse.

Most institutional investors have cooled on class-B malls amid concerns over sluggish retail sales, bankruptcies and store closures, according to Moore, making the takeover proposal “timely.” Over the past year, shares of stock in companies that primarily own class-B malls have fallen about 38 percent as a group, according to Moore.

Moore said the Rouse offer could set the stage for more activity by Brookfield.

“Going forward, we would not be surprised to see Brookfield use a newly established platform to potentially target other publicly traded [class-B] mall REITs,” Moore said.