Brookfield raises stake in GGP in $1.7bn deal

The Toronto-based investment firm has bought all of Fairholme’s interest in the mall REIT, increasing its total stake in GGP to 38%.

Brookfield Asset Management has increased its stake in General Growth Properties to 38 percent in a $1.7 billion deal with hedge fund Fairholme Capital.

The Toronto-based investment firm and fund manager said it had acquired all of Fairholme’s 113.3 million shares in GGP after a consortium of investors – led by Brookfield and including Fairholme – recapitalised the US mall REIT, helping it emerge from Chapter 11 bankruptcy protection in November.

Brookfield said it would pay $804 million in cash from its corporate balance sheet and $907 million of Brookfield shares to Fairholme, giving the hedge fund a 4.5 percent stake in the asset manager. Brookfield is limited to buying a 45 percent stake in GGP, the firm said in a statement.

GGP exited Chapter 11 in November after a 19 month restructuring process. Together with Fairholme, Pershing Square Capital Management, The Blackstone Group and the Teachers Retirement System of Texas, Brookfield led a $6.8 billion equity recapitalisation of the REIT. Brookfield invested around $1 billion of its $5.5 billion Real Estate Turnaround Consortium capital in GGP, while Blackstone invested $481 million through its $10.9 billion Blackstone Real Estate Partners VI fund. Texas Teachers invested up to $500 million. As part of the bankruptcy protection proceedings, a further $15 billion of project-level debt was restructured.

The Chapter 11 process saw GGP split into two separate publicly traded companies. GGP will continue to operate and own more than 185 stable, income-producing regional malls in 43 states, while a spinoff – known as The Howard Hughes Corporation – will control the non-income producing assets owned by the REIT, including development land and air space with approved planning consents.

GGP first filed for bankruptcy protection in April 2009, taking with it 158 cash-flowing properties that were created as “bankruptcy-remote” special purpose entities, after being unable to renegotiate the maturity terms on its debt load.