General Growth inks deal with Brookfield Asset Management

Chicago General Growth Properties announced Wednesday that it had reached an agreement in principle with Canadian property manager Brookfield Asset Management that will enable General Growth to exit Chapter 11 bankruptcy protection.

General Growth said Brookfield, which has an extensive portfolio of high-rise office properties in the United States, will invest approximately $2.5 billion in cash in exchange for General Growth shares, giving Brookfield a 30% stake in the Chicago-based company. General Growth says shareholders would receive a total of $15 a share as part of the plan.

General Growth envisions emerging from bankruptcy and raising up to $5.8 billion in cash to pay off creditors.

The plan also calls for the General Growth to spin off some assets as a new company. It reportedly would turn General Growth into a larger, healthier entity that owned at least 170 of the company’s malls and a smaller one that owned about 28 or so less desirable properties, as well as several noncore businesses. Brookfield would also invest a further $125 million in shares of the new company formed with the non-core holdings.

The deal requires approval by the bankruptcy court.

The reorganization plan is meant to fend off an unsolicited $10 billion takeover offer from the Simon Property Group. While it would leave General Growth independent upon exiting Chapter 11, it also would make Brookfield one of its largest equity holders.

Under the deal, Brookfield will own about 30% of General Growth and have the right to nominate three directors.

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