The plan would create two companies, General Growth Properties (GGP), which would have the higher-quality assets, and General Growth Opportunities (GGO), which will own a diverse portfolio of real estate assets, including the company's master planned communities and properties such as Ward Centers in Honolulu and South Street Seaport in New York City. The proposed plan provides unsecured creditors with PAR plus accrued interest and, before taking into account the warrants, the existing shareholders with approximately 34% of the equity of reorganized GGP and 86% of the equity of GGO.

Company officials said in a late Wednesday statement that the combined equity capital, along with its anticipated new $1.5-billion debt issuance--or the reinstatement of a comparable amount of existing debt--would, if approved, deliver substantially all of the cash required to fulfill the capital needs in connection with its emergence from bankruptcy.

The troubled shopping center REIT, chaired by local industry giant John Bucksbaum, will appear for another bankruptcy hearing on this plan later this month, and has until July to file exact terms of the plan. However, according to the company statement, the trust will continue to consider other options. It is rumored that Simon Property Group, which proposed a $9 per share takeover plan for $10 billion, may up its offer with financial assistance from companies such as Blackstone. A Simon representative did not return calls Wednesday evening.

According to a Brookfield statement, a sale, as opposed to this restructuring, would not maximize value for existing shareholders. "We believe this is one of the great real estate value opportunities currently available in the capital market," says Bruce Flatt, CEO of Brookfield, in a statement. "GGP's high quality assets and substantial scale as the second-largest regional mall owner presents all shareholders with a compelling long-term investment opportunity."

Adam Metz, GGP CEO, agreed that this plan fits shareholders better than a sale. "Importantly, it allows GGP's existing equity holders to participate in the potential upside value of GGP and GGO, both of which will be better-capitalized companies operating in an improving economy. We have structured the proposed transaction to protect the rights of minority shareholders, including existing GGP equity holders, by establishing certain ownership limits and voting restrictions. The proposed transaction further builds on the tremendous momentum we have achieved in the bankruptcy process to address our capital structure and put the company on a solid financial foundation for the future."

The Brookfield funding is the cornerstone investment in the $8 billion being raised by General Growth that will enable it to repay all creditors at PAR plus accrued interest. In addition to Brookfield's funding, GGP has entered into definitive agreements for equity commitments from Fairholme Capital and Pershing Square of $2.8 billion and $1.1 billion respectively, and with Brookfield's assistance, is finalizing the terms of a new $1.5-billion corporate credit facility. Following the recapitalization, Brookfield expects to own approximately 26% of GGP's equity, and will hold three of nine board seats in the recapitalized GGP.

Brookfield has also agreed to provide office asset management services and corporate finance matters at no cost to the company, master-planned community asset management assistance, and installing a Brookfield executive as CEO of GGO, if requested by GGP.

Instant Insights /

GGP Presents $6.5B Restructure Plan to Court

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