The General Growth reorganization continues to be a moving target. The latest twist is that Fairholme Capital Management and Pershing Square Capital Management are offering to invest $3.93 billion in the firm in backing the plan conceived by General Growth and Brookfield Asset Management.

Here’s General Growth’s press release.

Todd Sullivan has posted the term sheet.

And here’s an Associated Press write-up of what’s on offer.

Two major investors in General Growth Properties Inc. are joining Brookfield Asset Management in offering to inject a combined $6.5 billion in fresh funds into the shopping mall operator to help it emerge from bankruptcy protection.

General Growth said in a statement late Monday that its board is weighing an offer from Fairholme Capital Management, one of its largest unsecured creditors, and Pershing Square Capital Management, one of its largest shareholders, to invest $3.93 billion. It said the new equity capital investment is valued at $15 a share.

The offer would be teamed up with one from Canada’s Brookfield Asset Management, which last month said it would invest $2.6 billion in cash in exchange for General Growth shares.

Chicago-based General Growth said the combined investments, along with it issuing $1.5 billion of debt, would give it the cash it needs to emerge from bankruptcy protection and pay unsecured creditors in full in cash.

General Growth also said William Ackman, who runs Pershing Square Capital Management, resigned from General Growth’s board of directors in conjunction with the hedge fund’s participation in the investment offer.

There are no letters this time. Instead, David Simon’s latest salvo against General Growth came at a panel at the at the Citi 2010 Global Property CEO Conference. Simon blasted General Growth for not sharing any data on the company since signing a non-disclosure agreement. At the same conference, Simon said he’s not worried about any antitrust concerns that a GGP/Simon tie-up might provoke.

“We’ve had this long dance on the NDA, nondisclosure agreement,” David Simon, chairman and chief executive of Simon Property Group, said at the Citi 2010 Global Property CEO Conference. “They wanted a lot of restrictions in that — you couldn’t talk to partners; you couldn’t talk to financial sources. We finally got one we can live with; we signed one (a week ago) Monday. We have yet to see any data.”

Separately, Simon filed amended objections to General Growth’s request to extend the period it has in bankruptcy court to exclusively file a reorganization plan.

For its part, General Growth outlined the plan it will present in bankruptcy court tomorrow that will enable it to emerge from Chapter 11 protection by October. Todd Sullivan’s Value Plays blog has the full document here.

Here’s the schedule General Growth has laid out, including how it will handle outside bids:

(Click for larger image)

Meanwhile, throwing another wrench into the works is Bruce Berkowitz–one of General Growth’s largest creditors. He says he is unhappy with both Simon’s offer and General Growth’s Brookfield proposal.

General Growth is getting all its ducks in a row in advance of tomorrow’s bankruptcy court hearing. There’s a lot to wade through. In the past 24 hours the company has released its fourth quarter results, announced that it will move its stock back to the New York Stock Exchange, filed its amended 10-K and filed a slew of court documents.

Things have died down a tad on the General Growth front. I suspect this is merely the calm before the storm as the parties wait to see what happens at the March 3 hearing. There we’ll find out if General Growth’s exclusivity period will be extended or not.

In the mean time, here are some other news and notes from around the retail real estate world.

• The Federal Trade Commission is checking out Simon. But it’s not over the General Growth deal. Instead, there is an inquiry as to Simon’s strength in the outlet sector in light of its pending acquisition of Prime Outlets. Gap Inc. has been contacted by the Federal Trade Commission in regards to that deal. It’s an interesting development because if the FTC is interested in the Prime deal, then it seems likely it would want to review any deal with General Growth as well. One school of thought had been that the FTC would view retail real estate as one asset class. In that case, Simon’s concentration of malls would be viewed in the context of the entire shopping center universe rather than how much of the regional mall world it controlled. But this inquiry shows that the FTC may not look at things that way after all.


• Crain’s New York reports that Coca-Cola is considering opening a retail location in New York on a site that formerly housed a World of Disney store.


• There isn’t a long history of mall companies being able to sell naming rights of their properties. But that’s not stopping Ashkenazy Acquisitions Corp. from giving that strategy a whirl. The firm has hired Profit Increase Funding Inc. to help it secure naming rights deals for two properties outside Detroit.


• Lastly, on the lighter side, in Charlottesville, Va., a mass of snow that accumulated in a series of snowstorms in the Mid-Atlantic in recent weeks was plowed into a massive pile at the parking lot of the Barracks Road Shopping Center. Local youth have taken to calling the mount “Mt. Barracks” and even erected a Facebook page in its honor.

General Growth Properties President and COO Tom Nolan appeared on CNBC yesterday to explain General Growth’s plans and defend the deal it is proposing with Brookfield Asset Management. Then, later that night, John Bucksbaum made a rare public appearance at an industry dinner. Crain’s Chicago Business reported on his appearance.

Meanwhile, in another potential huge development in the process, the Wall Street Journal reported that Westfield Group may be entering the fray.

“A lot of people point to that,” he said at a real estate industry dinner in downtown Chicago. “I don’t think that was the problem. The problem was the credit markets disappeared.”

The remarks, at a gathering of the Real Estate Investment Assn., marked a rare public appearance for Mr. Bucksbaum, who has let others speak for General Growth since he stepped down as CEO in October 2008, at the peak of the financial crisis.

But he chose an unusual time to make them, just hours after the Chicago-based real estate investment trust (REIT) rolled out a much-anticipated proposal to recapitalize and exit from bankruptcy protection.

He made a case for the plan, which calls for a $2.6-billion equity infusion from Toronto-based Brookfield Asset Management, and dismissed a competing $10-billion takeover proposal from rival Simon Property Group Inc. In response to a question from a member of the audience, Mr. Bucksbaum didn’t address the merits of the Simon proposal, but said it didn’t constitute an offer, just “an expression of interest.”

Yet at other times, Mr. Bucksbaum seemed unwittingly to back up one of Simon’s key arguments. The Indianapolis-based mall owner contends that its offer is superior to the recapitalization because it will pay off unsecured creditors and shareholders in cash, a key element given the uncertainty of the financial markets.

Though General Growth values its plan at $15 a share, vs. Simon’s estimated $9, the company would need to raise additional capital in a variety of ways, including asset sales and new debt. It’s “a highly speculative and risky plan” based on the future performance of the financial markets, Simon said Wednesday.

Mr. Bucksbaum acknowledged that property and debt markets still look risky, saying that looming commercial real estate loan maturities over the next few years amount to a “very scary proposition.”

“In a situation like this, you never know what’s going to happen next,” he said. “You have to hope that you’ve seen the worst.”

It didn’t take long for Simon Property Group to respond to the proposed deal with Brookfield Asset Management that General Growth Properties announced earlier today.

Here’s the text of the latest missive:

Simon Responds to Inferior and Highly Conditional General Growth Proposal

INDIANAPOLIS, Feb 24, 2010 /PRNewswire via COMTEX/ — Simon Property Group, Inc. (NYSE: SPG) today issued the following statement in response to the highly conditional recapitalization proposal announced by General Growth Properties, Inc. (OTC: GGWPQ.PK):

“General Growth’s proposed recapitalization amounts to a risky equity play on the backs of its unsecured creditors. While continuing to block the immediate and certain 100% cash recovery provided by Simon’s offer, General Growth has preempted its own self-proclaimed ‘process’ in favor of a highly speculative and risky plan to attempt to raise $5.8 billion of new capital in today’s uncertain markets — including $3.3 billion of dilutive new equity, $1 billion in asset sales and $1.5 billion in new debt — on top of the approximately $28 billion it already owes. Simon is providing $10 billion of real value — $3 billion to shareholders as well as $7 billion to creditors — as compared to a complex piece of financial engineering that is so highly conditional as to be illusory.”

Simon’s offer is far superior to the General Growth proposal in many ways, including:

* $9 billion of cash upfront vs. the General Growth plan which offers only $2 billion in cash and the hope of additional cash down the road, subject to highly uncertain market conditions.

* 100% immediate and certain cash recovery to unsecured creditors vs. the General Growth plan which would likely result in unsecured creditors receiving most of any recovery at some point down the road in the form of equity in a highly leveraged, capital constrained entity. In addition, the inevitable sale of shares by creditors who receive stock would put downward pressure on the value of General Growth shares.

* Cash value to equity holders with no dilution vs. the General Growth plan which would result in significant dilution of General Growth shareholders — who would be left with two speculative equity securities that are likely to underperform.

* Fully addresses claims of unsecured creditors vs. General Growth’s proposal which turns the bankruptcy process on its head by favoring equity holders at the expense of creditors.

* No financing condition vs. the combination of the massive required capital raising and asset sales in the General Growth plan which amount to a financing condition for the majority of potential cash recovery for creditors.

* Potential for equity holders and certain creditors to elect SPG stock in lieu of cash, providing certainty and upside potential in an established equity security of an S&P 500 company that has historically outperformed. Stakeholders who elect SPG stock will be investors in an entity that has enhanced growth prospects through superior management, synergies and access to capital to realize value creation.

Updated at 2:18 PM

The Wall Street Journal is reporting that General Growth will unveil a plan at next week’s bankruptcy court hearing that would split the company in two. It will present this plan as an alternative to selling the firm wholesale to Simon.

Updated: General Growth has released the details.

General Growth Properties, Inc. (”GGP”) today announced that it has reached an agreement in principle with Brookfield Asset Management Inc., one of the world’s largest real estate investors and asset managers, to invest in a proposed recapitalization of GGP at a plan value of $15.00 per share and provide par plus accrued interest to unsecured creditors. The $2.625 billion proposed equity commitment from Brookfield is not subject to due diligence or any financing condition and is expected to create a floor value for the purpose of raising additional equity for the company. The plan is subject to definitive documentation, approval of the Bankruptcy Court and higher and better offers pursuant to a bidding process to be approved by the Bankruptcy Court.

The complete term sheet for the proposed plan with Brookfield is available on GGP’s website at http://www.ggp.com/company/Default.aspx?id=97.

The proposed plan is designed to maximize value for all GGP stakeholders and enable a restructured GGP to emerge from bankruptcy on a standalone basis with a diverse portfolio of high-quality income-producing assets, strong cash flow and a solid balance sheet capitalized principally with long-term non-recourse debt.

Under the terms of the proposed plan:

* GGP’s existing shareholders will receive one share of new GGP common stock with an initial value of $10.00 per share, plus one share of General Growth Opportunities (”GGO”) with an initial value of $5.00 per share, for total consideration of $15.00 per share (see description of GGO below under “Terms of the Brookfield Investment and Proposed Recapitalization”)

* Unsecured creditors will receive par plus accrued interest

* Brookfield will invest $2.5 billion at $10.00 per share for new GGP common stock and up to $125 million at $5.00 per share for GGO common stock

“This proposed plan offers significant value for all of our stakeholders,” said Adam Metz, Chief Executive Officer of GGP. “It is designed to allow GGP to deliver a minimum of $15.00 per share in value to our existing common shareholders, while providing our unsecured creditors with par plus accrued interest. The Brookfield-sponsored recapitalization — coupled with the more than $13 billion of restructured debt, our compelling scale as the second-largest regional mall owner, our fortress assets and a business plan that focuses on further deleveraging the balance sheet and building liquidity — provides a strong financial foundation for the future. In addition, GGP shareholders will be able to participate in the value-creation opportunity presented by this plan.

“We have tremendous respect for Brookfield and its management team. We believe Brookfield will add substantial value to both enterprises over the short and long term through its asset management expertise and access to global institutional capital sources. We look forward to welcoming Brookfield as a significant shareholder in the company following our emergence from Chapter 11,” continued Mr. Metz.

Terms of the Brookfield Investment and Proposed Recapitalization

Under the terms of the proposal, Brookfield will invest $2.5 billion in cash in GGP in exchange for GGP common stock, thereby providing sufficient liquidity to fund GGP’s bankruptcy emergence needs. Brookfield will own approximately 30 percent of GGP and have the right to nominate three directors. This cornerstone investment will provide the flexibility for GGP to pursue additional capital-raising alternatives up to a total of $5.8 billion, including the issuance of new equity, asset sales and limited new debt issuance. Brookfield has agreed to assist GGP in raising the balance of this capital using its relationships with global institutional capital sources.

As part of the restructuring, GGP intends to distribute to GGP shareholders shares in GGO, a new company that will own certain non-core assets, such as all of the company’s master planned communities and landmark developments like South Street Seaport and others. A shareholder must be invested in GGP prior to the recapitalization in order to receive a dividend of GGO. These assets produce little or no current income but have the potential for significant long-term value. GGO plans to raise $250 million through a rights offering at $5.00 per share, with Brookfield backstopping $125 million of such offering.

“We are excited about the opportunities this recapitalization creates for our company and all of our stakeholders,” added Thomas H. Nolan, Jr., President and Chief Operating Officer of GGP. “GGP has an extremely strong portfolio of successful properties, while GGO will have a large portfolio of opportunistic assets that have substantial long-term value, as well as certain assets where we believe value can be created through restructuring. By creating two separate companies, we enable both companies to manage their core strengths, take advantage of different market opportunities and appeal to distinct groups of investors with their own investment criteria. Our shareholders will be able to participate in the expected future value creation of both of these companies.”

Bid Protection and Path to Completion

As consideration for acting as “stalking horse” in the company’s process to raise capital, Brookfield will be granted seven-year warrants to purchase 60 million shares of existing GGP common stock at an exercise price of $15.00 per share. The warrants are intended to provide compensation to Brookfield for its financial commitment. Brookfield will not receive any other consideration or bid protection, including any break-up fee, expense reimbursement, commitment fee, underwriting discount or any other fees.

The companies expect to move promptly to execute a definitive agreement and file a motion seeking appropriate Bankruptcy Court approval. GGP will also ask the Bankruptcy Court to approve bidding procedures with respect to the solicitation of proposals superior to Brookfield’s including, but not limited to, the sale of the company.

Until the warrants are approved by the Bankruptcy Court, Pershing Square Capital Management is providing interim protection to Brookfield. If Brookfield’s investment in GGP is not made, and the company completes a transaction with another party at a per share value above $12.75, Pershing Square will be obligated to pay Brookfield 25 percent of its profits from its investment in GGP above $12.75 per share. GGP will not be required to reimburse Pershing Square for any amounts paid pursuant to this agreement.

This agreement follows GGP’s successful restructuring - or agreements to restructure - more than $13 billion of secured mortgage debt and the emergence from bankruptcy of more than 200 subsidiary debtors owning 108 properties.

UBS Investment Bank and Miller Buckfire & Co. LLC served as financial advisors to General Growth Properties, and Weil, Gotshal & Manges LLP acted as legal counsel to the company. Goldman Sachs & Co. and Barclays Capital served as financial advisors to Brookfield, and Willkie Farr & Gallagher LLP acted as legal counsel to Brookfield.

The plan is vaguely reminiscent of the “good bank/bad bank” schemes that were discussed last year as a potential way of dealing with bad debts on bank balance sheets. General Growth’s best assets would end up in one firm while its riskier assets would end up in another. The firm with the stronger assets would then tap public markets to help it pay down its debt.

Mall owner General Growth Properties Inc. is expected to unveil a plan Wednesday to exit bankruptcy this year by splitting the company in two, with Canadian property investor Brookfield Asset Management Inc. pledging $2.63 billion to the effort, said several people familiar with the matter.

General Growth and Brookfield envision the split creating both a pristine company that owns nearly 200 high-quality malls and a smaller company with riskier holdings that appeal to investors willing to gamble for higher returns.

The complicated plan, drafted partly by activist investor and General Growth board member William Ackman, is meant to top a $10 billion buyout bid that rival mall owner Simon Property Group Inc. made last week. General Growth will argue that its plan, which is dependent on selling additional stock, offers its creditors more value than Simon’s all-cash offer.

If General Growth’s creditors and a bankruptcy judge approve the plan, General Growth would then sell additional new shares in the larger company in the coming months to raise capital for paying some of its debts.

If General Growth splits, the larger of the companies, which will retain the General Growth Properties name, would hold 170 to 180 of the company’s more than 200 malls, according to people familiar with the plan. Brookfield has pledged to buy 30% of that company’s shares at a price of $10 per share for total consideration of roughly $2.5 billion.

The smaller company, called General Growth Opportunities, would include many of General Growth’s struggling or less valuable assets, these people say. Those include roughly 28 malls, including several that General Growth had considered forfeiting to lenders because they are worth less than their mortgage balances. It also includes General Growth’s residential-development division, parcels of raw land and its headquarters building in Chicago.

…

The Brookfield plan values General Growth at $15 per share, but unlike Simon’s all-cash buyout offer, it relies heavily on selling massive amounts of new stock in the coming months. The Brookfield plan values General Growth at about $4.5 billion in equity value, compared with $3 billion from Simon. But Simon is offering creditors more cash over stock and also has been cutting deals with Blackstone Group LP and other deep-pocketed partners in case it decides to raise its bid.

Both plans would repay the company’s $7 billion in debt, though the General Growth plan would likely convert some of that debt into stock, said these people.

…

While Simon’s bid values General Growth’s equity at $9 per share and the Brookfield plan essentially values it at $15, a major difference for creditors in the bankruptcy case will be that Simon’s plan offers to pay them entirely in cash, if they so choose. In contrast, the Brookfield plan relies on selling additional General Growth stock to pay debts and convincing some unsecured creditors to convert their claims to stock.

Neal Elkin, of Real Estate Analytics, and Harvey Green, of Marcus & Millichap Real Estate Investment Services, talk about whether commercial real estate is finding a bottom.

In a rare instance of industry rebirth, electronics retailer CompUSA appears to have come back from the dead, with a new concept store that is more in tune with the needs of modern consumers. The chain has already opened two locations in Texas, under the fitting name Retail 2.0, and might plan to open more stores in the future. Meanwhile, details continue to emerge by the hour on the bidding war apparently brewing over General Growth Properties. Sources close to the situation have told Bloomberg Canadian firm Brookfield Asset Management is looking to acquire a 30 percent stake in the REIT, as General Growth’s main rival Simon Property Group continues to push for the sale of the entire company.

• Brookfield will reportedly seek a 30 percent stake in General Growth Properties, according to a story from Bloomberg.


• Defunct electronics chain CompUSA has found a new life, according to Chron Business. The retailer, now under new ownership, has opened a new concept store in Houston that allows customers to research products from on-site computers.


• Our sister publication Multichannel Merchant reports that the mobile Internet is catching on with consumers, according to comments made at last week’s Internet Retailer Web Design and Usability Conference. We wrote about where we think the world of retail is heading in this month’s cover story.


• Book seller Barnes & Noble continues to resist takeover attempts by investor Ron Burkle, according to a story in Business Week. Last week, the retailer refused to revoke its poison pill plan that would prevent Burkle from amassing a 37 percent stake in the company.


• Business Week also reports that Glimcher Realty Trust plans to use the CMBS market to retire the debt on its Mall at Johnson City in Tennessee.


• Jones Apparel Group will close 166 stores this year, according to the Washington Business Journal.


• The Washington Post claims D.C. might face a large wave of commercial property foreclosures.

David Stejkowski has a nice rundown of some of the new developments in the ever-evolving General Growth saga. But more has happened even since he penned that piece. Most importantly, the Wall Street Journal is reporting that Brookfield Asset Management, which has loomed large in the background for the past week, is now readying a bid to take an ownership stake in General Growth.

A lot of people predicted something like this might come to pass. Such a bid would give Brookfield a foothold in the U.S. retail real estate market while allowing General Growth to remain a standalone entity. This would be the fate that it is widely believed General Growth chairman John Bucksbaum would prefer. In a related item, a piece in Crain’s Chicago Business runs down the motivations of some of the key players in the unfolding bidding war and also makes that assertion.

David’s post had a couple of other good links as well. In other analysis, Seeking Alpha has worked up an operating pro-forma of what a merged Simon and General Growth might look like.

Meanwhile, there is now a shareholder lawsuit brewing over General Growth’s rejection of Simon’s initial bid.