Bruce Berkowitz’s $1.7B deal

Fairholme Capital Management LLC, the investment firm run by Bruce Berkowitz, said its funds will sell their stake in General Growth Properties Inc. to Brookfield Asset Management Inc. in a deal valued at about $1.7 billion.

Brookfield will pay $804 million in cash and issue voting shares valued at about $907 million, based on the stock’s Jan. 14 closing price, Miami-based Fairholme said in a statement today. Fairholme will own a 4.5 percent stake in the Toronto- based company after the transaction is completed, according to a separate statement from Brookfield.

Fairholme partnered with Brookfield and William Ackman’s Pershing Square Capital Management LP to bring General Growth out of bankruptcy in November. The group committed more than $8 billion to the Chicago-based mall owner after prevailing in a takeover battle with Simon Property Group Inc.

“There’s no question they’ve made it clear to everybody that they intend to be a long-term shareholder,” Rich Moore, an analyst at RBC Capital Markets in Solon, Ohio, said of Brookfield. “They want a mall platform in the U.S.”

The transaction increases the Brookfield group’s interest in General Growth to 38 percent from about 27 percent, Brookfield said. That investor group includes China’s sovereign wealth fund, China Investment Corp., according to a Securities and Exchange Commission filing.

‘Validates’ Strategy

“This validates both the Brookfield and Fairholme strategy in being investors,” said Ben Thypin, senior market analyst at Real Capital Analytics Inc., a New York commercial real estate data firm. “I don’t think there’s a reason to sell now unless they’re set to make a good profit.”

Fairholme held 115 million shares as of Nov. 30, according to Bloomberg data.

“We are proud to have done our part to assist in the successful restructuring of GGP,” Berkowitz said in the statement. “We are excited now to become a shareholder in Brookfield Asset Management.”

The planned Fairholme sale is unlikely to be the beginning of selling by other large General Growth investors such as Pershing Square, Moore said.

The transaction is scheduled to be completed around Jan. 25, Fairholme said. The company’s Fairholme Fund will keep its warrants to buy General Growth shares.

General Growth fell 1.6 percent to $14.86 as of 12:26 p.m. in New York Stock Exchange composite trading. Brookfield gained 0.6 percent to $33.18. General Growth shares rose 2.5 percent from Nov. 10, their first day of trading after emerging from bankruptcy, through Jan. 14.

–Bloomberg