Simon Property Group Inc. has been buying the unsecured debt of bankrupt rival General Growth Properties Inc. in preparation for a bid on the entire company, The Wall Street Journal reported Friday morning.

The newspaper, citing unnamed sources, said the Indianapolis-based shopping mall owner is facing competition for General Growth from Toronto-based Brookfield Asset Management Inc., which also has been buying up General Growth's debt.

Simon, the largest U.S. mall operator, hired a financial adviser and a law firm in mid-November to help it explore making a bid for some or all of the assets of General Growth, which filed for bankruptcy protection in April. General Growth is the second-largest U.S. mall operator, with more than 200 properties.

Many of General Growth's properties are well-positioned and healthy, but the firm had to file for Chapter 11 after it failed to refinance some of $27 billion in debt as it came due. The company already has renegotiated mortgages on more than 90 of its properties.

But General Growth's reorganization plan comes at one of the most challenging times in commercial real estate history. And while General Growth has been mired in bankruptcy, its rivals took advantage of thawing equity and debt markets to raise cash. REITs raised about $20 billion this year, after the capital markets virtually shut down in 2008.

Simon this year conserved cash by paying most of its dividend in stock. At the same time, it’s used its clout to launch a capital-raising spree, rolling out stock and debt offerings at a time many real estate companies are begging for money. The result: Simon now has $6 billion in “dry powder” it can use for acquisitions, according to a report by J.P. Morgan.

Now players like Simon hope to use the opportunity to pick up General Growth and shopping mall gems like Faneuil Hall in Boston and Fashion Show in Las Vegas on the cheap.

It wasn't clear how much of General Growth's debt Simon has purchased, the Journal reported. But Brookfield, which in 2007 bid on Mills Corp. before the chain went to Simon and a partner, has bought close to $1 billion of unsecured debt.

Simon executives have said malls owned by General Growth, which filed for bankruptcy protection in April, would be a good fit, according to Bloomberg.

“We’re a logical buyer,” Chairman and CEO David Simon said in a Sept. 15 interview on Bloomberg Television. “There’s a lot we could do with those properties.”