Battle for General Growth biggest real estate fight in years

The battle for General Growth Properties Inc., owner of more than 200 U.S. malls from Boston to Los Angeles, is turning into
the biggest real estate fight since the sale of Sam Zell’s Equity Office Properties Trust.

Westfield Group, a Sydney-based property investor with stakes in 55 U.S. retail centers, signed an agreement letting it assess
General Growth’s finances, a person familiar with the pact said Wednesday. That may put Westfield in position to vie
for the bankrupt company’s assets as part of a contest already embroiling Simon Property Group Inc. and Brookfield Asset
Management Inc.

“For many years, the investing community failed to understand the real value of high-quality regional malls,”
said Rich Moore, managing director at RBC Capital Markets in Solon, Ohio. “We’ve just gone through the worst recession
in our history and these things are largely unscathed.”

Commercial real estate deals in the U.S. dropped to $44 billion last year, down 67 percent from 2008 and the lowest in records
going back to 2001, according to New York-based property research company Real Capital Analytics Inc. Globally, retail real
estate transactions totaled $50 billion, down 40 percent from a year earlier.

Plunging commercial real estate values (down 41 percent since their 2007 peak) have made landlords reluctant to sell if they
don’t have to.

The last time such a high-profile portfolio came to the market was in 2006. Blackstone Group LP beat out Steven Roth’s
Vornado Realty Trust to buy Zell’s Equity Office, then the largest U.S. office landlord, for $39 billion.

General Growth and Brookfield unveiled a plan Wednesday that calls for the Toronto-based company to invest $2.63 billion
in the mall owner and take a 30-percent stake.

Simon, which bid $10 billion for its biggest rival, called the Brookfield plan a “complex piece of financial engineering
that is so highly conditional as to be illusory.”

The target of the fight owns some of the most valuable properties in retail real estate. General Growth, the second-biggest
U.S. mall owner, has four of the five U.S. malls with the highest sales per square foot. Simon owns the best performer, according
to 2009 estimates by real estate research company Green Street Advisors in Newport Beach, California.

General Growth’s best-performing malls are the Grand Canal Shoppes and Fashion Show in Las Vegas, Ala Moana Center
in Honolulu, and Whalers Village in Lahaina on the Hawaiian island of Maui, according to Green Street. All four have annual
sales per square foot of $1,100 to $1,200. General Growth’s other malls include Boston’s Faneuil Hall and South
Street Seaport in New York City.

General Growth announced plans to split itself into two companies as part of an effort to exit bankruptcy with Brookfield’s

The proposal would give General Growth equity holders total consideration of $15 a share, the company said in a statement.
General Growth stockholders would receive one new General Growth share with an initial value of $10, plus one share of a new
company, to be called General Growth Opportunities, with an initial value of $5, for each share they own. Unsecured creditors
would be repaid in full plus interest.

“This sets the floor in our mind, $15, and you have a sophisticated real estate investor setting that price,”
General Growth President Thomas H. Nolan Jr. said Wednesday.

Under the unsolicited offer by Simon, which the Indianapolis-based company made public last week, equity investors would
have received about $9 a share and unsecured creditors paid in full for about $7 billion. General Growth said at the time
the offer was too low and it would invite other bids.

Non-disclosure agreements signed by both Simon and Westfield will allow them to talk with potential partners, something General
Growth had previously barred, according to the person familiar with contents of the documents.

One of those potential partners may be the same company that won Equity Office: Blackstone, the world’s largest private-equity
firm. The New York-based company is in talks to join Simon Property’s bid for General Growth, two people with knowledge
of the discussions said on Feb. 18.

At a bankruptcy court hearing scheduled for March 3, General Growth plans to ask for more time to work on its own plan for
exiting Chapter 11 bankruptcy.

“General Growth will lay out to a judge why its recapitalization plan for maximizing shareholder value is superior
to SPG’s $10 billion offer,” Alexander Goldfarb, an analyst with Sandler O’Neill & Partners LP in New
York, said.

“What makes this situation so fascinating is that here is a bankrupt company where not only will the creditors likely
be made whole, but the equity holders will also see recovery,” Goldfarb said.

General Growth filed the largest real-estate bankruptcy in U.S. history in April after amassing $27 billion in debt making
acquisitions. Brookfield owns almost $1 billion in General Growth debt, two people with knowledge of the company’s holdings
said last week.

William Ackman’s Pershing Square Capital Management LP, General Growth’s biggest shareholder, is backing Brookfield’s
proposal, which General Growth said yesterday is subject to approval by the bankruptcy court. The company may still receive
other offers as part of the bankruptcy process, Nolan said.

General Growth’s shares have rallied past Simon’s buyout offer, signaling investors expected a higher bid. The
stock rose 15 cents, or 1.2 percent, to $13.04 per share Thursday in over-the-counter trading. The shares are up 44 percent
in the last two weeks.

Howard Davidowitz, chairman of the retail consulting and investment banking company Davidowitz & Associates Inc. in New
York, said General Growth’s assets are strong for the category, even though he views enclosed malls as a risky investment.

“General Growth does have some great ones,” Davidowitz said. “There’s no question.”

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