May 21 (Bloomberg) -- Blackstone Group LP is in talks to invest with Brookfield Asset Management Inc. in a plan to bring mall owner General Growth Properties Inc. out of bankruptcy, according to two people familiar with the negotiations.
Blackstone, based in New York, would contribute $500 million toward the $7 billion in equity Brookfield and partners Fairholme Capital Management LLC and Pershing Square Capital Management LP pledged in bankruptcy court earlier this month, according to the people, who asked not to be identified because the talks aren’t public.
Blackstone would receive a 5 percent stake in Chicago-based General Growth and a seat on its board, the people said. An agreement may be reached as soon as next week, they said. Blackstone, the world’s largest private-equity firm, would also receive 5 million of the 120 million General Growth stock warrants being granted to Brookfield, Miami-based Fairholme and New York-based Pershing Square, one of the people said.
General Growth, the second-biggest U.S. mall owner, won bankruptcy court approval on May 7 for an auction process that includes the Brookfield-led investment. The plan beat out a rival proposal by the country’s biggest mall owner, Indianapolis-based Simon Property Group Inc. Blackstone had been a partner in the Simon offer.
The Brookfield deal would allow General Growth to emerge from bankruptcy as an independent company.
Peter Rose, a spokesman for Blackstone, declined to comment for this story. Katherine Vyse, a spokeswoman for Toronto-based Brookfield, also declined to comment. David Keating, a General Growth spokesman, said he had no immediate comment.
The negotiations were reported earlier today by the Wall Street Journal.
Blackstone plans to name John G. Schreiber, president of Lake Forest, Illinois-based Schreiber Investments Inc. and co-founder of Blackstone’s real estate group, as its selection for General Growth’s board, said a person familiar with the talks. Schreiber was a director at Rouse Co., which General Growth bought for $11.3 billion in 2004. Debt amassed in that purchase contributed to General Growth’s Chapter 11 bankruptcy.
Schreiber didn’t immediately return a telephone call seeking comment.
General Growth filed the largest real estate bankruptcy in U.S. history in April 2009 after amassing $27 billion in debt making acquisitions. Its properties include New York’s South Street Seaport, Boston’s Faneuil Hall and the Grand Canal Shoppes and Fashion Show in Las Vegas.
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