Brookfield deal doesn’t put Simon out of General Growth game

General Growth Properties Inc., the second-biggest U.S. mall owner, plans to split itself into two companies as part of an
effort to exit bankruptcy that includes a $2.63 billion investment from Brookfield Asset Management Inc.

The proposal would give General Growth equity holders total consideration of $15 a share, the Chicago-based company said
in a statement Wednesday. Indianapolis-based Simon Property Group Inc., which last week made public a $10 billion takeover
bid for General Growth, dismissed the plan as “a risky equity play.”

Some analysts believe Simon is still in the hunt for General Growth, but will have to make another offer.

Under the Brookfield proposal, 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 in an interview. “We are hopeful that our stock will continue to rise,
and our existing shareholders will continue to benefit from that.”

Under the unsolicited offer by Simon, the largest U.S. shopping mall owner, equity investors would have received about $9
a share and unsecured creditors paid in full for about $7 billion. General Growth said the offer was too low and it would
invite others to submit bids.

“General Growth’s proposed recapitalization amounts to a risky equity play on the backs of its unsecured creditors,”
Simon said in a statement. The plan is “highly speculative” because it would involve raising as much as $5.8 billion
through equity and debt offerings and through asset sales in “today’s uncertain markets,” the company said.

Brookfield, a Toronto-based company whose holdings include office properties and hydroelectric plants, would have a 30-percent
stake in General Growth under the proposal. The plan is backed by General Growth’s biggest shareholder, William Ackman’s
Pershing Square Capital Management LP, the statement said.

Wednesday’s proposal wasn’t Brookfield’s first bid for General Growth. A previous Brookfield proposal valued
General Growth at $11 a share, according to a letter from Brookfield Senior Managing Partner Cyrus Madon dated Wednesday.
The letter, to Nolan and General Growth CEO Adam S. Metz, was included in a U.S. Securities & Exchange Commission filing.

Brookfield’s plan is subject to definitive documentation and bankruptcy court approval, General Growth said. The company
may still receive other offers as part of the bankruptcy process, Nolan said.

Simon Property on Wednesday signed a non-disclosure agreement to receive information from General Growth, said a person with
knowledge of the agreement. Simon on Feb. 19 called General Growth’s draft of the agreement “unreasonable.”
Simon will be allowed to talk with potential partners, which General Growth had previously barred, the person said.

The bid by Simon Property was an “initial salvo,” and the Brookfield plan likely will prompt a new offer from
the mall owner, said Jim Sullivan, an analyst with Green Street Advisors Inc., a real estate research company in Newport Beach,
Calif.

It’s up to Simon to decide if it wants to raise its bid or “deliver a knockout blow, something that’s so
good for everybody that the bid will end right there,” he said.

Simon said Wednesday in bankruptcy court documents that it has been rebuffed by General Growth since August, and said the
company shouldn’t be allowed to control its bankruptcy for another six months, as General Growth has requested.

General Growth’s official committee of unsecured creditors supports Simon’s offer, which would pay the debt holders
in cash. Under the Brookfield-based offer, General Growth would pay unsecured creditors with a mix of cash and equity should
it use only Brookfield’s investment, Nolan said. By selling unsecured debt and issuing shares as well, General Growth
would be able to pay cash to unsecured creditors who don’t want equity, he said.

General Growth would split into a company owning shopping malls and another that would own buildings and land with redevelopment
possibilities. General Growth Opportunities would have holdings including six master-planned communities, New York’s
South Street Seaport, and land in Hawaii, Utah and New Jersey, according to the plan’s term sheet.

Among the properties to be held by General Growth Opportunities is Victoria Ward in Honolulu, which last year won approvals
to build as many as 4,300 residential units, 5 million square feet of retail and 4 million square feet of office space. The
new company also will have option to buy the air rights above Fashion Show in Las Vegas, allowing it to build above the mall.

General Growth Opportunities plans to raise $250 million through a rights offering priced at $5 a share, with Brookfield
backstopping $125 million of the sale.

The Brookfield-backed plan has advantages because it would help General Growth make the value of its assets easier to understand,
said a person involved in the bankruptcy case.

“The General Growth-Brookfield proposal will likely hold greater appeal for its shareholders,” said Ben Yang,
an analyst with Keefe, Bruyette & Woods in San Francisco. “The proposal to team up with Brookfield still requires
many pieces to fall into place, including selling new shares above and beyond Brookfield’s investment.”

General Growth’s shares have rallied past Simon’s buyout offer, signaling investors expected a higher bid. The
stock fell 8 cents, to $12.89 a share Wednesday in over-the-counter trading.

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.

Brookfield will be granted seven-year warrants to buy 60 million shares of existing General Growth stock at an exercise price
of $15, subject to bankruptcy court approval, regardless of if the transaction goes forward. Brookfield won’t receive
any other payment or break-up free.

Should Brookfield not make its investment in General Growth, and the mall owner complete a deal with another party at $12.75
a share or higher, Pershing Square will pay Brookfield 25 percent of its profits from its General Growth investment above
that price.

The agreement with Pershing Square “appears to be a side-door break-up fee,” said Sullivan of Green Street.

“Bill is passionate about the investments he makes, and he puts his money where his passion is,” Nolan said of
Pershing Square’s Ackman, who has a seat on General Growth’s board.

Pershing Square in December issued a 54-page presentation that said General Growth’s stock is worth $24 to $43. The
firm, based in New York, owns a 25-percent economic interest in General Growth, including 7.5 percent of its shares.

General Growth’s financial advisers were UBS Investment Bank and Miller Buckfire & Co. LLC. Weil, Gotshal &
Manges LLP was its legal counsel. Goldman Sachs & Co. and Barclays Capital served as financial advisors to Brookfield,
and Willkie Farr & Gallagher LLP acted as its legal counsel.