General Growth Properties has received a proposal from Fairholme Capital Management and Pershing Square Capital Management to inject $3.925 billion of fresh equity into the Chicago REIT.

Their equity injection would supplement one proposed by Brookfield Asset Management Inc., which two weeks ago agreed to inject $2.625 billion into the REIT as part of a broad recapitalization. Combined, the proposals would result in an equity injection of $6.55 billion.

Fairholme, which holds some $2 billion of GGP's $7 billion of unsecured debt, had previously indicated it would be willing to convert its debt holdings into common equity. Pershing is among the REIT's biggest shareholders. It is led by William Ackman and owns about 25 percent of the company's common shares.

Under the proposal, $3.8 billion of the capital commitment from Pershing and Fairholme would be used to buy GGP shares at $10 apiece. They were trading this morning at $14.50 each. The remaining $125 million would be invested in a $250 million rights offering by General Growth Opportunities, a new entity that will own GGP's non-core assets, such as the REIT's master-planned communities, certain retail properties and the office complex at its Ala Moana shopping center in Hawaii. Brookfield has already committed to invest $125 million in the rights offering.

GGP said that under the proposal, it would be able to reduce the $3.8 billion commitment by $1.9 billion if it was able to raise equity under more attractive terms.

GGP said it would also raise $1.5 billion from the issuance of fresh debt, or the reinstatement of existing debt. That, coupled with the equity injections by Brookfield, Fairholme and Pershing, would provide it with the cash needed to emerge from bankruptcy and pay off all unsecured creditors at par in cash.

Comments? E-mail Orest Mandzy or call him at (215) 504-2860, Ext. 211.