DBRS Comments on Brookfield Asset Management’s Increased Investment in General Growth Properties

DBRS notes today that Brookfield Asset Management Inc. (Brookfield or the Company, rated A (low) with a Stable trend) has announced an agreement to acquire from the Fairholme Fund (Fairholme) all the common shares it owns in General Growth Properties, Inc. (GGP), excluding the warrants. Fairholme’s approximately 113.3 million shares of GGP are valued at about $1.7 billion.

Brookfield’s interest in GGP will increase from approximately 10% to 20%. As Brookfield has been investing in concert with its Real Estate Turnaround Consortium (the Consortium), the Consortium’s collective ownership will increase from the 27.1% acquired in October 2010 to 38%. GGP owns a significant portfolio of premier shopping malls in the United States. Brookfield and its Consortium provided support during GGP’s successful recapitalization last year.

In consideration, Fairholme will receive from Brookfield about $907 million in Class A shares and $804 million in cash. This will provide Fairholme with a 4.5% equity interest in Brookfield. Brookfield has adequate cash and credit facilities to fund the cash payment. The funding will temporarily raise Brookfield’s debt-to-capital ratio at the corporate level to approximately 29% from 27% (based on its previous GAAP financials). The Company has indicated that it will repay the amount used on its line of credit this year.

Note:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Parent/Holding Companies and Their Subsidiaries, which can be found on our website under Methodologies.