UPDATE 4-General Growth raises $500 mln, eyes Chap. 11 exit

* Teacher Retirement System of Texas to invest $500 mln

* No. 2 U.S. mall owner eyes bankruptcy exit by October

* Jones Lang LaSalle takes over some third-party leasing

* General Growth shares rise
(Adds analyst comment)

By Jonathan Stempel

NEW YORK, July 12 (BestGrowthStock) – General Growth Properties Inc
(GGP.N: ), the second-largest U.S. mall owner, said on Monday it
won a $500 million equity investment from a large Texas pension
fund and still expects to emerge from bankruptcy by October.

The investment from the Teacher Retirement System of Texas,
provides fresh capital for General Growth, which in May won a
$6.55 billion equity investment from Canada’s Brookfield Asset
Management Inc (BAMa.TO: ), Fairholme Funds Inc and Pershing
Square Capital Management LP to fund its exit from Chapter 11.

“General Growth has certainty on its ownership and a
capital plan that has some very strong, well-established
backers,” said Alexander Goldfarb, an associate director at
Sandler O’Neill & Partners LP in New York.

“The Texas investment helps diversify the financial backers
and further solidifies General Growth’s financial position. It
could help attract other investors, given that ownership and
control are now less concentrated.”

According to a joint statement, the Texas fund will pay
$10.25 each for shares of a reorganized General Growth.

The investment requires approval by the U.S. bankruptcy
court in Manhattan and does not include a stake in a new
company being spun off to General Growth shareholders.

Based in Chicago, General Growth owns or has stakes in more
than 200 malls in 43 U.S. states, including Faneuil Hall in
Boston and Harborplace in Baltimore.

The company filed for bankruptcy in April 2009 after tight
credit conditions left it unable to refinance maturing
commercial mortgage-backed securities.

“We continue to make excellent progress with our
restructuring plan and are well on our way to exiting Chapter
11 by October,” Chief Executive Adam Metz said.

The Brookfield-led investment beat out a rival bid by Simon
Property Group Inc (SPG.N: ), the largest U.S. mall owner.

FIRST-QUARTER PROFIT

General Growth posted a first-quarter profit (Read more your timing to make a profit.) in May, helped
by an improved economy, higher sales for retail tenants and
stabilizing occupancy rates.

In a court filing, General Growth said it has already
restructured $14.71 billion of secured mortgage debt,
reorganizing a majority of its operating entities and obtaining
confirmed plans for 262 affiliates.

“General Growth was a national, high quality retail
platform that was just overlevered and relied too heavily on
CMBS,” Goldfarb said. “It is not that the malls themselves were
not performing.”

Separately, General Growth said it agreed for Jones Lang
LaSalle Inc (JLL.N: ) to take over its third-party leasing and
management business for 18 malls in 11 states, including the
Burbank Town Center in California and The Shops at Georgetown
Park in Washington. The terms were not disclosed.
[ID:nN12137539]

An Aug. 4 hearing has been scheduled to approve the Texas
fund investment, which expires on Dec. 31, 2010 unless extended
and has a $15 million breakup fee, the court filing shows.

UBS Investment Bank, Miller Buckfire & Co and Weil Gotshal
& Manges LLP advised General Growth on the investment.

General Growth shares rose 3 cents to $13.78 in afternoon
trading on the New York Stock Exchange.

The case is In re: General Growth Properties Inc et al,
U.S. Bankruptcy Court, Southern District of New York, No.
09-11977.
(Reporting by Jonathan Stempel; Additional reporting by Ilaina
Jonas; editing by Gerald E. McCormick, John Wallace and Robert
MacMillan)

UPDATE 4-General Growth raises $500 mln, eyes Chap. 11 exit