Brookfield's latest deal to buy Fairholme Fund's stake in U.S. mall owner General Growth Properties Inc. seems pretty straightforward on the surface. But behind the big corporate names is fund manager Bruce Berkowitz, and getting close to him can only be good for Brookfield.
Mr. Berkowitz is Fairholme's founder and he was rated Morningstar's fund manager of the decade last year. He's already amassed a serious fortune, but is still trying to increase it by making a bet on U.S. financials and commercial real estate. A recent Fortune magazine profile noted that he is the largest owner of AIG after the U.S. government and he has big stakes in Citigroup, Goldman Sachs, Morgan Stanley and Bank of America.
Although Fairholme is selling its entire stake in General Growth, it will continue to hold $907-million of Brookfield, or about 5 per cent of the company, and will hold General Growth indirectly through it.
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There are also some specifics behind the scenes that bode well for Brookfield. Most important, the U.S. has a unique restructuring law that allows General Growth to refinance all of its existing mortgages. The company is now going through its portfolio one-by-one and nabbing much lower rates compared to what it is currently paying.
General Growth also has a relatively new chief executive officer, who joined the firm from New York real estate giant Vornado Realty Trust.
After the deal, Brookfield will own 38 per cent of General Growth. Under the restructuring agreement, Brookfield can own at most 45 per cent of the company.
And while we're on the topic of Brookfield, you may have missed this profile of the company and its chief executive officer, Bruce Flatt, that ran in the New York Times just before year end.