market folly

Shares of General Growth Properties (GGP) have been a big winner for Bruce Berkowitz's Fairholme Capital (and mutual fund FAIRX). After scooping up debt and shares while the company was in bankruptcy, Berkowitz has profited from the company's emergence from Chapter 11 as shares rebounded from the low single digits to now over $14.

It appears as though Berkowitz has said that now is the time to take some profits off the table. Announced via a press release today, Brookfield Asset Management (also a large GGP investor) has acquired 113.3 million shares of GGP from the Fairholme Fund. This transaction is valued at $1.7 billion and Brookfield's ownership stake in General Growth Properties will rise to 38%. Per GGP's restructuring, Brookfield is limited to owning 45% of GGP at most.

Other large General Growth Properties investors include hedge fund Pershing Square. Bill Ackman's firm helped spearhead the campaign to restructure GGP and ensure its exit from bankruptcy. We've detailed previously that Whitney Tilson's T2 Partners also owns GGP but trimmed its stake as well.

To finance the transaction, Brookfield will use $804 million in cash and will issue 27.5 million shares of Class A stock (BAM). Upon completion, Berkowitz's Fairholme will own a 4.5% equity stake in Brookfield.

Maybe the most interesting note here is that Fairholme is selling its *entire* equity stake in GGP, but it will continue to own warrants. Todd Sullivan over at ValuePlays has an interesting look at why Berkowitz might be doing this. A hint: it relates to St. Joe (JOE), a battleground stock as Berkowitz is long and David Einhorn's Greenlight Capital is short. It's purely speculation, but it's certainly an interesting idea.