Two years after Simon Property Group lost a chance to recapitalize General Growth Properties (GGP) to Brookfield Asset Management, the showdown looks ready to repeat itself. Claiming that Brookfield has been trying to slowly acquire all of GGP on the cheap after becoming the REIT’s largest shareholder, the head of its second largest shareholder, Pershing Square Capital’s Bill Ackman, has been urging GGP to officially put itself on the block, with Simon as the most likely bidder.

Given that GGP’s share price has been trailing behind Simon’s since its exit from bankruptcy and that in the regional mall space “bigger is better,” such a deal would be a boon for both GGP and Simon, says Cedrik Lachance, managing director with Green Street Advisors, a Newport Beach, Calif.-based research and advisory firm. In the past 52 weeks, Simon’s share price has ranged between $103.32 per unit and $163.75 per unit, according to Chicago-based research firm Morningstar. During the same period, GGP’s share price has ranged between $10.38 and $21.12 per unit.

According to documents published by Ackman, Pershing Square and Simon executives have discussed a potential merger in the fall of 2011, and at the time Simon was willing to pay a 65 percent premium to GGP’s trading price, which was then $12.70 per share.

RBC Capital Markets analyst Rich Moore estimates GGP’s current price target at $18 per share, based on the high quality of the REIT’s properties. Today, the company owns 135 malls totaling 140 million sq. ft. In the second quarter, it reported consolidated portfolio occupancy of 94.1 percent.

“If they can get that price [$21 per share] and Simon is willing to pay and if GGP shareholders have the option of benefitting from the combined entity, I don’t see anything wrong with that,” says Todd Sullivan, author of the blog ValuePlays.

The hitch is that Brookfield, which has three members on GGP’s nine-member board of directors, including its CEO J. Bruce Flatt, who serves as chairman of GGP’s board, might have a conflict of interest in any sale discussions if it is interested in acquiring the REIT itself. Ackman claims that after he started talking about a potential merger with Simon, Brookfield indicated it might want to buy GGP as well, but then continued to ask for extensions to put together a deal. Brookfield was reportedly trying to secure financing and was planning to acquire GGP in partnership with an unnamed sovereign wealth fund.

In a press release issued on Aug. 23, Brookfield executives claim they are not taking any steps toward buying the company, nor do they have an interest in selling their existing stake in the firm. “Brookfield has no interest in selling its stake in GGP. We are 100 percent supportive of the current management team of GGP and believe that GGP’s business plan has and will continue to create significant long-term value for all stakeholders,” the release reads. “When Brookfield was chosen as an investor in GGP, it was explicitly on the basis that we were a long-term investor. We have invested considerable capital, time and attention to support management and the board as they enhance the value of GGP for all concerned. The results to date bear testimony to their success.”

Brookfield declined to comment any further on the matter. GGP did not respond to a request for comment.

REIT world insiders, however, are not buying Brookfield’s story. Both Sullivan and Lachance say that Ackman would not have spoken out against the investment partner he brought in to bail out GGP during the financial crisis if the facts did not bear out his story. “I think, based on Brookfield’s own words, they’d be more than happy to buy it,” says Sullivan. “They explored possibilities of buying it, including the disposition of some properties to Simon. I think they would have been happy, if no one said anything, to continue with the drip” acquisition.

That means that Flatt should step down from GGP’s board to allow it to make a decision about a sale that’s in the best interest of GGP shareholders, Sullivan notes. If Brookfield was interested in buying GGP itself, as CEO he would have a responsibility to get the lowest possible price for Brookfield shareholders that would be at odds with his responsibility to GGP shareholders to get the highest possible price for the REIT.

“I am shocked that GGP has not asked him to recluse himself from any conversations about a potential merger when there is a clear conflict of interest,” Sullivan says. “I am not sure how this isn’t sending up red flags all over the place.”