General Growth sticks with Brookfield bid - source

* June 2 deadline for second round bids for GGP

* Consortium offered to replace Fairholme-Pershing

* GGP decided current offer was better

* Blackstone eyeing investment but not signed agreement

By Paritosh Bansal and Ilaina Jonas

NEW YORK, June 2 (Reuters) - General Growth Properties Inc (GGP.N) looks set to proceed with a plan to emerge from bankruptcy, bankrolled by a group led by Brookfield Asset Management (BAMa.TO), as a deadline for others to submit bids passed on Wednesday, a source familiar with the matter said.

General Growth had set a June 2 deadline for offers. But it can still entertain better bids to either buy the Chicago-based company or to fund it as a stand-alone entity before a court date in mid-July to submit a plan to exit bankruptcy.

Brookfield, William Ackman's Pershing Square Capital Management and Fairholme Capital Management have offered to make a $6.55 billion equity investment and $2 billion capital backstop to help the No. 2 U.S. mall owner exit Chapter 11 bankruptcy protection.

The company made the Brookfield-led proposal the starting bid for the auction last month, choosing it over offers from its larger rival, Simon Property Group (SPG.N).

Simon, which had aggressively pursued General Growth for months, walked away after the Brookfield group was granted the inside track, and it has not returned to the table so far, the source said.

Blackstone Group (BX.N), which had partnered with Simon on its bid for General Growth, is interested in joining the Brookfield-led investment consortium, but it has not signed an investment agreement yet, the source said, declining to be named because talks are not public.

The private equity firm was considering investing $500 million alongside the Brookfield group, a source told Reuters last month. [ID:nN21166139]

General Growth received an expression of interest from one other consortium looking to replace the Fairholme-Pershing part of its recapitalization proposal, the source said.

Fairholme and Pershing have committed to invest a total of $3.93 billion in reorganized General Growth.

The rival group's offer would have potentially come at a better price than the $15 per share investment from the Brookfield-led group, but the terms overall were not good enough for General Growth to change track, the source said.

The Fairholme-Pershing investment terms offer more flexibility and other terms that are better, the source said.

General Growth was not immediately available for comment.

General Growth's shares closed up 0.9 percent, or 12 cents, at $14.10 on the New York Stock Exchange, underperforming the the benchmark MSCI U.S. REIT Index .RMZ, which rose 2.1 percent. (Reporting by Paritosh Bansal and Ilaina Jonas; Editing by Richard Chang) (For more M&A news and our DealZone blog, go to www.reuters.com/deals)