Fairfield reorganization, Brookfield sale approved

* Brookfield Asset Management to buy selected assets

* Reorganization to be completed Aug. 1

By Tom Hals

WILMINGTON, Del., July 6 (Reuters) - Fairfield Residential LLC received court approval on Tuesday for its plan of reorganization, clearing the way for Brookfield Asset Management Inc to acquire assets of the developer of multifamily housing.

Delaware's Bankruptcy Court approved a plan in which Brookfield (BAMa.TO) will acquire the reorganized operations for around $19 million, according to court documents. In addition, Brookfield and Fairfield's management will invest just over $28 million to recapitalize the company, which builds and manages apartment buildings and attached homes.

The San Diego company filed for bankruptcy in December, caught by falling prices for real estate and a lack of credit that prevented the company from refinancing its debt.

The Brookfield deal is expected to close on Aug. 1. The operations that Brookfield did not buy, such as joint venture partnerships and a portfolio of low-income housing, will be liquidated by a trustee over the next several years.

The money raised from those sales along with the payment from Brookfield will go to pay off creditors, according to Richard Chesley, an attorney with Paul, Hastings, Janofsky & Walker, which represented Fairfield.

The company had revenues of $952.9 million in 2008, its last full year before bankruptcy, and filed for court protection with $1.2 billion in assets and $978 million in total liabilities, according to court documents.

It also had about $3 billion of contingent liabilities stemming from guarantees by the company on projects by related businesses that were not part of the bankruptcy. The value of those guarantees would be evaluated by a third party and holders of the guarantees will receive a general unsecured claim, Chesley said.

General unsecured creditors will likely recover 9 cents on the dollar of their claims, the company said in court documents.

Fairfield Residential was formed in 1997 by the Fairfield Companies and Morgan Stanley Real Estate Fund II. The company has about 200 separate projects ranging from undeveloped land to fully operational developments. It manages about 55,000 apartments, according to court documents.

The California Teachers Retirement System and a subsidiary of Mitsubishi Corp (8058.T) were also investors. They will not recover anything for their ownership stake.

The company employed about 2,000 people when it filed for bankruptcy.

The case is In re Fairfield Residential LLC, U.S. Bankruptcy Court, District of Delaware, No. 09-14378. (Reporting by Tom Hals; editing by Andre Grenon)