General Growth Properties (NYSE: GGP) shares surged higher after activist investor Bill Ackman’s investment was followed by another large purchase by Morgan Stanley. The stock nearly doubled at the end of November when Ackman’s Pershing Square disclosed a 19.9% ownership stake in the troubled real estate investment trust. The rally was extended this week after Morgan Stanley increased its stake to 5.1%, presumably upon making a similar conclusion to that of the hedge fund.

General Growth Properties stock has plummeted over the past two months as investors grew increasingly concerned that the heavily leveraged mall operator may be unable to refinance billions of dollars of debt coming due late in 2008 and 2009.  The REIT had hired the Sidley Austin law firm as a financial advisor to refinance its hefty debt, but very little progress appears to have been made.

Investors are now speculating that Pershing Square and Morgan Stanley may be betting on a change of heart on the part of banks. The bailout packages designed to encourage lending may make the prospects of a refinancing more probable. Alternatively, others are betting that Morgan Stanley, Pershing Square or other large institutions/funds may be interested in providing financing using successful properties as collateral. In fact, Pershing Square did something like this with Borders Group where it held the international division as collateral for a high-interest line of credit to keep the company going…