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UPDATE 1-Prelios in exclusive deal talks with Italy's Feidos

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* Prelios picks Feidos over U.S. fund Fortress

* Feidos offer envisages 135 mln euro cap increase-source

(Adds details) By Elisa Anzolin

MILAN, Oct 11 (Reuters) - Loss-making property managerPrelios has chosen Italian consortium Feidos over U.S.fund Fortress for exclusive talks on a rescue deal, itsaid on Thursday.

The heavily indebted company manages properties in Italy andGermany including shopping centres, department stores andcorporate headquarters but has been hit by writedowns on itsreal estate investments in recession-hit Italy.

Prelios, indirectly controlled by Chairman Marco TronchettiProvera, said in a statement on Thursday that it had grantedFeidos exclusivity on negotiations until Nov. 12.

Feidos's offer for Prelios envisages a 135 million-euro($174 million) share issue, a source close to Prelios's boardtold Reuters on Thursday. But Feidos, controlled by Italian realestate entrepreneur Massimo Caputi, would only contribute 25million euros to the cash call, the source added.

Prelios's controlling shareholders would add another 25million euros, while the rest would be guaranteed by the banks,the source said.

Creditors have given Prelios a waiver on interest paymentsuntil the end of 2012.

With about 11.7 billion euros of real estate assets undermanagement, Prelios had net debt of 494.4 million euros at theend of the first half, when it posted a loss of 125.7 millioneuros.

In a statement the company also said Davide Malacalza,shareholder in the Camfin holding company whichcontrols Prelios, announced in a letter on Thursday he wasstepping down as a director.

For months now Malacalza has clashed with Tronchetti Proveraover how to solve Prelios's problems.

Shares in Prelios closed down 4.8 percent at 9.05 eurocents, underperforming a 1 percent rise in Milan's all-shareindex($1=0.7751 euros)

(Writing by Lisa Jucca; Editing by Greg Mahlich)

((elisabetta.jucca@thomsonreuters.com +39 02 66129507))

Keywords: PRELIOS BOARD/