Brookfield Property Partners plans to whittle down its portfolio of U.S. malls in addition to reducing staff by 20 per cent at its U.S. retail division after the coronavirus pandemic upended shopping centres.
The global real estate owner said it was forced to accelerate plans to overhaul its suite of more than 170 U.S. malls after local government restrictions temporarily closed indoor spaces, which contributed to Brookfield’s huge second-quarter loss. Mall landlords have had to deal with growing vacancies as retailers big and small file for creditor protection or shut their stores.
But chief executive officer Brian Kingston told investors that the company would not be rushing sales.
“The number of malls we will have at some point in the future will be fewer than the number of malls we have today,” he said at its parent company’s investor day, which was broadcast online. “That does not mean we are running out there trying to sell malls in a market like we see today," he said.
Mr. Kingston’s comments comes after Brookfield told its employees on Monday that one-fifth of its approximately 2,000 retail employees in the U.S. would be laid off. The company, which has US$203-billion in assets under management, owns real estate around the world, including 253 office buildings, 180 apartments, student housing, storage warehouses and hotels.
Brookfield became the second largest shopping centre operator in the U.S. when it acquired GGP’s 125 malls a few years ago.
Mr. Kingston said there is too much retail space in the U.S. But he said if retailers were reducing the number and size of their stores, they would likely choose to stay in or relocate to a Brookfield mall, many of which are in densely populated areas.
Brookfield and the largest U.S. mall operator, Simon Property Group, have proposed buying department store chain J.C. Penney Co. for US$1.75-billion. The retailer is currently restructuring under creditor protection.
The deal would be financed from Toronto-based parent company Brookfield Asset Management Inc.'s US$5-billion fund to prop up retailers by providing capital in exchange for non-controlling stakes in the business.
At the investor event, Mr. Kingston said the purpose of the fund was to draw on the company’s knowledge of retail to invest in brands that will succeed in the future. He said “historically, the department stores have not really fit into that category,” but called J.C. Penney an opportunity given the size and scale of the chain’s business. Mr. Kingston said Brookfield would invest to expand the department store’s online and distribution capabilities.
Brookfield is not the only mall owner struggling during the pandemic. Canadian real estate companies Cadillac Fairview, Ivanhoé Cambridge and Oxford Properties have had to provide rent deferrals for their hardest-hit tenants during the pandemic. Ivanhoé, a global real estate player owned by Quebec’s pension fund, Caisse de dépôt et placement du Québec, has been trying to sell some of its 25 Canadian malls.
Brookfield Property has lost 40 per cent of its value on the stock exchange since the beginning of the year and has had to buy back units to help prop up the price.
Brookfield Asset Management said that as of June 30, Brookfield Property represented US$14.4-billion of its US$45.3-billion invested capital.
With a file from David Milstead
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