Brookfield Moves to Buy Property Arm in Changing Mall Landscape

January 4, 2021

There are more changes coming for the already-on-the-move mall landscape.

Brookfield Asset Management said it and some of its institutional partners proposed buying out other investors in Brookfield Property Partners in a deal valuing the mall operator at $5.9 billion.

The financial giant, which has $575 billion in assets under management and itself publicly listed, offered $16.50 for each limited partnership unit of the property group it does not already own, a 14.9 percent premium over the company’s last closing price on the Nasdaq stock exchange.

Nick Goodman, chief financial officer of Brookfield Asset Management, said, “The privatization will allow us to have greater flexibility in operating the portfolio and realizing the intrinsic value of BPY’s high-quality assets.”

The property group acknowledged “receipt of a nonbinding proposal” and said it has formed a committee of independent directors to consider the offer.

The proposed deal is another sign of the times in the rapidly shifting world of malls and real estate in general.

Brookfield Property oversees $88 billion in assets, owning and operating not just retail space, but also offices, multifamily homes, logistics, hospitality, self-storage and more.

The stresses of COVID-19, the recession, rising work-from-home trends and the hard pivot to e-commerce for many consumers has made real estate a complicated game.

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Brookfield has played a part in much of it already, for instance teaming with Simon Property Group to buy J.C. Penney Co. Inc. out of bankruptcy last year.

But there’s also Simon’s acquisition of mall rival Taubman Centers, after a stutter step and a pandemic price renegotiation, the bankruptcies of mall operators CBL Properties and PREIT, continuing disputes of back rent during the spring COVID-19 shutdown and more.

America has been seen as having too much retail space for decades and although the reckoning was always around the corner, it never came given the entrenched interests that stood to gain from all those stores.

The complete shutdown of retail last year and the slow reopen and lingering weakness in the pandemic provide what now looks like a clean break between past and future.

Experts project that one-quarter of U.S. malls could close in the next five years — a reworking that the industry’s biggest players are clearly preparing for now.