GGP may also be the biggest test yet of what Kingston describes as Brookfield’s “counter-cyclical” investment strategy.
Regional malls have come under increasing pressure from Amazon.com Inc.and other online retailers. The Bloomberg REIT Regional Mall Index has fallen about 23 percent from its peak in July 2016. GGP’s shares are down about 27 percent over the same period, according to data compiled by Bloomberg.
That slide enabled Brookfield Property Partners to buy the rest of the Chicago-based company that it didn’t already own.
It was the only bidder because few fund managers can match its size, redevelopment expertise and optimism around the retail sector, according to Kingston.
“What is unique, and I don’t think is fully appreciated by the market, is that these are really great malls,” he said. “Yes, there’s trouble with retailers but not in the Class A shopping centers.”
GGP has about 125 malls in the U.S., including Ala Moana Center in Honolulu, Glendale Galleria in Los Angeles and Water Tower Place in Chicago.
Turnaround Plan
Brookfield’s plan for GGP is similar to what it has done with Rouse Properties Inc., another REIT it acquired in 2016.
It’s about redevelopment. Brookfield is building apartments at one Rouse mall outside of San Francisco, where housing is scarce. That could make the land 10 times more valuable than it is today, Kingston said.
Brookfield sees opportunities at about 100 of GGP’s malls. In same cases, that could mean replacing a big box store with a movie theater; in others, leveling half a mall and building apartments.