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Deals & Dealmakers

Macyʼs partners with Brookfield as it prepares to boost real estate value

Retailer Macy’s has formed a partnership with Brookfield Asset Management as it looks to boost the value of its real estate portfolio.

Macy’s, which has a flagship store in Herald Square that has been valued for as high as $4 billion, has been under pressure to spin-off its real estate assets.

With the new deal, Brookfield will have exclusive rights to create a “pre-development plan” for 50 Macy’s locations. Macy’s either owns or has a ground lease in the properties in the pool. Most are said to be in malls. Macy’s and Brookfield plan to either develop part of each asset or do a complete redevelopment of certain stores.

“We have real estate assets with significant value creation opportunities, and we believe that partnering with a leading global real estate investor like Brookfield is the best way to unlock the potential of those assets,” said Terry J. Lundgren, Macy’s, Inc. chairman and chief executive officer.
“The Brookfield alliance strengthens our ability to improve the customer shopping experience by giving us greater flexibility to invest in our most productive and highest-potential locations, and to make the most of our real estate assets, or portions of them.”

“We are pleased to partner with Macy’s on this important initiative,” said Brian Kingston, CEO, Brookfield Property Group. “The Macy’s portfolio includes some of the highest quality real estate in the United States and we look forward to working closely with them to unlock value for their shareholders and enhance the shopping experience for their customers.”

Macy’s has been under pressure to boost the value of its real estate holdings. Activist hedge fund Starboard Value claims that the company’s stock price could be as high as $125 in the event of a REIT spin-off. The stock opened at $39.99 on Thursday.

The agreement will last for 24 months. After that period, Macy’s can fold more assets into the partnership.

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