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Brookfield Property Partners closes on $15B GGP buy

Brookfield Property Partners completed its purchase of the retail REIT GGP Inc. for more than $15 billion yesterday (Tuesday).

Brookfield made a cash payment of $9.25 billion as well as a $6 billion equity investment to acquire GGP’s 125-property retail portfolio, completing a process that began in November 2017 and came to a head in March.

The Toronto-based company’s massive retail investment comes at a time when many investors are skeptical of the asset class.

The struggle is nothing new for GGP, which underwent the largest real estate bankruptcy to date in 2009, only to be bailed out by Brookfield and a consortium of other investors.

BRIAN KINGSTON

When the company put out a call for buyers last year, Brookfield Property Partners was the only firm to make an offer. Where others saw a risk, CEO Brian Kingston said his company saw an opportunity.

“We look for places where people are running away from,” Kingston told Bloomberg. “Ultimately we’re value investors. So that means many times it leads you to being contrarian.”

Prior to acquiring GGP, Brookfield’s real estate portfolio was valued at more than $100 billion and included roughly 260 office buildings as well as various other multifamily, retail and other property types.

By absorbing GGP, the Toronto-based company becomes one of the largest center owners in North America and it has already taken advantage of that position.

On Tuesday, CBRE announced that it had bought into joint ventures with Brookfield on three former GGP regional malls, totaling 3.7 million s/f in Atlanta, Minneapolis and the Dallas-Fort Worth area.

With a combined occupancy of 98 percent and healthy mixes of strong national and local retailers, CBRE Global Investors CIO David Morrison said the properties are well-positioned to beat the odds in the dismal world of brick and mortar retail.

“We believe that Class A super-regional malls remain one of the most attractive investments available today,” David Morrison said in a press release. “These assets have a historic track record of material out performance, dominating their retail catchment within their submarkets, and we expect that assets of this quality and scale should maintain that advantage going forward.

“The opportunity to invest in this sector in scale with this level of quality was very attractive, and we look forward to partnering with Brookfield on this portfolio.”

Along with Tuesday’s closing comes the introduction of the Brookfield Property REIT Inc., which will trade on the securities market under as “BPR.” This will allow investors to buy a stake in the company in the form of a REIT stock, fulfilling one of the conditions of the deal.

Of the final sale price, more than $8.9 billion went toward a pre-closing dividend and $200 million for a merger consideration. The rest of the cash went to GGP’s restrict stock and securities holders.

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