Malls changing, ‘absolutely not disappearing’

Continued from FP1

“GGP is not a bunch of third-tier malls that are getting destroyed by the Internet,” said Mark Rothschild, real estate analyst with Canaccord Genuity. “The malls are evolving, but they’re absolutely not disappearing.”

Rothschild said the company also aims to offer “unique experiences” at its malls, giving customers a reason to go there beyond shopping.

“There are malls that no matter what happens online, that real estate is still worth a lot of money and people will go to,” Rothschild said. “And there will be things that the landlords do to make that a fun place to be, whether it’s eating, whether it’s other activities, whether it’s shopping.”

Shares of Brookfield Property Partners fell 4.47 per cent in Toronto on Monday, to $28.66. The company’s stock price has declined 2.28 per cent for the year. Meanwhile, shares of GGP jumped 8.33 per cent, closing at US$24.05 Monday, down 3.72 per cent for 2017.

GGP said in a release that its board had struck a special committee of independent directors to review and consider Brookfield’s proposal.

“There can be no assurance that a definitive offer relating to the Proposal will be made, that a definitive agreement relating to the Proposal or any other transaction will be entered into by the Company, or that any transaction will be consummated,” GGP added.

But, if the deal does go through, Brookfield said it would create “one of the largest listed property companies in the world, with an ownership interest in almost $100 billion of premier real estate assets globally and annual net operating income of approximately $5 billion.”

Brookfield bought into GGP in 2010, helping the latter emerge from bankruptcy with a $2.5-billion investment that was made in return for approximately 26 per cent of the company. Hedge fund manager Bill Ackman’s Pershing Square also invested at the time, putting up $1.1-billion in exchange for an 11-per-cent stake, according to a release.

The latest GGP deal could give Brookfield another way to double down on retail, or to repurpose the valuable space it may occupy.

“We continue to acquire big-box anchor spaces in our malls and reposition them,” Kingston wrote in his letter to unit holders, prior to the deal. “We can earn excellent returns doing this and it is one of the best opportunities in U.S. retail today.”