By Miriam Gottfried 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 8, 2020).

Mall owner Brookfield Asset Management Inc. plans to devote $5 billion to shoring up retailers hit by the coronavirus pandemic, a bet on a beaten-down sector that could also help keep its rent payments rolling in.

The initiative will be aimed at taking noncontrolling stakes in retail businesses with prepandemic revenue of $250 million or more whose sales have plummeted as stores have been forced to close and consumers have remained on lockdown.

The Canadian investment giant said it plans to finance the program using money from its balance sheet and existing funds and investment strategies. It may also raise additional institutional capital for the program.

The retail-investment program, which was reported earlier by The Wall Street Journal, will be run by Ron Bloom, vice chairman of Brookfield's private-equity group. Mr. Bloom, a former restructuring banker at Lazard Ltd., is best known for his role leading the U.S. government's auto task force during the financial crisis.

Being a tenant of Brookfield won't be a requirement for investment, according to people familiar with the matter. Still, providing rescue financing for retailers could be a roundabout way for Brookfield to inject capital into its malls whose rent rolls have been battered during the pandemic. Shares of Brookfield Property REIT Inc., which had fallen by nearly half from the beginning of March through Wednesday's close, climbed by more than 6% after the Journal reported on the plans.

Known for its contrarian investing style, Brookfield already has placed a large wager on bricks-and-mortar retail through its real-estate business. In August 2018, the firm closed a deal to buy the two-thirds of real-estate investment trust GGP Inc. it didn't already own. The transaction valued the 125-property portfolio, mostly comprised of malls, at around $15 billion.

Brookfield is now hoping to leverage its retail expertise and the data it collects through its malls to backstop retailers whose businesses it believes will eventually rebound. It plans to target companies with experienced management teams that have been operating for at least two years. Investments could also include retailers that have already filed for bankruptcy protection.

Brookfield's announcement comes during a week when two major retailers, Neiman Marcus Group Inc. and J.Crew Group Inc., filed for chapter 11. J.C. Penney Co. is also preparing a bankruptcy filing, the Journal has reported.

Brookfield is hardly the only investor looking for opportunities amid the current economic carnage. Firms, including Silver Lake and Apollo Global Management Inc., have invested billions of dollars in the weeks since the pandemic began. Others, such as private-equity giant Blackstone Group Inc., have taken a more cautious approach based on the belief that the economic recovery will be gradual.

Brookfield's first investment in GGP was born out of the financial crisis after that mall owner filed for bankruptcy protection. That bet has generated more than $10 billion in profit for Brookfield and its investors over the years, but its future had looked uncertain even before the pandemic as the growth of e-commerce continued to take its toll on bricks-and-mortar retail.

Some of its major tenants had filed for bankruptcy protection and announced significant store closures before the coronavirus, and shares of rival mall owners had suffered.

Write to Miriam Gottfried at Miriam.Gottfried@wsj.com

 

(END) Dow Jones Newswires

May 08, 2020 02:47 ET (06:47 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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