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Brookfield, Macy’s form redevelopment venture

Brookfield, Macy’s form redevelopment venture 2016-11-10 Meghan Morris Brookfield Asset Management is teaming up with embattled department store Macy’s to redevelop up to 50 real estate assets, the Cincinnati-based retailer said Thursday. In the plan to unlock value from Macy’s real estate h

Brookfield Asset Management is teaming up with embattled department store Macy’s to redevelop up to 50 real estate assets, the Cincinnati-based retailer said Thursday.

In the plan to unlock value from Macy’s real estate holdings, the Toronto-based investment manager will create a pre-development plan for the assets over the next two years, according to the statement. Macy’s, which could add additional properties to the venture, is primarily seeking to redevelop its owned and ground-leased stores and land, most of which are in malls not controlled by large mall owners. The plans could include additional development on part of a property and the total redevelopment of a store.

Because the initiative is in preliminary stages, Brookfield has not yet determined capital sourcing. A source close to the deal said the company could structure the redevelopment projects through funds, its balance sheet or joint ventures.

“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,” said Brian Kingston, the chief executive of Brookfield Property Group, in Thursday’s statement.

Macy’s operates a total of 880 stores in 45 states under various brands, according to the announcement. As consumers shift to online purchases, the company has struggled with underperforming stores and consequently has been shedding properties to shore up capital.

Prior to its new venture with Brookfield, Macy’s struck a number of deals with other private equity real estate firms. In October 2015, Greenwich, Connecticut-based Starwood Capital Group bought the top four floors of the Macy’s department store in downtown Seattle for $65 million through its Starwood Global Opportunity Fund X, PERE previously reported. Starwood plans to convert the 300,000-square-foot space, which previously was used for retail and regional offices, into creative offices. Renovations include a new office lobby, dedicated elevators and a rooftop deck. Macy’s will continue operating in the first four floors of the building.

In August 2015, the chain sold the top five floors, air rights and garage of its downtown Brooklyn, New York store to Tishman Speyer for $170 million. The New York-based real estate investment firm plans to turn the retail space into offices and convert the parking garage into a mixed-use development.

Brookfield’s retail portfolio includes shopping centers in the US, Europe, Brazil and Asia, according to its website. Through the company’s 34 percent ownership of real estate investment trust General Growth Properties, the US’s second largest mall owner, Brookfield has an interest in 130 Class A shopping centers in the US. The firm manages about $250 billion in overall assets.