At the end of last year, approximately $45 billion of the world’s super prime retail real estate became subject to a sector-defining wave of consolidation.
First, Brookfield Asset Management bid $14.8 billion for the 66 percent of Chicago-based mall giant GGP. The bid was rejected, but the asset manager is expected to return with another offer. Shortly after, Unibail-Rodamco, Europe’s biggest property company agreed a deal to buy Australia’s Westfield in a deal valued at €13.4 billion and UK REIT Hammerson $4.5 billion struck a deal to buy its domestic rival Intu. Apart from Brookfield’s involvement, these deals were an all-listed affair.
Markus Meijer, chief executive of European retail real estate investment firm Meyer Bergman, believes some of private equity real estate’s bigger players could step into the sector’s consolidation fray if stock prices continue to fall. In an interview with PERE, he said: “I think some of the bigger players will more actively start to look at some of the bigger REITs, particularly if values continue to go down further.”
MEIJER ON THE RESILIENCE OF RETAIL:
But, he countered, the firms most likely to compete for positions in the mega-malls space, seen by many as one of the safer investment areas within the retail real estate universe in the age of e-commerce, owing to their experience-led offering – will be those running core and core-plus capital. Currently, he said, “I don’t think it is as compelling as some of the other opportunities they are presented with.”
Nevertheless, Meijer regarded mega-malls as a defensive asset class on account of the difficulty of developing them and competition to buy them. “It’s a difficult place for most PE players to play in unless you’re in the big leagues.”
The London-based firm finished fundraising for its Meyer Bergman European Retail Partners III fund, for which it collected €816 million – a firm record – earlier this year. But it will be directing its coffers to other parts of the retail real estate universe, such as high street shops and department stores, areas in which Meijer believes it can be tricky to buy wisely, but which can offer the sorts of value-added returns the firm seeks.
“There will continue to be a space for high street retail. Whether it’s online retailers, whether it’s bricks and mortar retailers, they will want to have a presence in city centers, particularly city centers where there’s very high foot traffic,” he said. Special attention, he warned, must be paid to stock selection, especially in regards to sustainable rents underpinned by healthy retailers. “If there’s a shock in the economy, the building must remain attractive.”