Brookfield Asset Management, the Canadian investment group that is one of the largest operators of US shopping malls, is launching a $5bn rescue fund for retailers that need extra capital to weather the coronavirus pandemic.
The fund will be overseen by Ron Bloom, a former Lazard banker who also led the US Treasury’s restructuring of General Motors and Chrysler before joining Brookfield in 2016.
It represents a significant commitment of capital to a sector that was contending with major changes in shopping habits even before governments shut shops and prompted nervous debate among retail executives about how soon customers would return.
As a major owner of retail property, Brookfield’s fate was already bound up with a retail recovery. Shares in Brookfield Property Partners, the listed vehicle through which the group holds many of its mall investments, have lost 55 per cent of their value since January, as investors fretted about store closures.
In February, Brookfield teamed up with two other buyers to acquire fashion chain Forever 21 out of bankruptcy, rescuing a chain that has a large presence at many Brookfield-owned malls.
Money for its $5bn fund is expected to come from Brookfield’s existing investment vehicles and its own balance sheet. The group may also look to raise new capital from investors, said a person briefed on its plans.
“There is not a programme-wide return target,” the person added. Decisions would be based on “the investment attributes of the business — regardless of whether they are a Brookfield tenant or not”.
A self-styled contrarian investor, Brookfield has a history of investing in out-of-favour sectors. In the aftermath of the 2001 terror attacks on New York, the company doubled down on its investment in lower Manhattan while other developers fled, making huge profits when the neighbourhood eventually bounced back.
Brookfield’s assistance for coronavirus-struck retailers could involve injecting cash at various points in the capital structure, said the person familiar with its plans. Alternatively, retailers could access cash by selling assets such as warehouses.
To qualify for consideration, retailers generally need to have been in business for at least two years, operate in markets where Brookfield already has a presence, and have at least $250m in “normalised revenues”.
There was another reminder of the pressure that the shutdown of stores is causing for landlords on Thursday when Washington Prime, owner of about 100 retail properties across the US, warned there would be a “substantial doubt” about its ability to continue as a going concern unless it secured relief from its creditors.
The real estate investment trust disclosed it had collected only about 30 per cent of rents it was owed for April because of the Covid-19 crisis. Bankruptcies last year of the retailers Charlotte Russe, Gymboree, and Payless ShoeSource further hurt its rental income.
Lou Conforti, chief executive, said the “exogenous shock has been dramatic to say the least” but pledged the company would “be back next quarter, with a vengeance”.