Advertiser Disclosure

advertising disclaimer
Skip to main content

Major Retail Landlords Are Hunting for Opportunities Amid the Sector's Carnage

[Updated: Sep 22, 2020 ] Jun 05, 2020 by Matthew DiLallo
Get our 43-Page Guide to Real Estate Investing Today!

Real estate has long been the go-to investment for those looking to build long-term wealth for generations. Let us help you navigate this asset class by signing up for our comprehensive real estate investing guide.

*By submitting your email you consent to us keeping you informed about updates to our website and about other products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.

Brick-and-mortar retailers have been under significant pressure in recent years as more consumers do their shopping online. Unfortunately, the retail apocalypse has gone from bad to worse this year because the COVID-19 outbreak forced many nonessential retailers to close their physical stores. That's putting further stress on their already troubled finances, which could cause more to close up shop permanently. Those closures would put more pressure on the occupancy levels of retail centers, further impacting their income streams.

However, while many see challenges in the retail landscape, others see an opportunity, including leading retail property owners Brookfield Asset Management (NYSE: BAM) and Kimco Realty (NYSE: KIM). Both are launching separate investment vehicles to capture opportunities in the space, suggesting they see some light amid all the darkness.

A $5 billion bet on retail revitalization

Brookfield Asset Management is one of the largest commercial property investors in the world. One of its biggest investments is in retail real estate. Through its affiliates Brookfield Property Partners (NASDAQ: BPY) and Brookfield Property REIT (NASDAQ: BPYU), Brookfield took control of leading mall owner General Growth Properties, which owns 122 high-quality malls and urban retail properties. Brookfield also owns 42 retail properties via its various private equity funds.

Because of that, it has a lot riding on the line if retailers continue closing locations. That's why the company recently launched the Retail Revitalization Program. Brookfield and its partners are putting up $5 billion of capital to help recapitalize retail businesses in its major markets. Through the program, the Brookfield-led group will make non-control investments in retailers, giving them funding to reduce debt and ease some of their financial constraints. Brookfield aims to provide financial assistance to retailers so that they don't need to reorganize through bankruptcy.

Brookfield has had lots of success in restructuring and rejuvenating several industries over the years. However, it has recently started investing directly into turning around struggling retailers. For example, the company partnered with fellow mall owner Simon Property (NYSE: SPG) to revitalize retailer Aeropostale and recently completed a similar deal with Simon to try to replicate their success with Forever 21.

By improving the financial health and operations of retailers, these companies will be able to continue paying rent in properties owned by Brookfield. The company also stands to benefit from its direct investment in these retailers. If they're successful, Brookfield's investment will increase in value.

Starting a new investment vehicle

Kimco Realty is one of North America's largest owners of open-air shopping centers. The retail REIT currently has an interest in more than 400 properties, most of which have grocery stores as their anchor tenants.

While Kimco is already a major investor in retail real estate, it believes that the COVID-19 outbreak could provide a unique investment opportunity. Because of that, it's exploring the potential to sponsor a separate investment vehicle. It could invest between $50 million and $100 million into this vehicle, which would raise additional capital from other investors.

Potential investment opportunities could include acquiring retail properties that the current owners need to sell because of financial stress or forming joint ventures with owners that need to raise cash to pay down debt or complete development projects. Kimco would receive income from managing this vehicle. It also stands to potentially earn a positive return on its investment via dividends paid by the investment vehicle as well as capital gains as property values improve.

Retail isn't dying; it's evolving

The retail sector is undergoing a major shift as more consumers do their shopping online. However, that doesn't mean physical retail will die out. That's clearly the view taken by major retail property owners Brookfield and Kimco as they're increasing their investment in the sector this year even though conditions have grown much worse. These bets demonstrate their firm belief that physical retail still has a bright future, which should enable them to earn an attractive return on these opportunistic investments.

Unfair Advantages: How Real Estate Became a Billionaire Factory

You probably know that real estate has long been the playground for the rich and well connected, and that according to recently published data it’s also been the best performing investment in modern history. And with a set of unfair advantages that are completely unheard of with other investments, it’s no surprise why.

But those barriers have come crashing down - and now it’s possible to build REAL wealth through real estate at a fraction of what it used to cost, meaning the unfair advantages are now available to individuals like you.

To get started, we’ve assembled a comprehensive guide that outlines everything you need to know about investing in real estate - and have made it available for FREE today. Simply click here to learn more and access your complimentary copy.

Matthew DiLallo owns shares of Brookfield Asset Management and Brookfield Property Partners. The Motley Fool owns shares of and recommends Brookfield Asset Management. The Motley Fool has a disclosure policy.