Brookfield Property’s Q1 losses come as retail tenants miss payments

CEO Brian Kingston said company is negotiating with nearly 2.5K tenants, including those seeking deferrals and abatements

Brookfield Property Group CEO Brian Kingston (Credit: Brookfield; Unsplash)
Brookfield Property Group CEO Brian Kingston (Credit: Brookfield; Unsplash)

Brookfield Property Partners is now negotiating with 2,400 of its retail tenants across the country who have been unable to come up with the rent. That inability to pay has cut deeply into Brookfield’s bottom line.

Its first quarter was dismal.

The real estate wing of the Canadian giant Brookfield Asset Management had a net loss of $373 million from January through March, compared with $713 million in net income over the same period last year.

The earnings report comes as credit rating agencies consider downgrading its retail real estate investment trust, which has $1.7 billion in debt coming due this year.

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“We’re in active dialogue with all of our tenants,” BPP chief executive Brian Kingston said during the Friday earnings call with investors, referring to tenants who have been unable to pay. He said the discussions involve retailers who have requested deferrals and abatements.

It stood in contrast to the company’s fourth quarter earnings call in early February, when Kingston sounded an upbeat note for the year ahead. “Our expectation is that 2019 was the peak for bankruptcies and 2020 will get a little better,” he said at the time, as the company reported net income of $1.5 billion from October through December, compared to $858 million for the same period in 2018.

Now, as states begin reopening their economies, it remains to be seen which retailers will be able to bounce back and adapt to the new retail landscape.
But Brookfield also appears to see opportunities amid the distress. Brookfield Asset Management this week said it was looking to invest $5 billion in retail companies hit hard by the pandemic, the Wall Street Journal reported. The company will target brands whose revenues exceeded $250 million before the virus took full effect in March.

“Retailers with weak balance sheets or weak business models will restructure,” Kingston told investors, referring to high-profile retail bankruptcies that have recently unfolded, such as J. Crew and Neiman Marcus. In February, a bankruptcy judge approved Brookfield Property, Simon Property Group and Authentic Brands Group’s $81 million acquisition of Forever 21.Brookfield and Simon were two of the fast-fashion retailer’s landlords and unsecured creditors.

“Weak retail real estate that is poorly located, that might have been able to hang around for longer, will quickly see values diminish and something different happen with it,” he said. “And that’s a good and bad thing.”