Brookfield, creditors reach deal on REIT’s $6.4B credit facility

Agreement limits dividends and requires Brookfield’s other entities to lend at least $250M to Brookfield Property REIT

Brookfield's Ric Clark (Getty)

Brookfield Asset Management has renegotiated a $6.4 billion credit facility for its retail-heavy real estate investment trust, Brookfield Property REIT.

The deal imposes restrictions on dividends and requires other Brookfield Asset Management–owned entities to lend at least $250 million to the REIT, the Financial Times reported.

In exchange, a group of creditors led by Wells Fargo waived a contractual clause that allowed them to demand immediate repayment of loans if Brookfield Property REIT failed to meet certain financial conditions.

The agreement includes an exception that allows the REIT to pay larger dividends if that is necessary to retain its privileged tax status or if money from other Brookfield entities fund those distributions, according to the Financial Times.

Brookfield sought to reassure investors in the troubled entity, saying in a press release that “nothing in the amendment will prevent [Brookfield Property REIT] from operating its business as planned including servicing its indebtedness and maintaining payment of dividends to shareholders looking forward.”

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The coronavirus pandemic hit Brookfield hard during an already difficult period for the retail industry. Brookfield Property Partners, of which the REIT is a subsidiary, suffered a $373 million net loss in the first quarter.

As stores closed and consumers focused on necessities, Brookfield Property Partners struggled to collect rent from many tenants. In April it brought in just one-fifth of rents from retailers. CEO Brian Kingston told The Real Deal the firm is working with tenants on rent deferral plans and in some cases lease restructuring. It’s currently trading lawsuits with tenant Gap over unpaid rent.

Despite general skepticism that the retail sector will be the property sector slowest to recover from the pandemic, Brookfield Asset Management announced in May a plan to invest $5 billion into retailers struggling through the pandemic.

Brookfield Property REIT shares closed Wednesday at $11.80 and opened Thursday at $11.64 before recovering. By early afternoon they were down about 0.3 percent from the previous day’s close. [Financial Times] — Dennis Lynch