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Brookfield to throw a $5bn lifeline to retailers battered by covid-19

Brookfield's private equity, real estate and other platforms will share oversight of the retail initiative, which will make non-control investments in merchants with pre-pandemic revenue of $250m or more.

Brookfield Asset Management plans to deploy $5 billion to retailers facing liquidity shortfalls due to the covid-19 pandemic, betting that leading merchants will continue to prosper after the crisis subsides.

Brookfield this week launched a “retail revitalization” initiative to bring financing to retail businesses operating in global markets in which the Toronto firm has a presence. The goal is to get money into the hands of companies facing short-term cash crunches and help them recapitalize.

Closings of non-essential shops and physical distancing intended to halt covid-19’s spread have created immense financial disruption for retailers. These new challenges add to existing competitive pressures imposed by e-commerce giants like Amazon.

Brookfield will make non-control investments in medium-sized retail businesses operating for at least two years and with pre-pandemic revenue of $250 million or greater. The profile describes many tenants in the firm’s real estate operation, Brian Kingston, CEO of Brookfield Property Partners, said in a Q1 2020 earnings webcast.

“While you don’t have to be a tenant of Brookfield to qualify for the program,” Kingston said, “with 150 retail locations around the United States and close to 2,400 tenants, no question some of our tenants will benefit from this access to capital.”

Along with financing, retailers will have access to “the knowledge, the relationships and the understanding” of tenants Brookfield has acquired through its real estate holdings, Kingston said.

Brookfield is a major investor in shopping centers. The firm in 2018 bought GGP, one of the largest mall owners and operators in the US, in a deal that valued the company at more than $15 billion.

Responsibility for the $5 billion retail initiative will be a shared across Brookfield investment platforms, including private equity and real estate. It will be funded off the balance sheet and through private pools, a Brookfield spokesperson told Buyouts. Additional capital may come through fundraising as opportunities are sourced and deals done.

While there is no target time-frame for investing, Brookfield is expected to ratchet up activity over the next 12 to 24 months, the spokesperson said.

In making investments, Brookfield will draw on a range of financing options, from bridge loans to permanent capital and “everything in between,” Kingston said. “There is no one size fits all,” he said, as each merchant will have different requirements.

The program is headed by Ron Bloom, a managing partner and vice chairman of Brookfield’s private equity group.

Bloom, who joined the firm in 2016, was previously Lazard’s vice chairman of US investment banking. Between 2009 and 2011, he worked for the federal government, playing a key role in the Obama administration’s auto industry restructuring strategy.

Retail has seen high-profile bankruptcies since the outbreak of covid-19. They include Neiman Marcus, which this week filed for bankruptcy protection. Acquired in 2013 by Ares Management and Canada Pension Plan Investment Board for $6 billion, the luxury retail chain is expected to emerge from Chapter 11 proceedings later this year.

Action item: Listen to Brookfield Property Partners’ Q1 2020 earnings webcast here.