Mall Owner Brookfield Property Will Fire 20% of Workforce

Just two weeks after agreeing to rescue some of J.C. Penney’s stores, Brookfield Property Partners L.P. (NYSE: BPY) is cutting about 20% of its retail division staff. In its annual report for 2019, the company said it had 22,000 employees.

The company did not announce the cuts. CNBC reported Tuesday that it had obtained an email to employees from Jared Chupaila, Brookfield Property’s CEO, informing them of the company’s plans.

In the email, Chupaila noted that Brookfield “made a conscious decision” not to furlough or fire employees when the coronavirus began to spread, but that the company has decided to make cuts now “to align with the future scale” of its portfolio. The cuts will affect both corporate headquarters staff and local leasing agents.

Brookfield Property is the real estate arm of Brookfield Asset Management Inc. (NYSE: BAM) and operates more than 170 retail properties in 43 U.S. states.

Mall owners like Brookfield Property have been buying bankrupt tenants like J.C. Penney, which the company acquired in a partnership with Simon Property Group Inc. (NYSE: SPG) for $800 million. The J.C. Penney acquisition included only J.C. Penney’s retail operations. The venerable retailer’s lenders will assume control of some entities housing J.C. Penney stores and the company’s retail distribution centers. All told, the deal for J.C. Penney totaled $1.75 billion.

In February, Brookfield, Simon and Authentic Brands Group jointly acquired retailer Forever 21 for $81.1 million. Other struggling and failing retail brands like Brooks Brothers (acquired by Simon and Authentic Brands for $325 million) are also on the block at steep discounts.

With cash and equivalents totaling about $1.5 billion at the end of the June quarter, Brookfield Property and Simon (cash balance of $3.3 billion) have a nice war chest for the retail bargains that have resulted from the pandemic.

While some of the recent deals have saved jobs (the J.C. Penney acquisition saved about 70,000), property owners like Brookfield and Simon get to retain tenants while Authentic Brands gets friendly landlords and the chance to license the newly acquired brands. If Brookfield or Simon owns the mall and the store, fewer leasing agents are needed and so are fewer corporate employees to support the remaining agents.

The cuts at Brookfield Property could indicate that the company plans to conserve more cash in order to increase its participation with Simon and Authentic Brands in acquiring more impoverished retailers.

Shares of Brookfield Property traded up about 3.8% early Tuesday, at $11.10 in a 52-week range of $7.10 to $20.58. The consensus price target on the shares is $15.04. Brookfield Property is a real estate investment trust that pays a yield of 11.32%.

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