Why Brookfield’s Underwhelming $9 Billion Bid for GGP Is Another Sign That American Malls Are Dying

Following months of back-and-forth talks, mall operators Brookfield Property Partners LP and GGP Inc. have finally reached a deal.

Brookfield announced that it will buy the remaining 66 percent of GGP for $9.25 billion in cash, forging a real estate investment trust between the two mall owners. The agreement comes after the latter operator reportedly declined a $14.8 billion cash-and-stock buyout offer — $7.4 billion in cash, for comparison — late last year from its largest shareholder, which then had an ownership of 34 percent. The GGP committee approved the renewed offer price of $23.50 per share, up a half dollar from the previous offer.

“We are pleased to have reached an agreement and are excited about combining Brookfield’s access to large-scale capital and deep operating expertise across multiple real estate sectors with GGP’s portfolio of irreplaceable retail assets,” Brookfield CEO Brian Kingston said in a statement.

Although the acquisition creates one of the world’s largest publicly traded property companies, Brookfield’s disappointing bid hints to a bigger issue of U.S. malls’ attempts to stay relevant in an increasingly digital world. Many shopping centers, including top-tier names, have struggled to retain tenants as department stores and specialty retailers continue to leave gaping holes in malls as they close their brick-and-mortars.

Teen accessories retailer Claire’s, for instance, became the latest mall staple to announce that it would shutter 92 stores, filing for Chapter 11 bankruptcy protection last week. In recent years, a range of popular mall names such as Aéropostale, Gap, BCBG, The Limited, Guess, Michael Kors and American Apparel have also reduced their physical footprints, either shutting down their branches or allowing their leases to expire amid slumping sales.

Even more telling of the times are the sweeping closures of anchor stores such as JCPenney, Macy’s and Sears — all of which have seen their traditional businesses take a hit after years of serving as shopping center mainstays. With vacancies of this caliber, other tenants might be more keen to negotiate cheaper rent or even break their leases in a domino effect that can spell financial trouble for mall owners.

It’s a balancing act: To stymie the surge of store closures, retail landlords must find the middle ground between appeasing their shareholders and catering to the new generation of customers.

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