GGP Ggp Inc. (delisted)

By Esther Fung 

One of the world's largest real-estate asset managers has purchased a 49% stake in three malls in a deal that values them at more than $1 billion and shows that investors still have an appetite for top-tier retail property.

CBRE Global Investors said it is buying stakes in malls in northwest Atlanta, Greater Minneapolis and Arlington, Texas, from Brookfield Property Partners, which will retain an interest. The malls, previously owned by GGP Inc., have a total of 3.7 million square feet of space and high sales of about $600 a square foot.

The deal comes as Toronto-based Brookfield closes on a $15 billion deal to buy the 66% stake in GGP that it didn't already own. Brookfield executives have said they would look for joint-venture partners, as they moved to revitalize the 125 property-portfolio.

The three malls in the CBRE deal are dominant malls in their regions and have potential for further gains from rent increases, according to David Morrison, CBRE Global's chief investment officer for the Americas.

"Class A malls were trapped in the idea that malls are transforming for the worse," Mr. Morrison said. "People are starting to understand that there are differences between malls that are thriving and malls that are struggling."

Shopping center values overall have been pummeled lately as online retail has gained strength and big name retailers have been forced to downscale or go out of business.

But some private investors see markets as having broadly mispriced mall assets, and that the overly negative sentiment is creating a buying opportunity. This is especially true for well-located property that rarely comes to market, some investors say.

While store closures are still occurring as a number of retailers continue to struggle, retail sales have grown at a strong clip so far this year as tax cuts and the low unemployment rate boosted consumer spending. This has helped some landlords find replacement tenants for spaces that had been vacated.

"The spur in consumer spending has driven better-than-expected tenant sales (not just online), which should continue through 2018," said real-estate research firm Green Street Advisors in a research note.

The three malls are the Cumberland Mall in northwest Atlanta; Ridgedale Center in Minnetonka, Minn.; and The Parks Mall in Arlington, Texas.

Mr. Morrison predicted the portfolio will grow cash flow, as retail sales rise and new food and entertainment features are offered. He said he expects returns from this acquisition to mirror the 8%-10% returns from properties in CBRE Global's core funds.

Write to Esther Fung at esther.fung@wsj.com

(END) Dow Jones Newswires

August 27, 2018 19:41 ET (23:41 GMT)

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