Macy’s in real estate pact with Brookfield; sells SF men’s store

Macy’s has signed an agreement that could lead to more downsizing of its valuable real estate portfolio. It also has entered into deals to sell one of its stores in San Francisco, and one in Portland, Oregon.



The department store giant announced that it has formed a strategic alliance with Toronto-based Brookfield Asset Management to further explore “value creation” opportunities in its real estate portfolio. The alliance is part of Macy’s previously announced strategy to generate value from its real estate holdings.



The agreement gives Brookfield exclusive right for up to two years to create a “pre-development plan” for approximately 50 Macy’s real estate assets, include owned and leased stores (and associated land), most of which are located in malls and not owned by major mall owners.



“We have real estate assets with significant value creation opportunities, and we believe that partnering with a leading global real estate investor like Brookfield is the best way to unlock the potential of those assets,” said Terry J. Lundgren, chairman and CEO, Macy’s. “The Brookfield alliance strengthens our ability to improve the customer shopping experience by giving us greater flexibility to invest in our most productive and highest-potential locations, and to make the most of our real estate assets, or portions of them.”



Separately, Macy’s said it has signed a contract to sell its 248,000-sq.-ft. Union Square Men’s building in San Francisco for $250 million. It plans to use part of the proceeds to consolidate the Men’s store into its main Union Square flagship. The transaction is expected to close in January 2017, and Macy’s expects to recognize a gain of approximately $235 million in January 2018.



The company continues to explore options for its downtown Minneapolis, State Street (Chicago) and Herald Square (New York City) stores.



Macy’s has also signed a contract to sell its downtown Portland, Oregon, store for $54 million. The transaction is expected to close in the fourth quarter of 2016, at which time a gain of approximately $36 million will be recognized. The store will continue operations through the holiday season and will be closed in spring 2017.



Last week, the retailer announced the sale of five locations to General Growth Properties.



In addition, as a result of lease terminations or expirations, the company will be closing Macy’s stores in Douglaston Mall, Douglaston, New York, and Lancaster Mall, Salem, Oregon, in early 2017.



Since the beginning of 2015, Macy’s said it has announced or completed asset sales with anticipated proceeds exceeding $800 million and “we expect continued progress going forward.”