Surprise Firing Points To Larger Financial Difficulties At Company That Owns Crossroads Center

(KNSI) – Brookfield Property Partners – the owner of the Crossroads Center Mall – missed an $83 million payment due in April.

There is no indication Brookfield plans to fulfill that obligation, which could trigger a foreclosure on the mall. The property is currently valued at around $50 million.

Around that same time in early April, the Brookfield Real Estate Income Trust announced its chief executive officer was stepping down after the unit suffered a $39 million annual loss. The REIT’s top holdings are apartment complexes, not retail operations. It also includes single-family rental properties. It shows that Brookfield is being pinched in several different asset classes thanks to tightening financial conditions related to the Federal Reserve’s interest rate hikes.

The replacement is Brian Kingston, already CEO of Brookfield Property Partners. That company is just one piece of a global empire consisting of hundreds of billions of dollars in assets, with several segments showing financial strain.

The stock for the parent company, Canada’s Brookfield Corporation, is down nearly 50% since peaking in November 2021. Pretax income for Brookfield Corporation in the fourth quarter of 2022 was only $139 million. In the prior quarter, it was over $1.2 billion.

Brookfield Corporation says reputation is a key risk factor it faces. From its 2022 annual report, “The growth of our asset management business relies on continuous fundraising for various private and public investment products, and retention of capital raised from third-party investors. We depend on our business relationships and our global reputation for integrity and high-caliber asset management services to attract and retain investors and advisory clients, and to pursue investment opportunities for us and the public and private entities managed by our asset management business. Our business relationships and reputation could be negatively impacted by a number of factors including poor performance; actual, potential or perceived conflicts of interest that are not adequately addressed; misconduct or alleged misconduct by employees; rumors or innuendos; or failed or ineffective implementation of new investments or strategies.”

It adds that poor performance could eventually make it difficult to raise new capital, including from lenders. Banks helped finance the purchase of Crossroads Center as part of a multibillion-dollar portfolio managed by General Growth Properties, or GGP. Brookfield says it uses debt and other forms of leverage to invest around the world, making it subject to risks associated with missing payments and being unable to refinance large loans like for the mall here in St. Cloud.

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