The Real Deal New York

Behind Brookfield’s development tear

The global real estate investor is flexing its building muscle on a scale like never before
By Rich Bockmann | July 20, 2018 11:30AM

Clockwise from left: Ric Clark, 666 Fifth Avenue, Ben Brown, a rendering of Greenpoint Landing in Brooklyn, and a rendering of 2401 Third Avenue in the Bronx (Credit: Curbed NY, LinkedIn, Brookfield, and renderings by ArX Solutions)

Brookfield Property Partners develops all over the world, but earlier this year the company found a new corner of its sandbox to play in.

The Canadian giant signed a contract in April to buy a sprawling, seven-building development site in Mott Haven for $165 million. The 1.3 million-square-foot, 1,300-unit megaproject — assembled by Keith Rubenstein’s Somerset Partners and the Chetrit Group — is one of the most ambitious developments the Bronx has ever seen.

The move is a bit unprecedented. Many other major New York owners, like Vornado Realty Trust, SL Green Realty and Boston Properties, largely stick to the meat-and-potatoes of operating properties. As public companies, they’re bound to pursue less risky endeavors. If and when they do build, they usually make their mark with a signature tower in a core neighborhood of Manhattan.

But Brookfield’s Bronx play — its first in the borough — is just one of many projects the company has recently taken on in New York. And it’s done so at such a pace that makes its competitors look lethargic.

“Their appetite is massive. They’re a machine,” said Eastern Consolidated’s Ron Solarz, who worked as a managing director at Brookfield’s investment-banking sister company from 2011 to 2014.

In the last six months, Brookfield has locked down roughly $1 billion in major development projects in the five boroughs. Most notably, in May, it swooped in as Kushner Companies’ white knight at 666 Fifth Avenue. The partners are planning an overhaul of the outdated office, with Brookfield reportedly injecting as much as $700 million worth of new equity. That same month, the developer announced it would build two new rental buildings at the massive Greenpoint Landing site with Park Tower Group.

“We’ll double the scale of that multifamily business in short order.” -Ben Brown, Brookfield

The company’s even placed bets on the struggling retail market, agreeing to pay $15 billion for the remaining shares in mall operator GGP and snapping up a portfolio of retail properties on Bleecker Street.

The spurt in activity follows a selling streak. Last year, Brookfield unloaded around $3 billion worth of properties between 245 Park Avenue and a stake in One Liberty Plaza. And its parent company, Toronto-based Brookfield Asset Management, just raised nearly $10 billion for its flagship real estate private equity fund. That’s more than double the size of its previous largest fund.

“They can raise incredible sums of money,” Solarz said. “And you know how it is: If you’re able to raise a lot of money, you need to put that money to work.”

The team

From left: Brookfield’s Sabrina Kanner, Alan Chun and
Maria Masi (Credit: Urban Green Council, LinkedIn and ULI New York)

Brookfield is no stranger to building. It’s overseeing major projects across the globe, including the 2 million-square-foot, 3,610-unit Canary Wharf residential and office complex in London and the $1 billion ICD Brookfield Place office tower in Dubai.

“We made a concerted effort to refocus part of our business back on our core markets, and New York being that,” said Ben Brown, who took over in April as the head of company’s New York and Boston region following the departure of 16-year company veteran David Cheikin. “This is obviously a big backyard of ours.”

The company’s expertise in New York dates back to its 1996 buy of Olympia & York, which had developed the World Financial Center, now known as Brookfield Place.

Through the acquisition, Brookfield inherited Olympia & York’s head of construction, Sabrina Kanner, who serves in the same role today, running point on the company’s ambitious development projects. She was in charge, for example, of tearing off the façade and re-skinning 5 Manhattan West — a feat she will reproduce on similar redevelopments like the former HBO Building at 1100 Sixth Avenue and presumably 666 Fifth Avenue.

Brookfield’s first ground-up development in Manhattan was the 38-story office tower at 300 Madison Avenue in 2002. But it wasn’t until work started on the Manhattan West megaproject that the company really began beefing up its development team in New York.

In 2014, Alan Chun, a former vice president at Vornado Realty Trust, transitioned from his job as head of retail investments for Brookfield in Brazil to join the company’s New York office as head of its commercial development group. The following year Maria Masi, who had worked at Rose Associates and AvalonBay Communities, joined in the group and now now oversees multifamily development.

Brown, 33, is also relatively new to his role. He has been running acquisitions in New York and Boston since returning from London a year ago, where he held a similar position. And in succeeding Cheikin, he’s taken over for someone whom many saw as a possible successor to company chairman Ric Clark.

(When reached via LinkedIn, Cheikin declined to comment on his abrupt exit from Brookfield, but said he’s finalizing the details of a new opportunity.)

Prior to joining Brookfield in 2010, Brown had held real estate investment jobs at the New Boston Fund and Sovereign Bank. But the Northeastern University alumnus got his feet wet in real estate as an intern in 2006 at Thor Equities.

At the time, the company was buying in Coney Island and along Fulton Street in Downtown Brooklyn. Company CEO Joe Sitt told TRD that, “Ben was one of the most talented young associates we ever had,” and “was excellent at assessing investment opportunities, and was responsible for us pursuing some successful ones.”

Even with the team Brookfield has in place, Clark has been instrumental in lining up some of its recent deals.

“They’re a go-anywhere, look-at-anything kind of manager.” -Ann Dai,Keefe, Bruyette & Woods

For instance, he has a close relationship with the Park Tower’s Klein family, which Brookfield partnered with on four residential buildings at Greenpoint Landing. The estimated project cost for those structures is roughly $1.6 billion.

Marian Klein Feldt, president of park Tower, said Brookfield was “a clear choice for the initial development parcels” when the two first teamed up in 2015 on Greenpoint Landing. “We share the same commitment to placemaking and quality for this new waterfront destination in Greenpoint, which we are developing and master-planning,” she said.

(The company didn’t have multifamily holdings until 2010, when it bought a 65-percent stake in national apartment company Fairfield Residential to bring the firm out of bankruptcy. The deal, also spearheaded by Clark, gave the company a portfolio of 55,000 units overnight.)

Brown said the company will look to do more large-scale, neighborhood-making projects like the one in the South Bronx, as opposed to one-off buildings.

“I think if I had a crystal ball, we’ll continue to do projects like that,” he said, noting that the company has a portfolio of 5,000 units in the city and is working on adding more. “We’ll double the scale of that multifamily business in short order.”

The equity builder

Brookfield’s 450 West 33rd Street project (Credit: Curbed NY)

If a global private-equity giant like the Blackstone Group merged with a megadeveloper like the Related Companies, you might get a company like Brookfield.

“I think they have the development expertise and also a huge fundraising capacity,” said Fried Frank’s Jonathan Mechanic, who has represented the company in many of its signature deals such as the projects in the Bronx and Greenpoint.

Brookfield is second only to Related in terms of square footage under development in Manhattan, with 3.8 million square feet in the works, according to an analysis by The Real Deal earlier this year.

Meanwhile, its parent company Brookfield Asset Management — which has some $285 billion worth of assets under management around the globe — is one of the largest asset managers in the world. It also has fundraising infrastructure on par with the world’s private equity giants.

Over the past decade, it’s raised $33.8 billion in private equity for real estate, according to Preqin. That puts it behind Blackstone ($91.3 billion) and Dallas-based Lone Star Funds ($56.6 billion) in terms of the world’s largest real estate private-equity firms.

The company is continually raising capital to invest across its business lines of real estate, renewable power, infrastructure and private equity, and Brown said access to that global investor pool is one of the keys to finding capital partners for Brookfield’s real estate investments.

“If we are talking to our main LPs — our institutional capital partners — that are invested in our [infrastructure] fund, there’s a good chance that they’re going to be looking at our real estate fund or vice versa,” Brown said.

Indeed, Brookfield has a cosmopolitan mix of partners such as the sovereign wealth funds the Qatar Investment Authority — an equity partner on Manhattan West and Canary Wharf — and the China Investment Corporation, which co-invests in One New York Plaza and the $2.7 billion International Finance Center in Seoul.

And it partners with domestic pension funds such as the California Public Employees’ Retirement System, which co-owned 245 Park Avenue with Brookfield and is joining the company on its $15 billion bid to buy the remaining shares in GGP.

Brookfield also has access to major lenders including Wells Fargo and Deutsche Bank.

Jerome Sanzo of the Industrial & Commercial Bank of China, which lent Brookfield and Park Tower $89 million for one of their completed Greenpoint Landing buildings, said the company is good at staying in touch with lenders, “even when they don’t have a particular deal.”

“But the reality is, they always have a deal in the market,” he said. “So they provide a lot of volume to lenders, so lenders want to be in touch with them.”

Cushman & Wakefield’s Doug Harmon, who arranged the sale of Chetrit and Somerset’s Bronx site, said the Canadian company has the “rare ability to be nimble and entrepreneurial,” adding that they have a track record of securing investments “that competitors miss.”

“They are a most formidable competitor and they accomplish it all with a Canadian decency and a well mannered, straight-forward, humble, handshake approach,” he said. “They are as dependable as they come.”

“Go anywhere, look at anything”

Brookfield’s most buzzed about project is the redevelopment of 666 Fifth Avenue with Kushner Companies.

Brown was tight-lipped when it came to specific plans for the building, but pointed to Brookfield’s experience in re-skinning properties such as 5 Manhattan West and the former HBO building at 1100 Sixth Avenue, where the firm’s already leased all the space to Bank of America.

In a recent interview with TRD, Charles Kushner said he has a “long-standing relationship” with Brookfield, specifically through their Rouse Properties subsidiary.

“But we like them, we like their culture, it’s very similar to our company culture,” he said. “They saw something in a repositioning of this asset that was consistent with what we felt was a good opportunity as well.”

The Kushner building isn’t the only major redevelopment Brookfield has pursued. Earlier this year, it lost out on buying the St. John’s Terminal in Hudson Square. Instead, Oxford Properties Group paid $700 million to buy a portion of the site.

The firm is also tackling a major redevelopment on Bleecker Street. Brookfield paid $31.5 million to buy the properties from New York REIT, which spent nearly $45 million acquiring them between 2010 and 2012. Brookfield plans to run the properties as something of a retail incubator, where it can try out new concepts amid the neighborhood’s vacant storefronts.

Brookfield had somewhat of an inside edge on acquiring the properties. It had earlier purchased the liquidating New York REIT’s office building at 333 West 34th Street for $255 million, and Brown said that proximity helped the company close the deal in Greenwich Village.

“For them to deal with one buyer that they had just executed with on a deal was paramount for the team and for Wendy [Silverstein] there,” he said. “So in exchange for that, we feel like we got a reasonably good basis. It’s probably a bit of a win-win for both.”

Sources that TRD spoke to seemed confident that Brookfield could continue its aggressive development play in New York. Analysts, too, remained bullish on the company because of its agility.

Ann Dai, a stock analyst who covers Brookfield Asset Management for Keefe, Bruyette & Woods, said that unlike companies that are focused on a single geography or asset class, Brookfield isn’t “vertically siloed.”

“They’re a go-anywhere, look-at-anything kind of manager,” she said. “I think they’re going where they see the returns.”