The Real Deal New York

Brookfield’s $4.7B Oaktree deal could bolster firm for downturn

Oaktree specializes in distressed debt
March 14, 2019 06:36PM

From left: Bruce Flatt, CEO of Brookfield Asset Management and Howard Marks, co-chairman of Oaktree

Brookfield Asset Management is already one of the largest alternative asset managers in the world. And its latest diversification play could help it during a downturn.

This week, the Toronto-based giant paid $4.7 billion for a 62 percent stake in Oaktree Capital Management, which specializes in distressed debt. Oaktree has countercyclical success to Brookfield, and was one of the biggest buyers of distressed debt during the last financial crisis, the Financial Times reported.

“Oaktree is the premier credit alternative manager in the world,” Brookfield’s CEO Bruce Flatt told the publication.

Oaktree, founded by Howard Marks, reportedly discussed deals with other players, according to FT. But the firm found Brookfield, whose shares have soared throughout the economic recovery, to be the “ideal” buyer as the asset manager’s investments perform better in stronger economic times, FT reported, citing a person with knowledge of the transaction.

“We do not produce steady growths in assets or profits and the last 10 years have been a tough period for that orientation,” Marks told the outlet.

Together, the companies will take in roughly $2.5 billion in annual fees on their assets under management, making the firm one of the largest of its kind, according to the outlet.

The move comes as investors and the real estate community prepare for a potential economic slowdown, along with any opportunities it might bring.

For example, Churchill Real Estate Holdings is in the midst of fundraising for a $200 million distressed debt fund that would target Manhattan real estate assets. And late last year, Maverick Real Estate Partners closed on what appears to be its largest distressed debt fund, with $200 million on hand to go after defaulted commercial mortgages around the city. — [Financial Times] Mary Diduch