Brookfield makes a full-court press on distress

CEO Bruce Flatt described environment as one of the best ever to buy troubled debt

National /
May.May 14, 2020 04:15 PM
Brookfield's Bruce Flatt

Brookfield’s Bruce Flatt

Count Brookfield Asset Management among the growing number of distressed-debt evangelists.

“This is one of the great environments, possibly, to buy distressed debts that may have ever been in existence,” CEO Bruce Flatt said on the company’s first-quarter earnings call Thursday.

The firm reported a net loss of $157 million for the first quarter, a stark contrast to the roughly $1.3 billion profit during the same period last year. However, Flatt still struck a mostly optimistic tone on the call, saying that the global firm was encouraged by what it has been seeing in the parts of Asia that have started to reopen.

He also noted that Brookfield had long been preparing for a market downturn and that its income from management fees, which he said is largely immune from market volatility, had grown significantly. The company earned $286 million from fees in the first quarter, up 20 percent year-over-year from $238 million, and it has $60 billion worth of dry powder to deploy across its businesses.

The talk about distress focused largely on Oaktree Capital Management, which Brookfield bought a majority stake in last year and which is looking to raise $15 billion for a distressed-debt fund.

“There is and there will be a lot of interest in the Oaktree strategy,” Flatt said. “We hope it will be a very significant fund.”

Brookfield Property Partners, the real estate arm of the company, held its first-quarter earnings call Friday and reported a net loss of $373 million. It is negotiating with 2,400 of its retail tenants in the U.S. that have not paid rent.

BPP CEO Brian Kingston was on BAM’s earnings call as well, largely to discuss how Brookfield is dealing with its retail portfolio, as the pandemic has been particularly tough on that sector. He said 75 of Brookfield’s retail centers have already reopened in a restricted capacity, and he expects more to reopen in the coming weeks. While he acknowledged that the sector will experience some pain going forward, he still expects Brookfield’s retail assets to increase in value in the long term.

(Related: Fifth Wall’s Brendan Wallace on the need for a retail bailout)

Kingston also recommitted to Brookfield’s plan to turn its retail properties into “mini cities” with entertainment, office and residential amenities, despite concerns about whether that strategy is still viable given social-distancing measures. He expects curbside pickup to be a more permanent part of Brookfield’s retail strategy as well, not just a stopgap measure for stores to use during the pandemic.

And he discussed Brookfield’s recently announced plan to launch a $5 billion fund for retailers struggling to get by during the pandemic, a move that he said has already attracted a lot of interest.

“Our phone has been ringing off the hook with investment opportunities,” he said.


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