What office woes? Brookfield targets $15B real estate fund
Asset manager raising cash for fifth fund after string of loan defaults
Undeterred by recent defaults in its existing property portfolio, Brookfield Asset Management is drumming up cash for another massive real estate investment fund.
The Toronto-based asset manager plans to raise $15 billion for its fifth flagship fund, Bloomberg reported. The target is lower than its previous $17 billion fund, an acknowledgment of the global property market and, perhaps, Brookfield’s own commercial setbacks.
A spokesperson for the company declined to comment to the publication.
Mentioning the new fund in a letter to shareholders last month, Brookfield Asset Management president Connor Teskey wrote that the current market “should provide significant opportunities to invest at highly attractive risk-adjusted returns. Teskey added on the firm’s first-quarter earnings call that “there is lots of interest” from investors, some of whom may be relieved that a limited percentage of equity in the firm’s latest funds is allocated to offices.
Other asset classes Brookfield invests in include housing, malls, hotels and logistics facilities, but top-quality office properties are its bread and butter. CEO Bruce Flatt has maintained a belief in the sector — particularly the top tier — telling shareholders last month that 95 percent of Brookfield’s office holdings are trophy or Class A spaces that outperform the rest of the market.
But a myriad of factors, including remote work, higher interest rates and lower occupancy are roiling the office market — and Brookfield’s portfolio has not been spared.
In recent months, Brookfield has defaulted on mortgages for more than a dozen office buildings, primarily in Los Angeles and Washington, D.C. Flatt told investors that those issues are isolated and immaterial to the firm’s real estate business, writing that much of the distress revolves around old properties or ones that were already struggling.
Problems keep cropping up, though. Last month, Brookfield became delinquent on a $275 million CMBS loan on EY Plaza in Downtown Los Angeles; the loan was promptly sent to special servicing.
For the sake of comparison, it’s worth noting that Blackstone recently closed its latest global real estate fund with $30.4 billion in capital commitments, which the firm said was the “largest real estate or private equity drawdown fund ever raised.”
— Holden Walter-Warner