Blueprint: Brookfield’s understated target, Blackstone’s profitable BREIT hotel sale, GIC aims to add Indian assets to its shed collection

Brookfield's $15 billion target for its latest opportunity fund is characterized as deliberately understated; Blackstone books a $275 million profit from its sale of a San Antonio hotel out of its BREIT portfolio; GIC continues to target stockpiling industrial assets, this time in India; and more in today's briefing, exclusively for our valued subscribers.

They said it

“It’s almost like one engine of investment growth is turned off. The other engine you need is cashflow, and so if you can be in these good neighborhoods with secular tailwinds, then you’ve got an opportunity to outperform”

Jonathan Gray, president and chief operating officer at Blackstone, discussed some of the big market themes the New York-based manager sees, in an interview last week with Australian Financial Review 

What’s new

Flatt target: Toronto-based Brookfield Asset Management’s CEO Bruce Flatt wants $15 billion again for its fifth flagship real estate fund. Onlookers say the conservative target relative to its predecessor is strategic.  (Source: Brookfield Asset Management)

Brookfield understates to overachieve
When it emerged last week Brookfield Asset Management was seeking $15 billion from institutional investors for its fifth global opportunity fund, onlookers speculated the target – $2 billion lower than the capital collected for its predecessor – reflected perceived headwinds facing the firm given its exposure to the office sector. Not so, according to PERE sources familiar with the matter. They say the target set by the Toronto-based mega-manager for Brookfield Strategic Real Estate Partners V is in line with the firm’s characteristically understated approach to fundraising since the series began in 2013. Indeed, BSREP had an initial target of $3 billion but collected $4.5 billion; 2016’s BSREP II had a target of $7 billion but corralled $9 billion; the target for 2019’s BSREP III was $12 billion, but that attracted $15 billion and last year’s BSREP IV initially had a target of $15 billion before being increased to $17 billion. Further, given the close timing between BSREP IV and BSREP V, Brookfield determined it better to target the same and outraise that target, rather than set a higher target and miss it, PERE was told. One source added he thought Brookfield would rather come back to the market more quickly with the next vintage than feel pressure to put too much capital to work. Naturally, Brookfield declined to comment on the matter.

Rooms available
New York-based Blackstone’s sale of the JW Marriott San Antonio Hill Country Resort & Spa to Nashville, Tennessee-based public real estate investment trust Ryman Hospitality Properties is the second largest single-asset hotel deal since covid, after Brookfield sold the Diplomat Hotel in Hollywood, Florida in February. The deal for the Texas property was for $800 million, representing a $275 million profit for Blackstone over its five-year hold period, Nadeem Meghji, head of Blackstone Real Estate Americas, said in an announcement. Ryman liked the property because of San Antonio’s population and job growth, as well as limited competition in the market for a property like this, according to an investor presentation.

For Blackstone, this is also another notable exit from its non-listed BREIT vehicle since the firm first limited redemption requests seven months ago. The firm sold out of a 49.9 percent stake in two Las Vegas hotel and casinos for $1.27 billion around that time. Blackstone has continued to receive redemption requests. In May, requests totaled $4.4 billion, a 4 percent decrease month-on-month and 18 percent lower than January’s high of $5.3 billion. Whether this deal assuages any of those investors remains to be seen.

GIC eyes ESR Indian logistics portfolio
Singapore’s GIC is in talks to acquire an Indian logistics portfolio from its long-term partner, manager ESR. The sovereign wealth fund is one of the potential buyers for the 10 million square foot portfolio of warehouse space which is valued at around $400 million. GIC and ESR have been investing in India together since 2020, with the pair initially focused on development and value-add industrial opportunities across the country. Last year, they extended their relationship and formed a $600 million joint venture to acquire income-producing core industrial and logistics assets in India.

Madison’s institutional backing
New York-based Madison International Realty has received the backing of a sovereign wealth fund to formalize a part of its business focused on providing growth capital to real estate firms. The firm plans to deploy $1 billion in the next 12 months, investing in four to six middle-market real estate managers, Ron Dickerman, president and founder, told PERE. The firm has previously made these investments from its flagship secondaries fund, structuring them whereby it will execute a traditional secondaries trade and provide growth capital for future investments. The firm already has a pipeline of deals, including a single-family rental manager it will buy in the next 30 to 60 days. Check out our full coverage of the launch later this week.

Trending topis

Solving SFDR challenges
It has been more than two years since the EU’s Sustainable Finance Disclosure Regulation went into effect, with the goal of accelerating decarbonization and fighting greenwashing. However, implementing the regulation in the property sector has been challenging, given that “SFDR is difficult to apply to real estate,” according to a paper released last week by a working group comprising representatives from the industry associations AREF, the Association of Real Estate Funds; INREV, the European Association for Investors in Non-Listed Real Estate; and the IPF, the Investment Property Forum. For example, the SFDR and recommendations from the Task Force on Climate-Related Financial Disclosures, which consists of 31 members from across the G20, differ in their calculation methodologies, while energy performance certificate ratings are inconsistent among the countries in the European Economic Area. Proposed solutions include adopting a single methodology for all buildings to assess their energy efficiency and revising the definition for “energy efficient asset.”

More workspace, less workspace
Office has been in a perpetual state of change since the pandemic disrupted work behavior. A report from brokerage Knight Frank and consultancy Cresa suggests more is coming. The firms surveyed 350 companies about their office needs and found more than half were planning to increase or greatly increase their total office portfolio in the next three years, primarily driven by smaller firms – those with less than 10,000 employees. For larger employers – those with 50,000 employees or more – the inverse is true, with reduction anticipated for around half. One of the biggest changes coming is almost half, 47 percent, of global firms plan to relocate their corporate headquarters in the next three years for reasons related to both functional and physical obsolescence and cost, the report stated. “Now that we are in a truly post-pandemic world, corporate decision-makers are ‘removing the blinkers’ and making clear decisions around their future corporate real estate strategy based on a broader array of business issues than just the pandemic,” Lee Elliott, global head of occupier research at Knight Frank, said in an announcement.

Data snapshot

Glaring gap for offices
Unlike during the global financial crisis, today’s real estate funding gap centers on one property type: offices. According to a report by global brokerage CBRE, the estimated gap is almost $73 billion for loans originated between 2018 and 2020 while retail, the asset class with the next largest gap, is a little over $5 billion.


IMMO homes in on growth
London-based single-family rental specialist IMMO, which uses proprietary technology to create portfolios of standing assets to suit allocators’ risk-return profiles, is looking to grow the scale of its partnerships with investors. Leading the charge will be Chris Chinaloy [his LinkedIn here], who has joined to head up the capital raising team as chief growth officer, a new role for the manager as it looks to tap the increasing interest from institutional investors in the SFR sector across Europe. Chinaloy was formerly chief strategy officer and head of capital markets at residential manager Round Hill Capital, where in 2021 he helped create Round Hill’s €1 billion-plus Nido Student platform in a joint venture with CPP Investments. To learn more about the move, read our coverage here.

Investor watch

KIC grows its allocation
South Korea’s sovereign wealth fund KIC is among a group of Korean institutional investors looking to grow its allocation in real estate. KIC has increased its real assets allocation from $13.4 billion in 2021 to $16.5 billion in 2022. Real estate represented the largest increase to an asset class in KIC’s portfolio, which concurrently saw a significant drop in its allocations to fixed income and equities in 2022. Similar to KIC, Korea’s largest pension fund NPS is also expanding its real estate allocation. Most recently, NPS added investment bank Goldman Sachs and US real estate firm Bridge Industrial to manage its overseas real estate investments. Check out our full coverage of KIC’s portfolio addition here.

This week’s investor meetings

Tuesday, June 13

Wednesday, June 7

Thursday, June 8

Friday, June 9

Today’s letter was prepared by Peter Benson, with Jonathan Brasse, Evelyn Lee, Charlotte D’Souza and Christie Ou contributing