Brookfield closes 2022’s largest real estate fund to date

The Toronto-based firm’s BSREP IV is only the third mega-fund and the first vehicle to close above $10bn this year.

Brookfield Asset Management has finished fundraising for its flagship real estate fund, Brookfield Strategic Real Estate Partners IV.

The Toronto-headquartered mega-manager has hit its target of $17 billion, managing partner and chief financial officer Bahir Manios told investors on the firm’s Q3 2022 earnings call. Brookfield launched the fund in April 2021, according to PERE data, and held a first close of $9 billion in August, PERE previously reported.

The fund becomes the largest real estate fund to close this year. It is also only the third mega-fundraise, one that nets $5 billion or more, in 2022. TPG’s Real Estate Partners IV, which raised $6.8 billion, was the previous largest. GLP’s China Income Partners V was the only other mega-fund to close this year, garnering $5 billion.

Some of the largest investors in the latest fund include New York State Common Retirement Fund, Minnesota State Board of Investment, Pennsylvania Public School Employees’ Retirement System and Los Angeles County Employees’ Retirement System, per PERE data. All of them committed $300 million or more. Other investors include Employees Retirement System of Texas and South Carolina Retirement System.

Brookfield’s blockbuster fundraise demonstrates the appeal of real estate and other hard assets during a volatile market environment. “Private real assets have proven to be a safe haven, further enhancing their appeal to investors,” chief executive Bruce Flatt said on the call.

The firm raised $33 billion across its various strategies in Q3 2022 alone, Manios said, giving Brookfield $125 billion of investible capital to deploy.

That will put Brookfield in an advantageous position as many major economies are set for a recession, meaning access to capital could become more difficult going forward, Flatt said.

The firm believes there will be distress upon which to capitalize. “Real estate is almost a tale of two cities,” Flatt said. “It always has been, but I think in this environment, the gap has widened between premier everything and poor-quality things.” He explained that opportunities to acquire good quality assets in troubled situations are likely to appear as borrowers, unable to make their debt payments, hand assets back to lenders.

Brookfield, given its position in the market, is focused on the best quality real estate and that will not change with this deployment cycle. “We have always had a strategy of focusing on the best of the best,” Flatt said. That includes segments of the retail real estate market, with Flatt noting retail sales in the US are up 30 percent from pre-covid numbers and high-quality centers are performing even better than that.