Brookfield moves up expected final close for BSREP III – Exclusive

The Toronto-based alternative asset manager is already nearing its target after two closes in quick succession.

Brookfield Asset Management has moved up the anticipated final close for Brookfield Strategic Real Estate Partners III, now that it is fast approaching its $10 billion target for its latest global opportunistic real estate fund, PERE has learned.

The Toronto-based alternative asset manager has held an interim close on BSREP III, raising a total of $9 billion, according to a filing with the Securities and Exchange Commission. PERE understands that a final close is now expected during the second quarter. Brookfield originally had projected a final close during the third or fourth quarter, according to a November fund document from consulting firm NEPC.

The firm declined to comment on the fundraising timeline.

The latest close represents an additional $2 billion equity haul that quickly follows its $7 billion initial closing for fund earlier this year. The $7 billion amount included a $2.5 billion commitment from Brookfield, the firm said in its 2017 earnings report.

“During late 2017 and early 2018, we raised initial capital for our third flagship real estate fund, which we expect will be meaningfully larger than its predecessor,” the firm said in the report.

The Toronto-based alternative asset manager has been soft marketing BSREP III since last March and officially launched the fund in June, PERE reported in May.

The fund’s investment strategy is focused on acquiring control positions in real estate companies, direct assets and distressed loans and securities. Approximately 70 percent of BSREP III’s capital will be invested in large-scale platform investments with an average equity size of $700 million, while the remaining capital will go to mid-cap property investments with an equity commitment of at least $100 million. Geographically, about 50 percent of the fund will be allocated to the US, while the other half will be invested in western Europe and other developed markets in Asia and South America.

If successful, the new fundraise would be Brookfield’s largest-ever, slightly exceeding that of BSREP III’s predecessor, BSREP II, which gathered a total of $9 billion in April 2016. That fund was launched in 2014 and had an original target of $7 billion. Brookfield attracted a total of $4.4 billion for its first global opportunistic fund in 2013, against a $3.5 billion target.

BSREP I generated a net internal rate of return of 19.5 percent and an investment multiple of 1.6x as of June 30, while BREP II yielded a 12 percent net IRR and a 1.1x investment multiple, according to the NEPC document. For BSREP III, Brookfield is targeting a 16 percent net IRR and a 1.6x equity multiple or greater, the document said.

The fund also is expected to be the largest global real estate vehicle to close this year. Just last week, PERE reported that Starwood Capital Group amassed $7.6 billion in the final close for its latest global property fund, Starwood Global Opportunity Fund XI, blowing past its original $5 billion-$6 billion equity goal.