After holding a final close on its first global opportunistic property fund last year, Brookfield Asset Management already has a successor on the horizon.
In a letter to shareholders this week, chief executive Bruce Flatt said Brookfield has continued to deploy a significant amount of capital from its flagship private funds. This included the firm’s $4.4 billion Brookfield Strategic Real Estate Partners (BSREP), which is more than 60 percent committed, along with its $7 billion infrastructure fund that is nearly 50 percent committed and its latest private equity fund, which is close to 80 percent committed.
“These levels of investment and the volume of transactions under review should enable us to launch new funds in each of these strategies within the next 18 months,” Flatt wrote in his letter. Indeed, the firm has been investing BSREP’s $4.4 billion of capital at a fairly rapid clip. When Brookfield held a final close on the fund – its first global real estate opportunistic vehicle – last July, the firm had invested $1.1 billion, or 25 percent, of the capital. By December, the amount invested had risen to 50 percent of the fund.
During the first quarter, Brookfield’s property group deployed nearly $400 million in nine acquisitions in North America, Europe and China, as well as a $3.5 billion equity investment in its $12 billion office portfolio. One of the investments made on behalf of BSREP during the quarter was the investment of $150 million in additional debt in the restructuring of Inmobiliaria Colonial, a Spanish real estate developer. Brookfield has invested a total of $1 billion in the restructuring and recently was repaid at par for its investment, giving the firm a profit of approximately $150 million during the past five months.
In his letter, Flatt also noted that Brookfield will continue to invest capital in Brazil, China and India across its real estate, infrastructure, renewable energy and private equity businesses. “No country (or company) in the world is without its challenges,” he wrote. “The real trick in investing is to separate countries (or businesses) that have fundamental flaws from those with strong fundamentals and issues that can be solved over time. We believe Brazil, India and China fit into the latter category.”
During the first quarter, the firm closed on its $750 million preferred equity investment in China Xintiandi, an owner of office and retail assets in Shanghai, and recently took over management of an underperforming Indian real estate fund. It also is in the process of acquiring an 8 million-square-foot office portfolio in India. “We believe the above transactions, with gross enterprise value of ±$4 billion, are only the thin edge of the transaction pipeline for our funds and therefore look forward to much more in each of these markets,” Flatt stated.
Brookfield held $115 billion in assets under management (AUM) in its property business during the first quarter, up from $103 billion during the same period one year ago and $108 billion during the fourth quarter. Of the $115 billion in AUM as of March 31, $18 billion was held in private funds, according to Flatt’s letter.