Brookfield prepares for next opportunity fund

The firm closed its last flagship real estate fund on $9bn in April, which is now 67% committed.

Brookfield Asset Management is readying its latest flagship property vehicle fundraise, the company said in its third-quarter earnings results Friday.

The Toronto-based investment manager, which oversees $250 billion in alternative strategies, closed its last global opportunistic property fund in April. Brookfield Strategic Real Estate Partners (BSREP) II garnered $9 billion in commitments, making it the largest private equity real estate fund to close this year.

Despite the relatively recent close, the vehicle is already 67 percent invested, and the firm typically begins fundraising for its next vehicle once its predecessor is 70 percent to 75 percent invested, Brian Lawson, the firm’s chief financial officer, said on Friday’s earnings call. When BSREP II closed in April, the firm had already committed about 45 percent of the vehicle’s capital.

“What it speaks to is being able to maintain quite a rapid pace of raising the funds and the breadth of opportunities to redeploy that and move onto the next one,” Lawson said on the call. “We would expect that the funds will continue to increase in size… there is just that natural progression of the funds being larger – particularly as you return in capital – and clients choosing to redeploy it with you.”

Brookfield launched BSREP II in 2014 and held a first close in April 2015, according to a filing with the Securities and Exchange Commission. Limited partners included the New York State Common Retirement Fund, which committed $400 million, and the Pennsylvania State Employees’ Retirement System and the Teacher Retirement System of Texas, both of which earmarked up to $200 million, according to PERE data.

Nearly all of the investors in BSREP I made follow-on commitments to the second fund and in many cases increased the size of their investments, PERE previously reported. The new investors in BSREP II came from primarily two areas: US pension plans and Asian investors.

Brookfield is currently fundraising for four vehicles, targeting $4.6 billion of third-party commitments in total. Its property vehicles in the market are its open-ended real estate fund and a real estate finance fund.

Last month, PERE reported that the firm was set to close on $900 million at the end of October for the open-end vehicle, Brookfield Premier Real Estate Partners (BPREP). The core-plus fund is expected to attract 50 percent to 75 percent of its capital from US investors. With capital from BPREP, Brookfield is focusing primarily on investments in US gateway cities, targeting the multifamily, retail and office sectors in particular. PERE understands that BPREP has similar terms to other core-plus funds, including a 9 percent to 11 percent net internal rate of return target, a 10 percent carry and a 7 percent preferred return, with a 50 percent catch-up.