Brookfield targets $10bn for next RE fund – Exclusive

The Toronto-based alternative asset manager’s current global property vehicle is about 80% invested or committed.

One year after closing on its largest-ever real estate fund, Brookfield Asset Management is seeking to repeat its fundraising success with its latest global property offering, Brookfield Strategic Real Estate Partners III.

The Toronto-based alternative asset manager has an equity goal of $10 billion for the fund, according to two people familiar with the matter. If successful, the new fundraise would be its largest-ever, slightly exceeding that of its 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.

With BSREP II approximately 80 percent committed or deployed as of March 31, Brookfield is expected to officially launch fundraising for BSREP III this quarter, chief executive Bruce Flatt said in his letter to shareholders earlier this month. 

Brookfield declined to comment. However, PERE understands that the alternative asset manager – whose real estate fund investors include the New York State Common Retirement Fund and Teacher Retirement System of Texas – has been soft marketing the fund since at least March, with an official launch expected in early June. During its third-quarter earnings call in November, Brookfield chief financial officer Brian Lawson said that the vehicle was already 67 percent invested and that the firm typically began fundraising for a successor fund once the current fund was 70-75 percent invested.

BSREP III is understood to have a similar strategy to its predecessor funds, focusing on large, complex distressed turnarounds or recapitalizations and mid-cap real estate transactions. In the firm’s first-quarter earnings call earlier this month, Flatt said he expected the fund to be about 50 percent allocated to the US. “Each quarter [to] six months, we’re putting $0.5 billion or $1 billion to work in great opportunities, and it’s largely because of the scale and presence that we have in the US,” he said during the call.

One of BSREP II’s most recent deals was the purchase of 13 student housing assets in seven university markets in the UK from local developer Unite Students for £295 million ($380 million; €340 million) in February. Other transactions on behalf of the fund include the firm’s debut transactions in the manufactured and self-storage sectors last year: the purchase of a 135-community manufactured housing portfolio from NorthStar Realty Finance Corporation for $2 billion and the acquisition of Simply Self-Storage, a US self-storage owner and operator, for $830 million.

BSREP II was generating a 0.33 percent return and a 1x multiple as of June 30, two months after its final close, while BSREP produced a return of 17.68 percent and a 1.39x multiple, according to an investment report from the Pennsylvania Public School Employees’ Retirement System, which committed $200 million each to BSREP II and BSREP.