Brookfield Strategic Real Estate Partners (BSREP), Brookfield Asset Management’s first global real estate opportunity fund, has reached an agreement to acquire Verde Realty, a Houston-based REIT that develops and invests in industrial properties, for $366 million.
The acquisition is expected to be one of the first investments on behalf of BSREP, which held a first close on $2.1 billion in commitments in May, raising capital from investors such as the Teacher Retirement System of Texas and the New York City Pension Funds. The fund, which has a $3.5 billion target and no hard cap, has not called any capital to date.
The transaction is scheduled to close during the fourth quarter, pending approval during a shareholder meeting on 29 August. Upon closing, a subsidiary of the fund, BSREP Industrial Merger Sub, will be merged into Verde Realty, with Verde as the surviving entity. The agreement includes a requirement that the fund acquire at least 55 percent of Verde on a fully diluted basis.
Verde, which purchases, develops and manages real estate assets in the US and Mexico, owned approximately $759 million in operating properties and $119 million in land as of 31 March, according to the REIT’s first quarter financial statements.
Additionally, Hillwood Development will be an investor in Verde following the merger. In March, Brookfield announced a $1 billion joint venture with Hillwood to acquire, development and manage value-added warehouses and other industrial properties in the US.
“We are excited for the opportunity to work with the experienced Verde team and expand the breadth of our real estate operations, establishing a cornerstone investment in an industrial platform of high-quality industrial properties,” said David Arthur, managing partner at Brookfield Asset Management, in a statement. BSREP also has agreed to provide additional capital to Verde in the form of a backstop for rights offerings of up to $200 million.
Upon closing, Verde will become part of Brookfield Property Partners (BPY), a new entity that Brookfield is likely to spin off later this year. BSREP is the first Brookfield fund where BPY is expected to be the lead investor.