In his opening remarks during his firm’s Q3 2023 earnings call, Brookfield Asset Management chief executive Bruce Flatt was optimistic about the firm’s fundraising prospects over the coming months.
The Toronto-headquartered manager amassed a total of $26 billion during the third quarter, representing its strongest fundraising quarter for the year and more than 40 percent of $61 billion raised year-to-date.
“We are fortunate that the businesses in which we have a leadership position remain very much in favor with global investors,” he said. These include Brookfield’s real estate business, which is the firm’s largest with $271 billion of assets under management at the end of the third quarter.
“We are seeing strong interest for our flagship real estate fund as opportunities are starting to surface in real estate,” Flatt said.
The firm has closed on an additional $2 billion in the quarter for the latest vehicle in its real estate opportunistic fund series. Brookfield Strategic Real Estate Partners V was officially launched this January and is believed to have a $15 billion fundraising target. Brookfield closed on $17 billion for the predecessor vehicle, BSREP IV, in November 2022.
In their Q3 2023 letter to shareholders, Flatt and president Connor Teskey said the firm expects to finalize the first close for BSREP V during the fourth quarter. Brookfield also deployed $2 billion of capital across its real estate funds, including $400 million for North American logistics, during the third quarter. “Transaction activity is picking up and 2024 should be one of the best years we have seen in a while for investment,” they wrote.
Flatt has been vocal about how the current market turbulence could create the best environment for opportunistic real estate investing since 2009. During the firm’s second-quarter earnings call, he said BSREP V will be “an excellent vintage, maybe one of our best.”
On the transactions side, Teskey said the firm expects to see “tremendous opportunity in credit and real estate” amid a recovery in the leveraged loan market.
“With the plateauing of interest rates, we expect the liquidity to return to the real estate market, both in terms of new investments at what is going to be very attractive value entry points, as well as creating the opportunity for monetization activity of best-in-class assets.”
Talking about the commercial real estate debt market, Teskey said that while the securitization market remains slow, issuance started to pick up in September and October.
“Nevertheless, the vast pools of commercial real estate loans that are maturing over the next 12 months to 24 months will face a thinner pool of capital available for refinancing,” he said.
“Real estate investors who lack deep relationships with large institutional investors will be looking for solutions. Combined with the broader trends around the availability of traditional lenders, the deficit of liquidity will create a very attractive lending environment for sponsors with significant dry powder like us.”
Teskey anticipated the firm’s next commercial real estate mezzanine debt fund, which will be the seventh vintage in the series, will be larger than its $4 billion predecessor. “But our ability to put capital to work at scale far exceeds the size of this fund,” he said.
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