Bruce Flatt is bullish on retail, despite increasing worries in the market about the threat of e-commerce.
In both his quarterly letter to shareholders and on the firm’s first-quarter earnings call Thursday, Flatt, the chief executive of Brookfield Asset Management, reiterated his firm’s thesis: “Retail real estate has always evolved, and we expect this to continue.”
“Over the last six months, the market chatter about retail in America has increased almost to the level of the love that Americans have for shopping,” Flatt wrote in his quarterly letter to shareholders. “It is safe to say that we do not believe that the retail real estate market is going away, and the numbers prove it.”
He noted, for example, that US online retail sales account for about 8 percent of $4 trillion of overall sales.
Brookfield is marketing its latest opportunistic vehicle, Brookfield Strategic Real Estate Partners III, with an undisclosed target. The firm has invested capital from the fund series in four property types, and Flatt said he predicted Brookfield will deploy about half the vehicle’s capital in the US, as it has with the predecessor vehicles.
Brookfield closed the predecessor vehicle, BSREP II, in April 2016 on $9 billion, and invested about 80 percent of the vehicle’s capital as of March 31, PERE previously reported.
Brookfield’s retail investments include direct entity ownership, including ownership through its real estate fund series, and stakes in two mall-focused real estate investment trusts. Flatt classified 90 percent of the firm’s retail holdings as “premier,” with stable income streams.
“We believe that the future of retail lies in the integration of online and brick-and-mortar retail,” he said on the call. “We’re working to ensure we’re a part of that with our premier assets.”
Non-premier assets will be redeveloped, typically into residential, office and hotel properties.
Brookfield finished the first quarter with about $250 billion in total assets under management, up from $240 billion at the end of the first quarter in 2016.