Why Brookfield has ‘really, really high hopes’ for its non-listed REIT

Brookfield Asset Management is the latest mega-manager to use its real estate prowess to appeal to individual investors.

The Toronto-based firm launched Brookfield Real Estate Income Trust last quarter with close to a billion dollars of assets. The vehicle is one of the first developed specifically for Brookfield’s recently launched wealth management platform, Brookfield Oaktree Wealth Solutions.

The Brookfield subsidiary places capital from high-net-worth individuals into alternative investment strategies, including private funds and mutual funds managed by Brookfield and Oaktree, respectively. The platform consolidates three formerly separate wealth management groups within Brookfield and its subsidiaries.

Brookfield REIT will “enhance our footprint across the private wealth channel and should attract new investors in the private wealth space,” Brookfield chief executive Bruce Flatt said during the firm’s third-quarter earnings call last week.

Focused on stabilized, income-producing real estate, Brookfield REIT is the firm’s response to the non-traded REITs run by chief rivals Blackstone and Starwood Capital. Private equity titan KKR is also vying for retail capital with its Real Estate Select Trust, or KREST, which it launched earlier this year.

For its part, Brookfield has committed half a billion dollars of assets to help seed the vehicle, which was announced this summer.

Formerly known as Oaktree Real Estate Investment Trust, Brookfield began taking over advisory duties for the REIT in mid-July. At the time, the platform had $478 million of AUM.

Brookfield set the stage for its new REIT at the beginning of the year when it initiated the $5.9 billion privatization of its previous listed entity Brookfield Property Partners. In August, Flatt said assets from that vehicle would be spun into Brookfield REIT.

During the third quarter, Brookfield transferred ownership of three assets from its balance sheet into the REIT: Domain, a 324-unit apartment complex in Orlando; Principal Place, a 643,000-square-foot office building in London, and the Burnham, a 328-unit apartment complex in Nashville. The firm also made one new acquisition: 1110 Key Federal Hill, a 224-unit high-end apartment building in Baltimore, for $75 million. Together, the properties boosted the REIT’s net asset value to nearly $1 billion.

Brookfield chief financial officer Nick Goodman said he expects the size of Brookfield’s real estate holdings to be a draw for high-net-worth individuals.

High hopes

“If you think about everything else that we do in our business around real estate, the scale and potential of the offering that we have is really tremendous, and we think it will really appeal to investors and to banks to get it onto the platform,” Goodman said during the earnings call. “We have really, really high hopes.”

Registered with the Securities and Exchange Commission in May, Brookfield Oaktree Wealth Solutions has a staff of 60 and partners with private wealth management teams at all the major banks, Goodman said. He added that Brookfield REIT is one of the earlier products designed specifically for the platform. The only other new offering from the business is Oaktree Diversified Income Fund, which was announced in July. That vehicle is an interval fund that invests in private and public debt products such as high-yield bonds, senior loans, structured credit and emerging markets debt.

Between the rising number of wealthy individuals around the world and the dwindling number of Americans who are relying on defined benefit retirement schemes, individual investor capital is the next frontier that many managers are racing to settle. Goodman said while the full scope of the opportunity in this space is not yet clear, Brookfield has identified a market demand that it is distinctly suited to meet.

“We know there’s significant capital in the retail channel looking for product like this,” he said. “And really, we have something that’s unrivaled in the space.”

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