Brookfield Asset Management intends to raise $15 billion for its fifth flagship real estate fund, a lower amount compared to its previous iteration. This decision comes as the global property market faces turbulence due to increasing borrowing costs, according to a recent report by Bloomberg.
Brookfield, renowned for its substantial ownership of prime office properties worldwide, commenced the fundraising process for the new fund earlier this year, shortly after concluding its fourth fund at $17 billion. A spokesperson for the Toronto-based asset manager did not provide any comments on the company’s fundraising activities.
During a recent shareholder meeting, Brookfield Asset President Connor Teskey stated that the firm is identifying attractive value entry points. He also mentioned that investors perceive the current climate as an opportunity for significant success, resulting in substantial interest. Notably, only a small percentage of the equity in the company’s current flagship real estate funds is invested in office properties.
Office landlords across the globe are grappling with heightened interest costs, declining property prices, and low occupancy rates as remote work continues. Fee-bearing capital in Brookfield Asset’s real estate business decreased to $98 billion in March from $103 billion at the end of the previous year.
CEO Bruce Flatt highlighted that Brookfield concentrates on top-quality office real estate, which promises superior returns in the long term, during an investor briefing last month. He expressed in a letter to shareholders of Brookfield Corp., the parent company of Brookfield Asset, that the organization’s office portfolio consists of 95 percent trophy or Class A office space, consistently outperforming the broader market. Additionally, the company invests in various other property asset classes, including hotels, malls, logistics, and housing.
Brookfield recently encountered defaults on mortgages for over a dozen office buildings, mainly in Los Angeles and the Washington, DC area. Notably, the company relinquished control of EY Plaza, a 41-floor tower in Los Angeles, to a receiver since the downtown office vacancy rate soared to 30 percent.
Flatt assured investors that these issues are isolated incidents and have no material impact on the firm’s extensive real estate business, which encompasses iconic properties such as New York’s Manhattan West and London’s Canary Wharf. He emphasized that Brookfield has always maintained a strong reputation as a responsible borrower and distinguished itself in the capital markets.
As of March, Brookfield’s assets under management exceed $825 billion, with real estate holdings under management totaling $270 billion.
