Brookfield Place in Lower Manhattan
Canadian asset management titan Brookfield has launched its fifth real estate investment fund amid what is expected to be a tumultuous year for the world's largest asset class.
The announcement of the new fund comes after Brookfield Asset Management was spun off of Toronto-based Brookfield Corp. in December and reported raising a record $93B last year.
"The broader markets remain more volatile," BAM President Connor Teskey said on the firm's earnings call Wednesday. "However, dislocation in financial markets have created the most attractive opportunities ... for those investors with dry capital. It is shaping up to be a very interesting and active year from an investment perspective across the business."
Brookfield's publicly traded asset management arm, the parent company of Brookfield Properties, closed the year with nearly $800B in assets under management across real estate, infrastructure, renewable power and transition. The firm launched fundraising for its fifth real estate fund this month and expects its first close "in the coming months," it said in its fourth-quarter earnings report.
The decision to raise new capital for real estate comes after Brookfield surpassed its fundraising goals for the year. Teskey said the firm's real estate finance fund has benefited from a growing pool of investors looking to invest in private credit strategies.
What's more, he said the need for capital in the credit market remains strong in part because of the recent reticence of traditional financial institutions during a period of economic uncertainty, creating an opportunity for Brookfield.
"Even though there is less debt available, the need for capital remains highly resilient," Teskey said. "Therein lies the opportunity for us to play an even more valuable role as a one-stop shop with not only different types of equity capital but also different forms of private credit to address the financing objectives of borrowers."
He said Brookfield thrives in uncertain economic moments and plans to continue to invest in opportunistic real estate plays as a result. Brookfield launched its 12th opportunistic credit fund in November and expects a first close "very soon," according to its report.
"Even if we can't be the winning bidder on the equity side, we know the asset well, we know the project, we were engaged in it and we can be a credit provider to the eventual buyer," Teskey said. "That's where the benefits of the broader Brookfield ecosystem will play out."
Brookfield isn't alone in making moves in the debt space. Blackstone executives also announced plans to focus on real estate debt during their fourth-quarter earnings call. In December, Goldman Sachs began raising its own real estate debt fund that started with an initial $366M.
Meanwhile, despite two straight months of declining returns from Brookfield's $2.4B nontraded REIT to end the year, Brookfield Real Estate Income Trust recorded a net inflow in the fourth quarter as well as in January, Teskey said.
That stands in contrast to Blackstone and Starwood's nontraded REITs, the two largest, which had to halt redemptions in the fourth quarter after retail investors rushed to take money out. Teskey attributed the continued deposits to Brookfield being "very, very thoughtful and very careful" in how it scaled its REIT.
While Brookfield expects that fund to contribute to a larger share of its fee-bearing capital over the next five years, it will still be "a very small component of that overall plan," Chief Financial Officer Bahir Manios said on the earnings call.
Brookfield set a goal to manage $1T in fee-bearing capital by 2027, more than doubling the $418B it managed at the end of 2022. It plans to do so by continuing to grow its diverse holdings across a range of investment classes.
"We're increasingly seeing large, institutional LPs looking to concentrate their capital among a smaller number of managers, but those managers that can offer them a greater diversity of products," Teskey said. "We certainly feel that we've been the beneficiary of that."