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Brookfield Asset Management Ready To Deploy $106B With An Eye On Real Estate

The entrance to Brookfield's Toronto headquarters

One of the world's largest asset managers has more than $100B to spend, and its CEO has his eye on U.S. commercial real estate.

Toronto-based Brookfield Asset Management, in its first-quarter earnings report this week, said it has $106B in dry powder, and, after a strong start to 2024, is ready to increase its transaction activity.

The firm has already raised $8B for its new real estate flagship fund, $2.2B of which came in the first quarter, and is still raising more capital, BAM President Connor Teskey said on the company's earnings call Wednesday

“Particularly in our real estate flagship, this is where we're really seeing the market opening up,” Teskey said. “And investors are seeing the upside and the rebound in that asset class and looking to get an increasing amount of exposure.”

News of its war chest comes as BAM reveals that its net income dropped 14.5% to $441M year-over-year in the first quarter on revenues of $884M, a 16% drop. Its distributable earnings also dropped, from $563M to $547M.

The alternative investment giant, which was formed in 2022 after Brookfield Corp. spun out 25% interest in its asset management business, has $925B in assets under management, including in private equity, credit, renewable power infrastructure and real estate.

Brookfield CEO Bruce Flatt said this week on CNBC that the most opportunities to buy commercial real estate assets this cycle will be those that are “overfinanced or not financed for this environment in general” in the U.S. 

“People borrowed too much money, or the businesses or assets didn’t perform to plan,” Flatt said. “Those always are the opportunities. So it’s going to be an excellent environment over the next 18 months to put money to work in commercial real estate.”

While Brookfield stands ready to buy, its most significant real estate transactions in the first quarter were dispositions.

The firm sold a 49% stake in ICD Brookfield Place, its 53-story, 1.1M SF office tower in Dubai, to Abu Dhabi investment firm Lunate and Saudi Arabia’s Olayan Financing Co. for roughly $1.5B. The firm is in talks to sell its five-star Conrad Seoul hotel, part of a larger mixed-use complex, for more than $360M.

“As transaction activity starts to pick up, we are observing a flight to quality, with buyers focused on the highest quality businesses and assets,” Flatt said. “We see many tailwinds for the earnings and valuations of our real estate business with core operating cash flows continuing to grow, interest rates and inflation peaking and expected to decline, financing spreads tightening and transaction volumes increasing.”

Brookfield also completed nearly $15B in financing for its real estate business, including $4B in its office portfolio, Flatt said in a first-quarter letter to Brookfield Corp. investors. On BAM's earnings call, he said the company has refinanced $18B overall at lower debt costs than its previous borrowings.

The company is also preparing to launch its seventh real estate debt fund later this year, Teskey said on the call.