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Brookfield Asset Management is targeting some big numbers with its real estate strategy in the coming years.
The private equity giant will look to raise $25B from real estate sales over the next five to seven years, Brookfield CEO Bruce Flatt said in his quarterly letter to shareholders. As of the close of Q2, BAM reported $30B of equity invested in real estate, through a combination of direct ownership and investment funds.
About $16B of Brookfield's real estate equity is invested in what the company calls its core portfolio, consisting of 50 office and retail-anchored, mixed-use properties across 25 of the world's largest cities. Through the selling of minority stakes in those properties, Brookfield anticipates raising about $10B without giving up any control of what Flatt called irreplaceable assets.
The remaining $14B of equity is invested in what the company calls its opportunistic portfolio, "virtually all" of which Brookfield intends to sell in the next five to seven years, Flatt said. The $15B the company expects to generate from those sales is based on an assumption that through a combination of redevelopment and operational savvy, Brookfield's 25,000 real estate-focused employees can push the value of those properties higher before disposal.
During Q2, BAM completed the process of taking its main real estate subsidiary, Brookfield Property Partners, private, Flatt said. The move allows the company greater freedom in its disposal strategies and less dependence on the public valuation of its holdings — a valuation Flatt has said is far too low.
While Brookfield is counting on some of the capital it will generate from real estate sales to fund other strategies, it remains one of the most effective private equity fundraisers in the world. The real estate fund for which it is currently raising capital, Brookfield Strategic Real Estate Partners IV, has already brought in $9B at a faster pace than its predecessor, Flatt said, adding that he expects it to surpass the previous fund's $15B total before it closes. Combined with infrastructure and private equity-specific funds, Brookfield is targeting over $100B for its current fundraising efforts.
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