Brookfield Asset Management’s real estate sales have more than quadrupled this year after a sluggish 2023 and 2024.
Courtesy of Brookfield
Lowell Baron, the newly appointed CEO of Brookfield Asset Management’s real estate business
The investment management giant has sold $13B worth of properties globally within the first half of the year, up from $3B during the same period last year and $2B the year before, Bloomberg reported.
Most recently, it sold the $2.2B net lease investment platform Fundamental Income this month to Starwood Property Trust.
“We’re edging back to a more normalized rate of transactions,” Lowell Baron, who was named CEO of Brookfield Asset Management’s real estate arm last month, told Bloomberg. “Over the last couple of years, there has been a severe lack of liquidity in the market and there haven’t been larger transactions trading.”
Buyers and sellers being unable to agree on valuations, coupled with interest rates that have stayed high longer than expected, has stalled deals. As a result, dry powder has been building up on the sidelines.
That means investor money has been tied up. Private real estate fundraising fell for the third consecutive year in 2024, with firms bringing in $131B, Bloomberg reported, citing PERE. That is less than half the 2021 peak.
Some vehicles are now reaching the end of their investment period. That, along with a buildup in distress, might force fund managers to move.
“When we were out talking to our partners, one of the reasons people were holding back is because they weren’t getting capital back,” Baron said.
Nearly 60% of commercial real estate investment management firms reported having difficulty raising money, according to a survey by investment platform Agora. But the biggest players have had more success.
Brookfield raised $5.9B in the first quarter alone for its fifth opportunity fund and has $16B in dry powder. Blackstone raised $7.2B for its real estate funds in the second quarter, up 22% year-over-year, it reported this week.
Baron said he expects the spigot to open further as capital is deployed.
“We are returning a material amount of capital to our investors and I think it is going to grease the wheels and allow them to allocate to new funds,” he told Bloomberg.
Capital deployment is also increasing as the future of remote work becomes more certain, though Brookfield hasn’t been shy to invest in offices, unlike some of its competitors. Earlier in the pandemic, the firm acquired three European office landlords, according to Bloomberg.
But it has had to navigate the same struggles as its peers who invested heavily in office properties.
In 2023, two of its LA office towers, EY Plaza and the Gas Co. Tower, were placed in receivership, with Brookfield eventually losing both. It also lost an office building on K Street in Washington, D.C., to its lender, Starwood. To keep other buildings, it has had to invest in renovations and renegotiate its debt.