Brookfield eyes US$25b from property sales to fuel growth

Canada

BROOKFIELD Asset Management Inc aims to reap US$25 billion from commercial property sales, banking on a rebound for pandemic-hit assets such as malls and office towers to power its next stage of growth.

After taking its property arm private earlier this year, Brookfield has about US$30 billion of equity tied up in commercial real estate, and expects to wring almost as much cash from those holdings in the coming years to fund new investments, chief executive officer Bruce Flatt said in a letter to shareholders on Thursday.

The outlook for malls and office towers has been bleak since Covid-19 lockdowns cleared them out early last year. Consumers' embrace of e-commerce and the persistence of remote work arrangements have raised questions about whether people will return to those properties even after it's safe to do so.

Amid all the pessimism, Brookfield - which oversees about US$626 billion in assets globally, from renewable energy to insurance - spent about US$6.5 billion to acquire all the shares of Brookfield Property Partners LP that it didn't already own.

"We believe we paid our partners a fair price, and the added benefit is the flexibility to manage these assets in the private markets," Mr Flatt said in his letter. "We believe that the economic recovery and ensuing real estate recovery will enable us to monetize significant capital from our property investments."

Brookfield considers about US$16 billion of its wholly owned real estate "irreplaceable" - office and retail-anchored properties in major cities, mainly New York and London, that have tended to appreciate in value over time while providing steady cash flow, according to Mr Flatt. The company intends to hold onto those, at least in part, "for a very long time, if not forever," he wrote.

Still, by selling stakes in these assets and refinancing them as their valuations climb, Brookfield expects to be able to free up about US$10 billion to fund other investments.

The remaining US$14 billion of its properties are considered "opportunistic investments" with a shorter time horizon of five to seven years, Mr Flatt wrote. BLOOMBERG