Brookfield Asset Management expressed continued optimism in the real estate sector, including in hotels as it noted that the current landscape will lead to the best investment environment it has seen since 2009.
The global real estate market is currently grappling with higher interest rates, surging inflation, and tightening lender criteria. However, the market volatility, far from deterring Brookfield, seems to present opportunities, with the company doubling down on its bullish outlook for the sector.
“The combination of the pockets of stress in capital markets and strong underlying fundamentals with constrain and supply will lead to the best environment we have seen since 2009 to execute on our longstanding investment strategy for real estate, which is to buy high quality assets for value and drive upside through active asset management,” said Bruce Flatt, Brookfield CEO.
Solid fundementals
Flatt stressed that the fundamentals of most real estate asset classes remain strong, noting several indicators that point towards a sturdy real estate market.
“Retail centres hit record sales in 2022, premier office rents are at all-time highs in most cities. Rents for logistics properties grew 11 per cent in 2022. Multi-family rents in the US went up 15 per cent year-over-year. Hotel rooms are full almost everywhere with ADRs ahead of pre-pandemic levels,” he noted.
Brookfield's recent activity has been notably bullish. Over the past six months, the firm committed to investments worth $50 billion, monetized assets worth $15 billion, and grew its assets under management to $850 billion.
Hospitality investments
Turning to hospitality, Brookfield has made some notable moves in the hotel sector in the past six months. Earlier this year, the company sold the Diplomat Beach Resort in Hollywood for $835 million, making it the third-largest single-asset hotel sale in US history according to JLL. It also reportedly started the sale pf Center Parcs UK at a price point of between £4 billion and £5 billion, a significant increase from the £2.4 billion purchase price in 2015.
Looking ahead, the overall outlook of the asset manager is positive. Flatt noted that Brookfield has raised $37 billion of capital in 2023 so far, and with an expected acceleration of fundraising in the latter half, is poised to raise close to a record $150 billion of capital this year. Brookfield notes that this is expected to drive meaningful growth to fee related and distributable earnings for 2024 and beyond.
It seems we’re to expect more activity from Brookfield this year due to the current investment landscape.
“Buying great assets with compromised capital structures is always the easiest way to strong returns. It is during periods of time like now where opportunistic real estate flagship fund series is designed to take advantage of market turbulence,” Flatt says.
Flatt’s comment’s came as Brookfield reported a robust financial performance for the second quarter of 2023, generating fee-related earnings of $548 million – up 16 per cent YoY – and distributor earnings of $527 million. The significant increase in fee-related earnings was attributed to a 12 per cent growth in fee-bearing capital at $440 billion.
Connor Teskey, president of Brookfield added: “We have close to $3 billion of cash on our balance sheet and significant access to additional debt and equity capital. This gives us the ability to look at a wide range of potential acquisitions that can augment and complement our existing platform and supercharge our future growth. Nothing yet to announce on this front, but with increasing consolidation across our industry, we are actively watching for opportunities.”