Global owner says industry's fundamentals solid as sentiment rapidly improves
Brookfield's head office is in New York. (CoStar)
By Garry Marr
CoStar News
February 12, 2025 | 9:10 AM
Brookfield Asset Management, one of the world's largest real estate owners, said it sees opportunities in the property sector, especially in assets in need of refinancing, and that its orientation in America offers some protection from potential tariffs being implemented by the United States.
In a letter to shareholders issued Wednesday, CEO Bruce Flatt and President Connor Teskey said fundamentals remain solid in the real estate and private equity markets. More than that, the Brookfield executives said, sentiment is rapidly improving.
"Occupancy rates are healthy across most sectors, new supply has been limited in recent years and cash flows for quality properties have never been higher," the executives said in their letter.
Brookfield Asset Management owns properties across the globe. Last month, it invested $1.6 billion in the luxury Gajoen hotel complex and land for a logistics property in Tokyo.
The global commercial property market is showing signs of improvement as capital becomes more available and some uncertainty lifts while major corporations figure out their space needs in bringing workers back to their offices. In Canada, multiple interest rate cuts by the central bank has injected confidence into the market, though owners still want further reductions in borrowing costs.
"The record levels of refinancing activity in 2020 and 2021 have led to a number of borrowers who need solutions to their financing in 2025 and 2026, creating opportunities to lend to or acquire strong assets which are over-financed," they said.
Tariffs exposure limited
On a call with analysts, Brookfield addressed the growing issue of tariffs and noted its business is very domestically oriented based on infrastructure and real assets that are integrated into the local communities.
"Only a small portion of our business focuses on goods and service that travel across borders," said executives.
Last month, United States President Donald Trump said he would impose tariffs on good imported from Canada, Mexico and China. The tariffs against Canada and Mexico have been put on a 30-day pause.
However, TD Cowen said in a report this week said, "BAM's portfolio companies have limited exposure to a global trade war."
Brookfield Asset, the firm that officially moved its head office to New York from Toronto this year, reported its fourth-quarter and year-end earnings Wednesday in United States dollars. The company said it had net income of $2.168 billion, up from $1.839 billion a year earlier.
It also said it increased the dividend it pays out to shareholders.
"Driven by the growth in our flagship and complementary funds and credit business, this positive outlook and our strong financial position enabled us to raise our quarterly dividend by 15%," Teskey said in a statement accompanying Brookfield Asset Management's earnings.
Last week, the company closed a previously announced transaction between Brookfield Asset Management, or BAM, and Brookfield Corp. Publicly traded Brookfield Asset Management now owns the company's entire asset management business.
Under the deal approved by shareholders, Brookfield Corp. exchanged its 73% private ownership in the asset management business for an equivalent interest in public shares of BAM.
Brookfield, topping more than $1 trillion in assets under management for the first time in 2024, introduced a plan to position BAM for broader index inclusion.
"We have since made significant progress by relocating our corporate headquarters to the U.S. — where most of our senior management is based — and which represents our largest employee base, as well as the majority of our revenues and assets under management," said Flatt and Teskey, in their letter. "As we have previously noted, we also expect the board’s composition will increasingly reflect our U.S. focus."
Flatt recently took over the position of chair of Brookfield Asset Management after Mark Carney, the former governor of both the Bank of Canada and the Bank of England, stepped down last month to run for the leadership of the federal Liberal Party and potentially to become prime minister of Canada.
Brookfield Asset Management said it raised over $700 million of capital for real estate during the quarter, including nearly $500 million for the fifth vintage of its flagship real estate fund strategy. The company expects to hold a final close for this flagship in the first half of 2025.
Brookfield said it spent $2.4 billion, including the deployment of over $800 million from its fifth real estate flagship fund into a portfolio of U.S. multifamily properties that includes nearly 5,000 units, and a portfolio of 14 United States student-housing assets with almost 9,000 beds. It also agreed to sell a portfolio of Tritax EuroBox properties to Segro after completing the acquisition of Tritax, the listed industrial investor.
The asset manager monetized $1.8 billion of capital with transaction that included selling a portfolio of shopping malls in the United Kingdom.
"We are ready to monetize a number of investments where we have created value through our operating expertise. We believe 2025 will be a good year to pursue some of these capital recycling initiatives," said Flatt and Teskey in the letter.
On a conference call with analysts, the chief executive said, "Our real estate businesses are picking off some excellent properties at very attractive entry points, similar to previous cycles."
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