Brookfield aims to raise $100 billion for new flagship funds

Brookfield Asset Management Inc. said it plans to raise $100 billion for its next round of flagship funds after it delivered first-quarter earnings buoyed by share sales and asset divestitures.

The Toronto-based alternative asset manager sold $13 billion of assets during the quarter, resulting in $6.4 billion in profit for Brookfield and its clients, the company said Thursday. Brookfield’s share amounted to $1.8 billion. Chief Executive Officer Bruce Flatt called it an “exceptional” result.

“In the current low interest-rate environment, demand for the type of assets we own is strong,” Flatt said in a letter to shareholders. “Many of our businesses are critical infrastructure assets that are underpinned by long-dated, contracted or regulated cash flows. With the capital markets being highly accommodative, we have been monetizing assets.”

During the quarter, Brookfield took public its Shoals Technologies Group Inc. solar products business, sold a life-sciences real estate portfolio and completed two secondary offerings of shares in Graftech International Ltd. It also unloaded a portion of its holdings in Brookfield Renewable Corp. and West Fraser Timber Co., a Canadian firm that’s enjoying the benefit of soaring lumber prices.

Flatt said the combination of strong markets and asset sales means there’s enough capital on hand for its planned $6.5 billion privatization of Brookfield Property Partners LP, and the repurchase of its own shares, to soak up some of the new equity being issued in the transaction.

Brookfield said it had a record quarter, with its funds from operations reaching $2.8 billion and its distributable earnings hitting $2.5 billion. Total assets under management grew to $609 billion.

The company has about $80 billion in capital available, Flatt said in the letter, including $18 billion on its own balance sheet. Brookfield has started raising money for its fourth flagship real estate fund and its new Global Transition Fund, which will focus on environmentally and socially responsible investments.

It’s also in the midst of closing a new debt fund and aims to launch new infrastructure and private equity funds in the next 12 months as part of its plan to raise $100 billion across its flagship funds, Flatt said.

Bloomberg

“The sustained low interest-rate environment combined with institutions’ need to earn returns from alternatives has created a very constructive fundraising environment,” Flatt said.

Brookfield remains confident that commercial real estate will rebound as Covid-19 vaccinations take hold. Flatt said he believes many people survived in the short term without an office, but in the long run most companies won’t prosper without the interaction that comes from people working in close proximity to one another.

“The tone in the market for commercial property assets is very negative at the moment. Real estate stocks have been trading as though no company will ever occupy an office again, no person will ever set foot in a store and nobody will ever travel again, for either business or leisure,” Flatt wrote. “We do not believe that any of these will be the case, and so we are investing accordingly.”

‘Outsized Gains’
Andrew Kuske, an analyst with Credit Suisse, said he expects Brookfield’s transactional activity to accelerate in the back half of 2021 and into 2022.

“On balance, the quarter is positive on continued growth in the underlying asset management business along with the validation of past investments with outsized gains being realized -- even with some operating weakness,” Kuske said in a note to clients.

Flatt said he believes there’s an opportunity to pick up infrastructure assets because governments have borrowed heavily to launch stimulus programs to combat the pandemic. That could open an opportunity for government infrastructure assets to come to market to raise funds.

Brookfield shares were up 1.2% to $45.28 at 11:59 a.m. in New York.