The Canadian alternative asset manager is set to grow the size of the company, leveraging Brookfield’s track record as owner and operator of real estate, according to people familiar with the strategy. The plan is to expand the portfolio over time to compete with rival REITs managed by Blackstone Group Inc. and Starwood Capital Group, they added.
The new company, Brookfield Real Estate Income Trust Inc., will be formed by transferring the advisory role from Oaktree Real Estate Income Trust Inc. to Brookfield. Manish Desai, President of Oaktree REIT, will retain this role within the new company.
Oaktree REIT has total assets of $ 478 million, including residential properties in Atlanta, Denver and Dallas and office buildings in Los Angeles and Arlington, Virginia, according to its website. The fund has generated a return of 10.3% per year since its inception in December 2019.
“Oaktree has done a great job, generating strong returns for shareholders,” Brookfield chief executive Zach Vaughan said in a statement announcing the deal, which was first reported by Bloomberg News. “This transition benefits shareholders going forward through the combination of Brookfield’s supply networks, operating capabilities and global footprint, while maintaining the advantage of cutting-edge credit expertise. Oaktree.
Brookfield will bring its stake in three multi-family and office buildings to the company valued at more than US $ 400 million, the people said. The strategy will remain largely the same, but will include certain non-US markets where Brookfield operates.
The transition is expected to take place in the fourth quarter. Units of the new REIT will be distributed by Brookfield-Oaktree Wealth Solutions to individuals and high net worth investors.
Private real estate investments are considered by some investors to be more attractive than public investments because they can be less volatile and often generate better long-term returns. In a separate transaction, Brookfield Asset is trying to take over private New York-based Brookfield Property Partners LP.
KKR, Blackstone Offers
Brookfield’s move with Oaktree assets comes amid a surge in the private REIT space by some of its private equity competitors.
KKR & Co. launched its KKR Real Estate Select Trust Inc. in May with US $ 150 million from its own balance sheet, while Starwood’s private REIT has total assets of approximately US $ 7.8 billion, according to its website.
Blackstone’s private REIT, or Blackstone Real Estate Income Trust Inc., had total assets of US $ 48.4 billion at the end of May. BREIT, which was launched in 2017, invests primarily in fully leased apartments and industrial properties. He said on Wednesday he had reached a deal to acquire American International Group Inc.’s stake in an affordable housing portfolio for around $ 5.1 billion.
Although the initial salvo is relatively modest, Brookfield Asset – with $ 609 billion under management as of March 31 – has demonstrated in the past its ability to scale up operations in new markets and with new funds.
In real estate, for example, the original Brookfield Strategic Real Estate Partners fund raised US $ 4.4 billion in 2013. The fourth iteration is currently seeking to raise US $ 17 billion, according to people familiar with the matter.