Brookfield cuts value of real estate holdings amid market swoon

Real estate assets dropped about 5% in the first quarter

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Brookfield Asset Management Ltd.’s real estate assets dropped about five per cent in the first quarter as the value of some properties fell.

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Fee-bearing capital in real estate funds dipped to US$98 billion in the quarter, the Canadian asset manager said Wednesday, down from US$103 billion at year-end. The decline included a downward adjustment of US$1.8 billion for “market valuation,” according to a company presentation.

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“Unfortunately, the negative sentiment is dragging down the real estate sector more broadly,” the firm’s president, Connor Teskey, told investors during an earnings call Wednesday. “We think that’s completely unfair.”

The Brookfield group is one of the world’s largest owners of prime office properties, with a portfolio that includes New York’s Manhattan West and London’s Canary Wharf. Office landlords in major cities around the world are being squeezed by a combination of higher borrowing costs and lower occupancy, as many companies continue to allow employees to work from home at least part of the time.

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Brookfield Asset’s parent company has defaulted on mortgages covering more than a dozen office buildings, mostly in Los Angeles and around Washington.

The property market is “bifurcated” as high-quality assets perform well and lower-quality assets struggle, Teskey said on the call.

The group’s major real estate holdings are no longer publicly traded since it took Brookfield Property Partners private in 2021. For Brookfield Asset, fee-bearing capital from what’s now called Brookfield Property Group fell to US$19 billion in the first quarter from US$21 billion in the first quarter of 2021.

  1. The atrium of the Brookfield Place office complex in the financial district of Toronto.

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  2. Brookfield Place in New York City.

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  3. The Gas Company Tower, centre, is one of the properties in default.

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Brookfield began raising money for its fifth flagship real estate fund in January. The last vintage, in 2021, received US$15.3 billion in commitments.


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