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Brookfield passes halfway mark for debut RE secondaries strategy

The alternatives giant has closed at least three balance-sheet real estate secondaries deals prior to launching a formal fundraise for the strategy.

Brookfield Asset Management, one of the world’s largest alternatives firms by assets under management, is halfway to the second-largest pool of capital yet raised for a real estate secondaries strategy.

The Canadian firm raised $1.5 billion for the business before launching a formal private fundraising process, chief executive Bruce Flatt wrote in a Q3 2021 letter to shareholders.

The vehicle, Brookfield Real Estate Secondaries Fund, is targeting up to $3 billion, and has already received at least $150 million from South Korea’s Public Officials Benefit Association, according to Secondaries Investor data.

If the vehicle hits its $3 billion target, it would be behind Landmark Partners’ $3.3 billion Real Estate Partners VIII, which closed in 2018 and remains the largest pot of dedicated capital to the strategy.

The Toronto-headquartered firm has closed at least three transactions thus far on balance sheet, Secondaries Investor understands.

In September, BAM recapitalised a Chicago-based industrial park managed by Elion Partners, a minority-owned real estate operator and manager with $2 billion in assets under management. That transaction included an $80 million primary commitment to Elion Real Estate Fund V.

In March, the firm emerged as sole backer of a process involving NorthBridge Partners’ last-mile industrial portfolio. The stapled restructuring, which involved $360 million of gross asset value, resulted in 21 assets being moved into a continuation fund. That was its second real estate secondaries deal, Secondaries Investor reported.

Brookfield launched its real estate secondaries business last year by hiring Fabian Neuenschwander from Partners Group, as Secondaries Investor reported. The firm has since added Kayley Laren from Goldman Sachs and Julian Falconer from StepStone.

For real estate transactions, the firm targets deals of between $50 million and several hundred million, with no upper boundary given that Brookfield can invest both third-party capital and from its own balance sheet, as Secondaries Investor reported in March.

Real estate secondaries deal volume hit a record high last year, with $8.5 billion across 113 transactions closing or being placed under contract, according to data from Landmark. Recapitalisations of funds and property portfolios drove the majority of transactions last year, accounting for two-thirds of deals.

In September 2020, Flatt said that secondaries could grow into a $50 billion business for the firm, as rising levels of exposure to alternatives made portfolio management increasingly important.

The firm is set to launch an infrastructure secondaries business in late 2021, followed by private equity secondaries, Secondaries Investor reported in May.