Jan 18, 2023
Brookfield property fund for rich investors drops as rates rise
Brian Madden discusses Brookfield Asset Management
A Brookfield Asset Management Inc. property fund for affluent investors posted its second consecutive monthly decline in December as rising interest rates weigh on the industry.
Brookfield Real Estate Income Trust dropped 1.6 per cent in December, following a 1.9 per cent decline in November. The fund has had only one other losing month since its inception in 2019, according to its disclosures.
Despite the weak results to end the year, Brookfield REIT still gained 12.7 per cent in 2022. The US$2.4 billion fund holds apartment buildings, offices and logistics properties, primarily in the US. A year ago, it bought DreamWorks Animation’s campus in California for US$327 million — its largest single purchase.
“Throughout 2022, third-party valuation firms began adjusting assumptions regarding property valuations that are a key component of our net asset value calculation, leading to some recent downward valuation movements in our portfolio,” Brookfield REIT said in a regulatory filing. Operating performance of the properties “continues to be strong.”
Real estate funds are going through a rough patch as soaring borrowing costs and a cooling economy impact property values. Blackstone Inc.’s US$69 billion fund for well-off retail investors is limiting redemptions after receiving withdrawal requests exceeding its quarterly limit. And some of the biggest institutional investors in US commercial real estate have sought to cut their exposure to property funds managed by JPMorgan Chase & Co., Morgan Stanley and Prudential Financial, Bloomberg reported Tuesday.
Brookfield took over the management of the properties from subsidiary Oaktree Capital Management in 2021. The plan was to expand the portfolio to compete with rival REITs, Bloomberg reported at the time.