Brookfield Asset Management’s Toronto headquarters has been busy with some fundraising
Japan’s Government Pension Investment Fund (GPIF) has committed $500 million to Brookfield Strategic Real Estate Partners V (BSREP V), marking its second direct investment in a dedicated real estate vehicle this year.
In an update last week, the world’s largest pension fund disclosed the commitment to the Toronto-based asset manager’s fifth opportunistic vehicle, which invests in high-yielding properties globally and has a $15 billion target.
The move comes after the Japanese pension giant in July disclosed a $500 million investment in the $30.4 billion Blackstone Real Estate Partners X (BREP X) fund, marking the first time GPIF made a direct real estate fund investment.
The investment in Brookfield’s fund takes place despite GPIF recently posting a loss of ¥683.2 billion ($4.5 billion) for the July to September period – its worst quarterly result on record.
Pension Fund Favourite
Brookfield Strategic Real Estate Partners V is expected to utilise the same strategy and approach as its predecessor funds, targeting sectors where it believes that it possesses specialised knowledge and a competitive advantage, according to investment management firm Aksia, which advised Pennsylvania’s Public School Employees’ Retirement System (PSERS) on a commitment to the vehicle.
Brookfield boss Bruce Flatt is getting some support from Japan
Those areas of advantage are considered to office, retail, multifamily, logistics and hospitality, as well as in alternative sectors, such as life sciences, manufactured housing, student housing, senior living and self-storage.
The fund is expected to hold a final close in the first half of 2024.
In addition to PSERS, which committed $300 million to the fund, other GPIF, which manages around ¥219.32 trillion ($1.5 trillion) in assets, is investing in the vehicle alongside the Minnesota State Board of Investment, which has committed up to $200 million to the strategy.
The South Carolina Retirement System is also backing the strategy with up to $100 million in capital.
In the company’s latest earnings call, Bruce Flatt, chief executive officer of Brookfield, said that current market conditions present one of the best opportunities in the recent years to purchase real estate assets.
“In the decades that we have invested in real estate, we have found that volatile markets often present the best opportunities to acquire high quality real estate at exceptional values,” said Flatt in the call in August. “It is during periods of time like now, where opportunistic real estate flagship fund series is designed to take advantage of market turbulence.”
Brookfield Strategic Real Estate Partners IV, the predecessor to this latest vehicle raised $17 billion in total commitments at its final close, making it the largest real estate fund to close in 2022.
Funding Challenges
GPIF’s investment comes amidst a challenging fund raising conditions for property funds globally, with many vehicles unable to liquidate assets to return cash to investors as property prices slide and transactions slump.
According to data provider Preqin, private real estate investment funds globally raised $18.2 billion in the third quarter, representing a 71 percent plunge from the second quarter and a 53.7 percent year-on-year decline.
In its “Future of Alternatives 2028” report, Preqin expects real estate investments across all markets to be hampered by lower office demand, pricing discrepancies, and concerns over high interest rates.
Despite the current market headwinds, GPIF continues its bets on some of the largest global real estate funds with Blackstone’s BSREP V having set a fundraising target of $15 billion and BREP X closed at $30.4 billion in April.
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