Brookfield Asset Management Reports Strong Third Quarter Earnings
The firm raised for than $26 billion for an assortment of investment funds targeting CRE
Brookfield (BN) Asset Management — the private credit and investment management arm of the Toronton-based Brookfield Corporation — announced strong third-quarter earnings Monday, largely on the back of more than $26 billion raised for several flagship funds, the firm’s strongest fundraising quarter of the year.
Brookfield’s distributable earnings — a proxy for cash flow — came out to $568 million for the quarter and $2.2 billion over the last 12 months, reflecting 8 percent for the quarter and 13 percent year-over-year.
The firm has deployed more than $5 billion across various capital strategies during the quarter, according to Chief Financial Officer Bahir Manios.
CEO Bruce Flatt said during the call that his firm currently has more than $100 billion in “dry powder” to invest across asset classes and roughly $865 billion in assets under management.
“The scale, partnered with the interconnectivity of our businesses, enables us to spot trends early, sort for proprietary deal opportunities, underwrite with accuracy, drive better operations, and have best-in-class access to capital,” Flatt said. “Our results were strong in the third quarter and our capital-raising momentum is building.”
Nothing has powered Brookfield Asset Management more than its powerful fundraising apparatus. The firm has raised $61 billion in capital commitments since the start of the year, with the third quarter featuring $3 billion in commitments for its infrastructure drawdown fund, $2 billion for its flagship commercial real estate fund, and $1.3 billion for its infrastructure debt fund, according to Manios.
Brookfield’s sixth private equity fund closed the quarter at $12 billion in commitments, the largest sum raised by Brookfield yet in the private equity sector.
“Our strong fundraising success this year should lead to strong revenue growth next year, and at the same time, direct cost growth should slow as much of the necessary investments have been made in the platforms we have,” said Flatt. “The combination of faster revenue growth and slower expense growth means next year should be a very strong year for [free related earnings] and [distributable earnings per share].
Connor Teskey, president of Brookfield Asset Management, spoke to the dynamics of commercial real estate lending and how Brookfield plans to fill a void brought on by a pullback in liquidity.
Teskey noted that the securitization market remains slow and that the vast pool of commercial real estate loans maturing over the next two years will face trouble sourcing available capital to refinance.
However, this dynamic plays right into Brookfield’s hands, he said, pointing to the firm’s next CRE mezzanine debt fund, which should be larger than the $4 billion raised during its sixth iteration.
“The deficit of liquidity will create a very attractive lending environment for sponsors with significant dry powder like us,” Teskey said. “We are not only one of the most experienced real estate investors in the world, but we also have one of the longest-running private debt platforms in commercial real estate [for over two decades].”
The Brookfield Asset Management leadership team emphasized repeatedly on the call that the firm views infrastructure as its most profitable path forward — particularly with the need for CRE buildings to undergo decarbonization and for data centers to ramp up their power usage through the use of artificial intelligence.
“Right now, you are seeing one of the greatest capital needs in memory to build out data centers, to build out renewable power, and quite frankly that is happening at a time where capital is becoming increasingly scarce for some market participants and some developers of those assets,” Teskey said.
“So that creates a great opportunity for us both on the infrastructure side and on the transition side to be not only a capital provider, but an operating partner to those businesses, as well,” he added.
Brian Pascus can be reached at email@example.com.