Brookfield Asset Management CEO Bruce Flatt (Brookfield, iStock)

Brookfield Asset Management has big plans for its massive office and retail portfolio after recently taking its struggling real estate arm private.

The Toronto-based asset manager, one of New York and Los Angeles’s largest office landlords, hopes to make $25 billion from its real estate portfolio, according to Brookfield CEO Bruce Flatt’s letter to investors on August 12.

The company recently paid $6.5 billion to buy out the outstanding shares of its real estate arm, Brookfield Property Partners, hoping to have better luck in the private markets than in public trading. Last year, the firm reported net losses of $2 billion as the pandemic devastated the company’s mall properties. The company also came under scrutiny from analysts and short sellers for its accounting and asset valuation and questions about whether it could sustain paying its dividend to investors.

Brookfield Asset Management said its now-privatized property arm has a portfolio worth $30 billion and plans to hold most of these assets for the long haul.

“They provide an excellent total return for shareholders over the longer term, but also act as a liquidity pool for us should we ever need capital,” said Flatt in the letter.

Out of the $30 billion portfolio, Flatt said it has $16 billion in “irreplaceable assets” that it plans to hold onto, but can make $10 billion refinancing and selling partial interests in these properties. It has another $14 billion invested in shorter-term “opportunistic property investments” which it hopes will generate over $15 billion of equity, according to Flatt.

Separately, Brookfield Asset Management said it raised $9 billion for its flagship real estate fund and expects to surpass $15 billion.

Flatt mentioned in a conference call with analysts on August 12 that average sales per square foot for its retail tenants have improved to above 2019 levels.

Overall, Brookfield Asset Management’s financial performance improved significantly from a year ago, according to Flatt.

Its net income rose to $2.4 billion from a loss of $1.49 billion last year, according to its second-quarter earnings released on August 12. Its real estate division’s revenues increased to $189 million in the second quarter, more than doubling from $89 million for the same time period last year.

Brookfield Asset Management, which has $625 billion in assets under management, has been putting that income to work in new acquisitions.

Last month, the asset manager said it would use existing assets through subsidiary Oaktree Capital Management to launch a private real estate investment trust. This week, Brookfield Reinsurance Partners, a recent spin-off of Brookfield Asset Management, agreed to buy insurance company American National Group for $5.1 billion in an all-cash deal.

Contact Keith Larsen