Inside Brookfield’s Billion-Dollar Capital Recycling Play

The company has sold a 28% stake in its Manhattan office and multifamily portfolio and entered into a contract to sell 112 self storage assets for more than $1.3 billion.

Brookfield Place

NEW YORK CITY–It has been a busy month for Brookfield Asset Management on the acquisition side  — and, as it turns out, regarding its dispositions as well.

During its quarterly earnings call CEO Brian Kingston told investors that the company is selling a 28% stake in its Manhattan office and multifamily portfolio and plans to sell an additional 7% stake over the remainder of this year for total proceeds of $1.8 billion to Brookfield Property Partners. He also said that one of BPP’s opportunity funds has entered into a contract to sell 112 self storage assets for more than $1.3 billion.

In total, the company’s capital recycling initiatives have returned $2.2 billion to Brookfield Property Partners year to date, Kingston said, and the company expects an additional $1.7 billion in additional proceeds by the end of this year.

“We remain very active in recycling our capital out of stable and mature assets and then using those proceeds to fund new investments and fortify that flexibility to our balance sheet,” he said. (per a transcript provided by Seeking Alpha).

A Partnership With Institutional Investors

Kingston described the Manhattan stake sale as a partnership with institutional investors to invest in its portfolio holdings — similar to what it did with its Washington DC portfolio a few years ago. The Manhattan portfolio consists of Brookfield’s core holdings as well One Manhattan West, and first of its residential towers in Greenpoint.

A 46% Gross IRR

The sale of the self-storage units will deliver a 46% gross IRR — 2.6 times its initial invested capital — and the net proceeds are projected to be $130 million. “The transaction represented a compelling opportunity for us to walk in a meaningful gain on the stabilized portfolio and several of our secondary operating markets,” Kingston said.

Accelerating GGP’s Mixed-Use Plans

One final tidbit from the earnings call: Kingston gave a hint as to what the company plans to do with GGP’s retail properties: The company will reconfigure the assets into mixed-use properties at “a more rapid pace and better financial returns that would have been possible on a standalone basis for GGP.”