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Bruce Flatt has his eye on ways for Brookfield Asset Management Ltd. to scoop up premium properties that other owners loaded with too much debt.

“The easiest way to make money in real assets, especially in real estate, is to buy great assets with bad capital structures,” the Brookfield chief executive said Dec. 6 at an investor conference hosted by Goldman Sachs Group Inc.

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“There will be a number of those situations,” Flatt said. “They’re not coming in one day, or there’s not going to be just an event. But they’re just going to be coming in the next 24 to 36 months, and hopefully we can capture some of those.”

Commercial real estate owners have come under pressure from a rise in borrowing costs that’s pushing down property values and stifling transactions. Brookfield Asset Management, which spun out of Brookfield Corp. last year, is one of the world’s largest property investors, with more than US$270 billion in assets under management in that sector and more than US$20 billion in uncalled commitments it can tap for real estate.

Flatt said his firm has “too much money” to go after buildings that need significant fixing up or redevelopment. Brookfield will instead be focused on prime buildings that have been hit by the rise in rates.

Brookfield has run into some of its own issues, as it’s among corporate landlords that have stopped making payments on office buildings they’ve deemed to be money-losers as vacancies increased with the growing acceptance of remote work. Flatt said office and retail properties make up a small part of BAM’s real estate portfolio.

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Flatt said the current downturn isn’t as stark as previous cycles.

“There are times like this; I can go back five iterations and it’s been a lot worse than it is today,” he said.

Bloomberg.com

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