Brookfield real estate fund tumbles 6.7% for first yearly loss

Article content

A Brookfield Asset Management Ltd. property fund for well-off investors posted its first annual loss since inception as it lowered its valuation on some properties due to higher interest rates.

Brookfield Real Estate Income Trust Inc. ended last year down 6.7 per cent after back-to-back monthly losses in November and December.

Article content

The US$2.2-billion REIT holds rental housing, logistics and other properties, mostly in the United States. Its largest investments include Briggs & Union luxury rental apartments in New Jersey and DreamWorks Animation studios in California, which the Canadian firm bought for US$327 million in 2021.

Article content

The real estate fund also owns 20 per cent of London-based Principal Place, a 15-story office building developed by Brookfield.

Brookfield took over the management of the properties from subsidiary Oaktree Capital Management in 2021. The plan was to expand the portfolio to compete with rival REITs, Bloomberg reported at the time. The fund has gained 9.3 per cent annualized since inception in 2019.

The sharp rise in interest rates since 2022 and concerns about the economic outlook have unsettled global property markets. In the last year, some real estate managers have been hit with such sizable redemption requests that they’ve had to gate the funds. A Blackstone Inc. real estate trust for wealthy investors posted a 0.5 per cent loss in 2023, the lowest annual return since its 2017 debut.

The dislocation in real estate is giving Brookfield REIT the opportunity to boost its exposure to property credit, according to its managers, taking advantage of higher yields.

A spokesperson for Brookfield said the firm continues to value its holdings conservatively even as interest rates are expected to stabilize.

“We believe this…