Brookfield Asset Management is moving its head office to New York from Toronto to expand its institutional investor base and access to capital.
In a letter to shareholders issued Monday, CEO Bruce Flatt and President Connor Teskey said the company is seeking the "deepest pools of capital possible" for its Brookfield Asset Management shares.
"Our business fundamentals, including our stable, predictable earnings, an asset-light balance sheet, and strong growth prospects, make us an attractive investment," Flatt and Teskey said in the letter. "While we are pleased with our progress, there is still more we can do. One common theme we have heard has been the importance of broader index inclusion."
Broader index inclusion, Brookfield said, "is expected to drive increased ownership of its Class A shares by passive institutional investors, who collectively manage trillions of dollars in capital."
Capital markets began to tighten about two years ago, making it harder and more expensive for real estate investors to acquire properties and fund new developments. Real estate professionals have said they are hopeful that recent interest rate cuts by the Bank of Canada and the U.S. Federal Reserve will help make capital more readily available.
Brookfield has more than $1.38 trillion, or approximately 1 trillion U.S. dollars, in assets under management across renewable power and transition, infrastructure, private equity, real estate and credit.
Flatt and Teskey said Brookfield has essentially operated as a U.S. company for 20 years, and its largest share of revenues, assets under management, and employees are based in the U.S. The majority of its institutional shareholders are U.S. investors. and the majority of its shares are traded on the New York Stock Exchange.
Starting with its 2024 annual report, the company's financial reports will be filed with the Securities and Exchange Commission and will be identical in form to those filed by other U.S. domestic issuers.
The company previously spun off its asset management business as a privately held company with two shareholders: Brookfield Corporation, which privately holds 73%, and publicly traded Brookfield Asset Management, which owns the remaining 27%.
As part of the restructuring, Brookfield Corp. will now exchange its private interest in its asset management business for public shares of Brookfield Asset Management on a one-for-one basis.
Shareholder approval required
Publicly traded Brookfield Asset Management will then own 100% of the asset management business. The company said the move will result in its stock market value more accurately reflecting the total market value of its asset management business, which was approximately $85 billion U.S. dollars as of Monday.
The move requires shareholder approval because 1.2 billion shares of Brookfield Asset Management will be issued to Brookfield Corp. in exchange for an equivalent number of privately owned shares of the asset management business, representing the 73% interest. The vote is set for Dec. 20, and the transaction is expected to be completed in early 2025. It is subject to regulatory and other customary approvals.
Publicly traded Brookfield also reported earnings for the third quarter. For the period ended Sept. 30, the company had a net income of 129 million U.S. dollars, compared to US$122 million a year earlier.
The company raised $1.6 billion U.S. dollars of capital for real estate during the quarter. Brookfield deployed 1.5 billion U.S. dollars, including more $500 million U.S. dollars into numerous logistics portfolios across North America and Europe in its opportunistic flagship strategy.
After the quarter, Brookfield made an offer to acquire Tritax EuroBox, a publicly traded European logistics REIT, for approximately $730 million U.S. dollars.
It sold 5.4 billion U.S. dollars of real estate assets in the past few months, including its UK Retail Parks Portfolio, a U.S. manufactured home portfolio and the Conrad hotel in Seoul, Korea.
Teskey and Flatt said in their letter that they are seeing greater monetization activity, leading to more capital being returned to clients and providing a more constructive fundraising environment across the industry.
"Given the high quality of our underlying portfolio, we have benefited disproportionately from this trend and expect it to continue," they said.
Specific to real estate, they said, "new supply is low across most sectors, financing markets have been steadily improving throughout the year, and underlying fundamentals remain strong, creating an attractive market for high quality assets."