Brookfield Sells Stake in NYC Portfolio for $1.4B

The company announced the sale of a 28 percent stake in its New York City core holdings, as well as plans to sell another 7 percent by early next year.
One Manhattan West
One Manhattan West

In a week that saw plans for two major multi-billion acquisitions moving forward, Brookfield Property Partners LP announced it had sold a 28 percent stake in its New York office and multifamily portfolio for about $1.4 billion to help finance future Brookfield investments.

The company, the publicly traded real estate arm of Brookfield Asset Management Inc., revealed the transaction along with plans to sell another 7 percent stake by later this year or early 2019, bringing the amount to be raised to about $1.8 billion. Brookfield made the announcement in its second-quarter 2018 earnings report and during an Aug. 1 earnings call with analysts.

The new BAM-sponsored real estate venture was included in a list of several capital recycling initiatives made during the second quarter, including the $167 million sale of the Hilton Los Cabos in Los Cabos, Mexico, and the execution of a sale agreement for 112 assets in its self-storage portfolio for $1.3 billion, which is expected to close in September.

“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,” Brian Kingston, senior managing partner & CEO of Brookfield Property Partners, said on the earnings call.

The Eugene
The Eugene

Kingston and Chairman Ric Clark said the company chose to allow institutional investors to invest in most of the core New York City office and multifamily portfolio rather than on a building-by-building basis. The investments include the 67-story, 2.1 million-square-foot One Manhattan West office tower under construction on the Far West Side and The Eugene, the 62-story, 844-unit apartment tower at 435 W. 31st St. that is the first completed ground-up portion of the Manhattan West mega-project. It also includes the first of the residential towers under construction at Greenpoint Landing in Greenpoint, Brooklyn.

The portfolio sale does not include an office building at 300 Madison Ave. that has a self-amortizing mortgage on it, and projects that have yet to be developed. The portfolio stake also comes out of Brookfield’s ownership interests because it has joint ventures on many of the projects.

“This is more akin to what we did in Washington, D.C., a couple of years ago, where we’re bringing in institutional investors to partner with us. And then rather than bringing them in one building at a time, it’s really bringing them in across the entire portfolio or at least a large subset of the portfolio all at once,” Kingston said on the earnings call.

Brookfield’s busy week

The news of the Manhattan portfolio stake sales came one day after Brookfield Asset Management announced it had agreed to buy Forest City Realty Trust for $11.4 billion and less than a week after GGP Inc.’s shareholders approved Brookfield Property Partners $14.8 billion acquisition of the remaining 66 percent share of the giant mall operator that it didn’t already own.

Kingston said during the conference call he expected the GGP transaction to close by the end of August. He also noted the firm would be launching Brookfield Property REIT (BPR), a new REIT security that would be an investment option for public equity investors.

“The cash component of the transaction will be funded through a mixture of acquisition, financing and about $4.2 billion of equity that will be provided by our institutional investment partners. The acquisition financing, which has a five-year term associated with it, will be repaid over the next 18 to 24 months through a combination of asset-level financings as well as some further asset sales,” he said.

Image courtesy Brookfield Property Partners