Brookfield Asset Management Inc. has bought the DreamWorks Animation campus in California for US$326.5-million, part of nearly US$600-million in deals for a new real estate investment trust it’s selling to wealthy investors.
The new Brookfield REIT isn’t publicly traded; instead, Brookfield is marketing the units to its wealth management clients, requiring a minimum investment of US$2,500. The REIT represents an alternative to investing in its limited partnerships, which are more complex at tax time, and also offers a substitute for Brookfield Property Partners LP, a publicly traded investment that Brookfield privatized this year, saying the stock markets were undervaluing the Brookfield real estate portfolio.
The REIT had been managed by Oaktree Capital Management, in which Brookfield took a majority stake in 2019. The REIT now moves under Brookfield’s supervision, and the recent deals jack up its holdings to more than US$1.5-billion, triple what they were under Oaktree.
The 15-acre, seven-building, 500,000-square-foot animation facility, located in Los Angeles’ media district, serves as DreamWorks’ headquarters and has the animation infrastructure for movies and television series. DreamWorks has been there 20 years, and its lease runs to 2035, Brookfield says. About 1,500 DreamWorks employees work there.
As part of beefing up the REIT’s portfolio, Brookfield also bought apartment buildings and distribution centres.
The REIT acquired two luxury apartment buildings totalling 445 units for a total of US$172-million. One is in downtown Wilmington, N.C., and the other is in Beaverton, Ore., a suburb of Portland that’s home to Nike.
Brookfield REIT also recently acquired three logistics facilities totalling more than 500,000 square feet for US$71-million. They’re in the suburbs of Chicago and Washington, and in Lakeland, Fla., a city between Tampa and Orlando.
Brian Kingston, the chief executive officer of Brookfield’s Real Estate Group, said Brookfield is marketing the REIT to investors “who are looking for a bit more income-oriented, yield-oriented product that they can hold forever, but has some liquidity – certainly more liquidity than our private, closed-end funds where the money is locked up for longer periods.”
“This is how we have owned real estate on our own books, our own balance sheet, which is very long term, compounding away. It is not a new strategy for us. It is really just a new form of raising capital from a channel that we have really not focused on to date.”
U.S. investors are also able to account for their taxable income with a much simpler 1099 form, versus the K-1 tax form that is used by partnerships and trusts.
In July, Brookfield took Brookfield Property Partners LP private, removing the venture’s stock listings from the Toronto and New York exchanges. Throughout the COVID-19 pandemic, Brookfield CEO Bruce Flatt offered a full-throated defence of commercial real estate, particularly office buildings, and Brookfield said public investors, who were disenchanted with BPY’s ownership of malls and other retail real estate, were undervaluing the shares.
Brookfield attracts institutional investors to its giant portfolios of what it calls “alternative assets” – real estate, infrastructure, energy and distressed debt. The assets – US$650-billion at the end of the third quarter – are placed in partnerships, some of which trade on U.S. and Canadian exchanges, and other private funds. Brookfield invests its own money alongside the capital from outsiders.