Brookfield Properties on Capital Raising Frenzy
One of the biggest owners of commercial properties in the United States, Brookfield Properties, is successfully raising money through a variety of channels; be it preferred share sales, joint ventures or outright commercial property sales. The largest challenge currently facing the commercial real estate market (CRE) is the refinancing of debt held through various commercial mortgage backed securities (CMBS) channels. Government backed initiatives, such as the Term Asset-Backed Lending Facility (TALF) remains largely closed to the CRE market. The securitization industry for months looked to the TALF program's single commercial loan branch for the development of a facility geared specifically toward new issuance. And, to make matters worse, CMBS delinquencies will likely double in the next two years. Nonetheless, the industry is chugging along as Invesco Mortgage Capital said it would use proceeds from its recent public offering to buy CMBS. Starwood Property Trust is also making a run at investing in CMBS deals. Indeed, HousingWire sources confirm that opportunities in CRE are not only heating up, but the global investor landscape is changing as well. A recent Brookfield deal provides a case in point with the recent sale of 1625 Eye St, a skyscraper it originally purchased from the Union Labor Life Insurance Company for $157.5m in 2003. Brookfield just sold 90% of its interest in the property to HSBC Alternative Investments (HAIL) for $203.4m, or $587 per leasable square foot. HSBC Alternative Investments is an exclusive syndicate of HSBC Private Banking clients and marks a trend away from institutional investor involvement. Edge Fund Advisor, a Washington, DC-based real estate investment company and asset management firm acted on behalf of the London-based HAIL. The property is 100% occupied, just two blocks from the White House, and in the heart of Washington DC's central business district. "This transaction perfectly demonstrates HSBC Private Bank's ability to open doors for its clients. This syndicate purchase would have been an impossibility for our clients acting individually." said Chris Allen, CEO of HSBC Private Bank's alternative investment division, adding, "we consider Brookfield to be one of the premier real estate companies in the world." Mark Keller, CEO of Edge Fund Advisors also echoed Allen's opinion on Brookfield. And on the same day of the Eye Street joint venture, Brookfield sold One Bethesda Center, a 170,000-square-foot building in Maryland, to JBG Associates. The two transactions generated approximately $103m in net proceeds for Brookfield. Additionally, Brookfield announced a public offering of shares in Canada due to strong investor demand, though details on the transaction are restricted in the United States. As of press time, Brookfield had no comment on its recent activity or its strategy for using the raised capital. Write to Jacob Gaffney.