Signs That Capital on the Sidelines Maybe Be Reentering the Markets

With transaction volumes down, price discovery largely missing, valuations heavily off, and a challenging interest rate environment, a natural question is when CRE markets would again pick up.

Many in the industry have been talking for more than a year about all the capital sitting on the sidelines, waiting to make an entry, possibly looking for distressed deals. One way to know when decisions will start to be made is by watching when the money starts to move from one pocket to another.

The money has started to move. Brookfield Asset Management has been pulling in investments at a significant rate. In its earnings release on Monday, the company reported that it had raised $61 billion in capital in the first nine months of 2023, $26 billion of which came in during the third quarter. The company also announced that it had $102 billion of dry powder “available to deploy into attractive market opportunities.”

“We are very fortunate that the businesses where we have established a leadership position remain in strong demand by investors,” said Connor Teskey, president of Brookfield Asset Management, in a prepared statement. “We closed our sixth private equity strategy at $12 billion, our largest ever to-date. We also held strong closes for our fifth infrastructure flagship fund and third infrastructure debt fund and began raising capital for our second transition flagship fund. When completed, those funds should represent the largest funds ever raised by a sponsor for each of these respective strategies.”

Teskey said, “2023 is shaping up to be an excellent year for capital raising, which sets the stage next year for excellent earnings and dividend growth.” Part of that includes an expected close of the company’s fifth real estate flagship fund.

Then Galapagos Capital, a Brazilian investment firm, said that it planned to raise a $2 billion fund for investment in U.S. real estate over the next few years, as Bloomberg reported.

“We invested in a team of experts to be prepared to take this opportunity when it comes,” Bruno Carvalho, a partner and head of international business for Galapagos, told Bloomberg in an interview. “Much of the Fed’s interest-rate hike movement has already happened, and at some point, this will stop, helping to bring property prices up.” The firm is looking at Florida, Texas, Georgia, Tennessee, North Carolina, and South Carolina as potential locations. They’re also focusing on multifamily, medical office, and healthcare and recovery clinics.