Office Losses Slow, But Funds Lose Value At $80B Brookfield Real Estate Unit

The division of investment giant Brookfield that owns its real estate assets saw net operating income increase despite a bump in valuation losses on its portfolio in the second quarter. 

Results for Brookfield Property Partners showed a slowdown in the value decline of the firm’s $19.4B office portfolio in Q2 compared to the same period last year. But its stakes in funds Brookfield manages made a loss due to value drops. 

Brookfield Property Partners owns a $19.2B portfolio of retail assets, stakes in funds managed by sister company Brookfield Asset Management, and myriad other real estate assets across the world.

Its commercial property portfolio totaled $80B at the end of Q2, and the company reported $5.6B of developments. Assets include half-shares in Canary Wharf in London, Manhattan West in New York City, the Fashion Show mall in Las Vegas and the Ala Moana Center mall in Honolulu. 

Overall net operating income for the division rose from $1.1B in Q2 2023 to $1.2B in Q2 2024, driven by an increase in income on its limited partner investments. That includes investments in Brookfield’s four opportunity funds, two value-add multifamily funds and a series of debt funds. 

But those LP investments also saw the biggest loss in value of any Brookfield Property assets over the quarter, dropping in value by $506M in Q2 compared to a $168M rise in Q2 2023. 

Brookfield Property is one of the world’s largest office owners, with assets concentrated in London and major North American and Asian gateway cities. 

Value declines in its office portfolio slowed from $511M in Q2 2023 to $318M in Q2 2024. That 70M SF portfolio comprises 126 assets, which are about 90% leased. 

The value of the firm’s 108M SF, 106-asset North American retail portfolio rose by $80M, compared to a $125M rise in Q2 2023. 

The amount of debt on which Brookfield Property has suspended payments increased in the quarter from approximately 2% in Q1 to less than 4% in Q2. It said it was in conversation with lenders on those loans and hoped to agree on modifications or extensions, although properties could be handed to lenders. 

The company has $68B in total debt obligations, $13.2B of which matures this year and $13.7B of which matures next year. Of that $27B maturing in the next two years, $15.5B has extension options. 

When it comes to debt maturing this year, $4.8B is secured against offices, $3.6B against retail assets and $4.8B against assets in its funds.