Brookfield Announces Strategic Deal

Toronto-based Brookfield Asset Management Inc. (BAM - Snapshot Report) announced the purchase of 19 apartment communities (4,892 units) in N.C., S.C. and Va. from Babcock & Brown Residential Holdings LLC. The deal value is estimated to be around $414 million.

The acquired properties are situated in the Charlotte and Raleigh-Durham sub-markets, which are economically viable and have a robust population growth. These factors prompted Brookfield to buy properties in this region, as it is expected to contribute greatly to higher occupancy rates and increased rental income. Currently, average occupancy of the portfolio is 92% and is financed with individual non-recourse first mortgage loans, which have been considered a part of the deal.

Fairfield Residential – a wing of Brookfield – has been allotted the task of managing these properties as it has significant presence in the region. Moreover, Brookfield is likely to put in around $30 million as additional investment to revamp the properties to maximize the returns from the investment.

The acquisition of the abovementioned properties will strengthen Brookfield’s multifamily portfolio to about 20,000 units across the U.S. In Dec 2012, Brookfield acquired majority stake in Verde Realty – a U.S. based privately-owned real estate investment trust (REIT). The company has shelled out $886 million to buy stake in Verde.

The acquisition is expected to prove very lucrative for Brookfield. Through this acquisition, the company will be able to expand its footprint in the international real estate arena.

Currently, Brookfield holds a Zacks Rank #3 (Hold). Other asset management stocks that are doing well and are worth considering for investment include – Virtus Investment Partners, Inc. (VRTS - Snapshot Report), Cohen & Steers Inc. (CNS - Snapshot Report) and Lazard Ltd. (LAZ - Analyst Report). Virtus carries Zacks Rank #1 (Strong Buy) while the other two carry Zacks Rank #2 (Buy).