UNITE HERE launched a new website, www.BrookfieldRealEstateWoes.org, on August 24, 2023, as a resource for regulators, members of the public, and other stakeholders who may be concerned about the dozens of headlines affiliates of Brookfield (NYSE: BN) have garnered this year about defaults, debt downgrades, and other commercial real estate distress.
According to research compiled by UNITE HERE, at least $5.8 billion of Brookfield affiliates’ office and retail loans are either in default, have been surrendered to lenders, or are at risk of default according to analysts and industry press.
The financial health of Brookfield’s commercial real estate holdings may be of particular interest to current or potential policyholders of American National Insurance Group, the Texas-based insurer acquired by Brookfield in 2022. UNITE HERE’s research has uncovered over $1 billion in debt instruments that appear to be related to Brookfield’s real estate holdings on American National’s 2022 sworn Annual Statement. These include bonds issued by three entities related to Brookfield Property Partners (formerly BPY), which Brookfield took private in 2021 after BPY suffered over $2 billion in losses in 2020; and bonds issued by Canary Wharf Group Investment Holdings, the London office complex jointly owned by Brookfield and Qatar’s sovereign wealth fund and which had its bond rating downgraded to junk in June 2023 by Moody’s.
The majority of these investments are listed on American National’s sworn annual statement as “unaffiliated,” despite being classified in other filings as affiliated investments. The investments were classified as “unaffiliated” after the Texas Department of Insurance (TDI) approved, with certain conditions, a Disclaimer of Affiliation filed by Brookfield Asset Management (NYSE: BAM).
“We don’t know why TDI accepted Brookfield’s argument that its insurance holdings and other companies or joint ventures under Brookfield Asset Management control should be considered ‘unaffiliated,’” said Charles Decker, Research Coordinator with UNITE HERE. “But the listing of this real estate debt as ‘unaffiliated,’ combined with Brookfield’s famously opaque corporate structure, makes it nearly impossible to evaluate the risk-reward characteristics of these investments.
“In the absence of guidance from regulators, we believe current and future policyholders should have as many of the facts as possible. American National has at least $1 billion of Brookfield-related real estate debt on its investment books backing its customers’ policies. But since so much of that debt is listed as ‘unaffiliated,’ we don’t know if regulators are even aware of it.”
The website also notes that the financial health of Brookfield’s real estate holdings has implications for policyholders of American Equity Life (NYSE: AEL) if Brookfield Reinsurance’s (NYSE: BNRE) proposed acquisition is approved by regulators: “Dumping real estate debt on American National’s books during the ‘office real estate apocalypse’ might be a good deal for Brookfield. But is it a good deal for American National’s policyholders? And if Brookfield’s purchase of American Equity Life is approved, what will AEL’s books look like after the takeover?”
UNITE HERE is the hospitality workers’ union in the U.S. and Canada, representing 300,000 workers in hotels, gaming, food service, airports, and more.
View source version on businesswire.com: https://www.businesswire.com/news/home/20230824136904/en/
Contacts
Ted Waechter
twaechter@unitehere2.org
