He dismisses the flight of young families to the suburbs as an “anomaly” and the permanent home office policy popular in Silicon Valley as impractical, because “the efficiency is not even close to a shared workplace”. If anything, tech companies are leasing or buying more downtown space, not less.
Flatt – who oversees about $ 200 billion in commercial real estate, including dozens of office towers – argues that big cities are resilient: London survived lightning during World War II and New York recovered from the 1918 Spanish flu, 2001 terrorist attacks and Hurricane Sandy in im Year 2012.
“People like to hang out with other people, they like to be“ in ”, there are jobs and employment, they can walk to work, they can do all the things that go with it and that doesn’t stop them. “Said Flatt in a Bloomberg Front Row interview. “These cities won’t go away.”
Flatt said that the majority of corporate tenants want people at their desks. Brookfield, like other real estate companies, was one of the first employers to repopulate its Manhattan offices, sending hundreds of workers back from June.
As COVID-19 cases hit new records in the US and increase around the world, Flatt’s confidence in a return to pre-pandemic norms stands out, and it can be wishful thinking. But Brookfield – manager of $ 550 billion in real estate, infrastructure, renewable energy, private equity, and credit – has historically made money at a disadvantage, buying what others have to sell at bargain prices.
Brookfield’s acquisition of a controlling stake in Oaktree Capital in 2019 made Brookfield the second largest alternative asset manager after Blackstone Group Inc. The company now plans significant expansion in insurance, impact investing, technology and limited partnerships.
“Will we have $ 1 trillion in fortune five years from now? Probably, ”he said.
Armed with approximately $ 80 billion of balance sheet capital and “dry powder” funds from Brookfield customers, Flatt said he expected companies and investors to dump assets they could no longer afford after borrowing heavily to help fight the coronavirus To survive locks. Governments in unprecedented deficit from stimulus spending will accelerate the privatization of government assets.
Another reason to buy: Flatt expects a dramatic revaluation of commercial real estate with central bank interest rates frozen to zero in the foreseeable future. An office building that was worth $ 1 billion before the pandemic.
“Capitalization rates, or multiples, are going down, which means values are going up,” said Flatt. “It’s just getting started and it hasn’t started in New York because assets aren’t trading, because people aren’t comfortable just yet.”
Currently, the markets are reflecting a more pessimistic outlook. Brookfield stocks have plummeted 30% since late February, while an index of US real estate companies has fallen nearly 20%.
Barry Sternlicht, CEO of Starwood Capital Group, said in June the coronavirus left New York at a “tipping point” and predicts wealthy residents will emigrate as taxes rise and services fall.
While Brookfield stands ready to capitalize on the changes brought about by the pandemic, such as increasing demand for data centers and sustainable energy, about 20% of its business is still struggling to varying degrees.
Flatt said he had an agreement with the Bahamian government to reopen the 4,000 rooms at the company’s Atlantis Resort on Paradise Island from Dec. 1. Guests flown in on chartered planes and tested for the virus on arrival can live in a safe. “Bubble” and does not have to be quarantined.
Brookfield has also partnered with rival mall operator Simon Property Group Inc. to buy three of its largest tenants, Aeropostale, Forever 21 and JC Penney Co., out of bankruptcy. It’s part of a strategy to make Brookfield one of the survivors of a shakeout that Flatt predicts could wipe out half of the U.S. retail space
“There will be a consolidation and the best will get better and the worst will go away,” he said. “If you have a poorly located retail center with a few tertiary tenants, you will likely lose all of them and it will be plowed up and turned into something else.”