Alternative asset manager willing to buy out Home Capital

by Ephraim Vecina on 21 Jun 2017
Noting that the Canadian real estate market remains fundamentally sound, Brookfield Asset Management Inc. stated that it won’t be opposed to buying Home Capital Group Inc. so long as the terms are right.

“Everything that is in the market we look at. If there’s a transaction that made sense on a risk/reward that we could get involved in, we’d be pleased to be involved,” chief executive officer Bruce Flatt said during the company’s annual general meeting in Toronto late last week. “Whether that happens or not, we’ll see.”

This position stood at odds with that of other major Canadian investors like Fairfax Financial Holdings Ltd., which has maintained some distance from the residential real estate segment over fears of a bubble.
 
“The real estate and mortgage market in Canada are totally fine,” Flatt disagreed, as quoted by Bloomberg. “Housing prices have gone up quite a bit in many places, but the mortgage market is a very sound financing market. There are a small group of banks that control the mortgage market and these are very high-quality banks and it will not be a problem.”

Although it’s currently the country’s largest alternative asset manager, Brookfield has almost no exposure to the mortgage market in Canada outside of its home building ventures and its subsidiary Royal LePage Real Estate Services. Flatt assured that this doesn’t mean that they would avoid the sector, however.

“We have been in the residential market for 30 years building houses,” Flatt said. “There are times when it’s not as good as it was, like in the United States when it wasn’t as good for five years. But we were in it before, we’re still in it, and it’s been one of our most profitable businesses.”

Home Capital will consider all options to regain stability after settling with the regulator over allegedly misleading investors, a person familiar with the company’s plans has said.

The Toronto-based company is supposedly in talks with Canada’s six biggest banks to replace a $2 billion rescue loan from Healthcare of Ontario Pension Plan. Private-equity firms Onex Corp. and Catalyst Capital Group Inc. as well as Brookfield have discussed various transactions with the company, according to other sources familiar with the matter.

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