Brookfield-Backed Fundamental Income Prepares First Bond Offering

Article originally posted on CoStar on March 10, 2023

Phoenix Firm Looks To Sell Securities Tied to Revenue Stream of About 180 Single-Tenant Properties

Fundamental Income Properties, an investment firm specializing in sale-leaseback deals and bankrolled by Canadian investment giant Brookfield Asset Management, is for the first time looking to sell securities in a fundraising effort tied to revenue from about 180 of its single-tenant properties.

The Phoenix-based firm filed preliminary paperwork for the bond offering with the Securities and Exchange Commission. The filing updated a previous offering from the firm in August that never went to market.

The securities deal comes at a time when sale-leaseback activity has picked up in the previous three quarters as steeper borrowing costs compel more firms to consider property sales to raise cash.

Fundamental Income reached $1 billion in real estate acquisitions in February since launching in April 2020, according to the firm. Brookfield holds a majority ownership interest, capitalizing its formation with $500 million.

More than half of Fundamental Income’s investment growth came in the back half of last year.

“We had a strong finish to 2022, investing over $550 million and demonstrating the value of a dedicated real estate capital partner capable of supporting clients operating in all market environments and virtually all industries,” Alexi Panagiotakopoulos, chief investment officer of Fundamental Income, said in a statement. “We look forward to continuing on our trajectory as companies strive to efficiently capitalize their businesses, make acquisitions, execute growth plans, reduce leverage, or create liquidity and value for their shareholders.”

Fundamental Income declined to comment on the upcoming securities offering.

S&P Global Ratings had prepared a presale analysis on the 2022 deal.

Last summer, Fundamental Income was looking to raise $346 million backed by the rental income from about 180 properties, according to S&P. About 68% of the properties were retail and the remainder were industrial.

S&P’s noted the transaction’s strengths include the fact that 88% of the properties were subject to master leases, with multiple properties leased under a single contract, which could reduce the probability of default caused by any individual property’s performance weakness.

Among the weaknesses of the offering, S&P listed Fundamental Income’s short operating history and that the entire property pool is leased to either unrated or noninvestment-grade tenants.