Corner of Berkshire & Fairfax Message Board

General Category => Investment Ideas => Topic started by: menlo on October 18, 2011, 02:24:33 PM

Title: BAM - Brookfield Asset Management
Post by: menlo on October 18, 2011, 02:24:33 PM
I believe this one used to be followed on this board, but my search didn't turn up anything of note (recently - and my apologies if I missed something).  I'm curious if anyone owns it or has it on a watch list.

According to the various presentations at their website, it trades at a 20-30% discount to NAV.  IF Europe doesn't fall apart, and IF China has a soft landing (or no landing...), and IF the latest US PPI number shows some follow-through (up 0.8% in September), then their global hard/real asset approach might garner some interest going forward.  And now that I think about it, IF Europe falls apart, that might be an opportunity for them to pick up distressed assets.

Any thoughts are most welcome - I think the 3rd Avenue Fund group likes the company, and their quarterly reports might have additional detail, too.
Title: Re: Brookfield Asset Management
Post by: augustabound on October 18, 2011, 03:41:38 PM
IF Europe falls apart, that might be an opportunity for them to pick up distressed assets.

Any thoughts are most welcome - I think the 3rd Avenue Fund group likes the company, and their quarterly reports might have additional detail, too.

Yes, and yes.  They'll be buyers if things get cheap.
 
I'm currently going through all Third Avenue letters to find mention of BAM since they first bought Brascan around 2000.  So far, each letter just mentions how cheap Brascan/Bam is on an adjusted NAV basis.
Their Third Avenue real estate fund has held Brookfield Properties as long, if not longer than the value fund has held Bras/BAM.  But still, only mentions of trading at cheap relative to adjusted NAV. 

From what I can tell, and please someone correct me if I'm wrong, TA version of adjusted NAV is basically a tangible book value unless the footnotes show any hidden liabilities like leases etc.  Uncle Marty Whitman has said many times that inventories can be a long term fixed asset (as in retail) but that doesn't really apply to BAM. 
(That was another reason I've been going through every letter, including the other TA funds, was to find out their version of NAV. 
Title: Re: Brookfield Asset Management
Post by: beerbaron on October 18, 2011, 04:05:48 PM
There is some mention by Whitman about BAM in the following video collections.

http://www.bengrahaminvesting.ca/Resources/videos.htm

BeerBaron
Title: Re: Brookfield Asset Management
Post by: augustabound on October 18, 2011, 04:27:56 PM
There is some mention by Whitman about BAM in the following video collections.

http://www.bengrahaminvesting.ca/Resources/videos.htm

BeerBaron

I forgot about the resources there, thanks for the link.

Also forgot to mention, I started looking at BAM again after seeing a thread here about someones question about the future capital allocators and Bruce Flatt of BAM was suggested by a few people.
Title: Re: BAM - Brookfield Asset Management
Post by: dwy000 on October 18, 2011, 06:39:08 PM
You might want to check some of the Bruce Berkowitz discussions as well.  He holds a big position and has had some favorable things to say about them, especially with respect to their role in the GGP restructuring.
Title: Re: BAM - Brookfield Asset Management
Post by: mranski on October 19, 2011, 10:56:41 AM
This investor writes about BAM in his newsletters. I have found it quite useful, plus other commentary is good.

http://www.tiddcapital.com/

Title: Re: BAM - Brookfield Asset Management
Post by: augustabound on March 17, 2012, 03:35:49 AM
Finally, a catalyst for Brookfield? (http://www.theglobeandmail.com/globe-investor/investment-ideas/finally-a-catalyst-for-brookfield/article2370809/)
Title: Re: BAM - Brookfield Asset Management
Post by: thepupil on March 17, 2012, 06:22:20 AM
I own Brookfield Asset Management. I highly recommend reading their supplemental for 2011

 http://www.brookfield.com/content/financial_reports/supplemental_information-86.html

Also read their most recent shareholder letter. As the author of the above link points out BAM suffers from asset complexity but is making moves to change that by consolidating its holdings into flagship public entities, which hopefully will re-rate the stock.

The bull case for BAM is you are buying a "discounted" portfolio of best in breed infrastructure assets that provide some level of inflation protection and high IRR through non recourse single asset leverage.

I put discounted in quotations because in order to get comfortable with owning BAM you have to get comfortable with the prices currently being paid for trophy office real estate in the USA, Canada, and Australia. This is the biggest risk to BAM, in my opinion. Their internally calculated NAV (which is detailed quite nicely in the supplemental) is dependent upon cap rates in the 5-6% range.

As interest rates have declined and the desire for hard assets and yields has increased (REIT valuations are historically high, for example), much of BAM's earnings have been derived from revaluation of its portfolio at lower rates and higher prices, so buying BAM at 11X earnings includes a large component of "unrealized appreciation" in the earnings component.

I think Brookfield's management is top-notch, their asset quality is very high (ie World Financial Center), and they are conservatively capitalized at the corporate level, but the margin of safety in buying assets at a discount could disappear in a world in which capitalization rates rise to higher than historically low levels. Also they are heavily invested in commodity driven economies (Australia, Canada, Brazil) so you are also investing in the commodities supercycle/China/emergin markets story, which I think carries significant risks

All that being said, I think BAM is one of the more intelligent ways to invest in trophy real estate and infrastructure

I have been working on a valuation model but haven't gotten around to it because I work a lot and investing is my hobby... but here is a basic list of what BAM owns  :

Stakes in Publicly traded corps
Brookfield Office Properties
Brookfield Office Canada
General Growth Properties
Brookfield Renewable Energy
Brookfield Infrastructure Partners
Brookfield Residential Properties
Acadian Timber
Brookfield Real Estate Services

Other Assets
Corporate Cash
Canary Wharf Group 22% Interest
Brazilian Retail Properties (35% Owned Private Fund)


The 22% interest in Canary Wharf Group is a nice hidden asset.








Title: Re: BAM - Brookfield Asset Management
Post by: thepupil on March 17, 2012, 07:56:41 AM
also of use : http://www.brookfield.com/_Global/1/img/content/File/Investor%20Relations/2011%20Brookfield%20IR%20Day%20-%20Sept.27%20Final.pdf
Title: Re: BAM - Brookfield Asset Management
Post by: jeffmori7 on November 14, 2012, 09:08:19 AM
For those interested by Brookfield, here is a nice summary of their activities and their roadmap for the next ten years :

https://www.brookfield.com/_Global/42/img/content/File/Investor%20Relations/Presentations/2012/F_2012_BAM_IR_Day_October_11.pdf


And here is the latest letter to shreholders for the Q3, where Flatt speaks again about their position on GGP and the whole affair with Ackman :

http://www.brookfield.com/_Global/42/documents/relatedlinks/5140.pdf
Title: Re: BAM - Brookfield Asset Management
Post by: savant on November 14, 2012, 10:24:14 AM
WOuld anyone have access to Brookfield's historical annual reports / shareholder letters? ARs on the Brookfield website only go back to 2005.

Thanks
Title: Re: BAM - Brookfield Asset Management
Post by: augustabound on November 14, 2012, 04:45:24 PM
WOuld anyone have access to Brookfield's historical annual reports / shareholder letters? ARs on the Brookfield website only go back to 2005.

Thanks

Pre-2005 they were Brascan.
http://www.sedar.com/DisplayProfile.do?lang=EN&issuerType=03&issuerNo=00002413
They only seem to show 1997-2004.
Title: Re: BAM - Brookfield Asset Management
Post by: savant on November 14, 2012, 10:26:28 PM
WOuld anyone have access to Brookfield's historical annual reports / shareholder letters? ARs on the Brookfield website only go back to 2005.

Thanks

Pre-2005 they were Brascan.
http://www.sedar.com/DisplayProfile.do?lang=EN&issuerType=03&issuerNo=00002413
They only seem to show 1997-2004.
Thank you sir
Title: Re: BAM - Brookfield Asset Management
Post by: biaggio on December 21, 2012, 03:47:51 AM
http://www.canadianinsider.com/node/7?ticker=BAM

Bruce Flatt just bought almost 1.5 million shares.

Title: Re: BAM - Brookfield Asset Management
Post by: bargainman on December 21, 2012, 04:41:17 AM
looks like he bought them from Kerr, David Wylie:

"He has been a Director of Brookfield Asset Management Inc., (formerly Brascan Corp.) since May 1987. "

It's odd though.. why does that page show both a buy and a sell of 9,609,554 to/from Flatt?

Any idea?
Title: Re: BAM - Brookfield Asset Management
Post by: PlanMaestro on February 06, 2013, 10:15:50 AM
Brookfield Faces Bribery Charges in Brazil
http://online.wsj.com/article/SB10001424127887323807004578286104086711588.html?mod=WSJ_RealEstate_MiddleBuckets1
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on February 15, 2013, 05:16:47 AM
Q4 2012 and full year results are out.
Please, see files in attachment.

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on February 16, 2013, 06:56:12 AM
Find in attachment the full transcript of the Q4 2012 Conference Call.

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on February 22, 2013, 08:39:46 AM

Brookfield Renewable Succeeds in Bid for Western Wind

http://www.marketwire.com/printer_friendly?woid=855163&segid=6

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes
Title: Re: BAM - Brookfield Asset Management
Post by: Yours Truly on February 22, 2013, 10:31:23 AM
Anyone look into the upcoming spin-off consisting of BAM's commercial RE?
Title: Re: BAM - Brookfield Asset Management
Post by: premfan on February 22, 2013, 12:41:16 PM
I'm liking how BAM is getting fixed LTD. Its sort of like a hedge against inflation. I should investigate BAM some more.
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on February 26, 2013, 08:00:25 AM
A new article on Seeking Alpha about BAM:

http://seekingalpha.com/article/1224491-brookfield-a-wealth-creation-machine?source=email_rt_article_title

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on March 12, 2013, 01:12:42 AM
Two worrisome articles on BAM.

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes
Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on March 12, 2013, 08:53:46 AM
Two worrisome articles on BAM.

giofranchi

Gio, thanks for posting these.

Worrisome is a good word to use in my opinion as, while I am inclined to temper the tone of both articles, nevertheless they raise a flag or two.

Regarding the "Second Wave" article, without knowing the full facts (which we'll probably never know), it would appear that the author is venting frustration at the poor share price over the last year or so.  Brookfield may have been fully justified in calling off a sale of the asset based on a "good faith" assessment by management of its long-term worth.  That the share price is (greatly) lower today could simply be a combination of changed facts in the intervening period plus a depressed Mr. Market, or perhaps just a mistake!  I would add too that Brookfield's Private Equity Group has an excellent long term track record and is motivated to generate long-term value for its investors.  Now if Brookfield was trying to engineer it so that Second Wave will ultimately be forced into bankruptcy (allowing Brookfield to pick up the pieces on the cheap), well that's a different story.  If anyone has evidence of the latter I would be very interested to hear about it.

As for the "Paper World" article, the author has obviously done a lot of work and has highlighted some "worrisome" issues.  However, I think it's a pity that he decided to take such a definite negative line of argument throughout the article, because it just looks like he's got an axe to grind (company said considering legal action would do that to you I suppose).  Anyone who's studied the Brookfield / Brascan / Edper story will know it has a history of wanting control for limited capital (Jack Cockwell, current board member and the driving force behind the group from the 70s through to the early 2000s, was the brains behind this strategy).  So the accusation of a pyramidal control structure, is well, about 40 years old.

The focus on the lack of cash flow relative to net profit, particularly in the last 3 years, is just too myopic in my opinion.  Net profit / total return is simply the amount that flows through the P&L to the balance sheet / intrinsic value of the company.  In assets such as real estate / infrastructure etc., cash flows do not typically reflect an increase or decrease in value.  If Brookfield buys a distressed asset on a 10% yield and a year later it's yielding 5%, with no change in cash flows, does this indicate a paper world in a sinister sense?  In my view, the pertinent questions are: can the company fund its obligations (mainly interest as capex tends to be minimal), how predictable are its cash flows and obligations and for how much could the company sell its assets, given a reasonable amount of time to find buyers.  As a reminder, management believes both book value and its estimate of intrinsic value are understated versus what it could achieve in an orderly wind-down of the company.

The author does however raise some interesting points about BIP and BREP, the infrastructure and renewable energy businesses, which I admit I haven't looked at in as fine a detail as BAM.  For instance, the renegotiation of the two power purchase contracts with related parties.  And they are playing silly games by suggesting that Trevor Eyton is independent, because he most certainly is not!

Neither do I much like that Brookfield decided to go down the legal route with the author.  Without knowing the specifics of this case, Brookfield has a history of secrecy and are prone to aggression when questioned about their integrity.  From Peter Bronfman to Jack Cockwell and then to Bruce Flatt, everything that I've read about them would support the view that Brookfield's culture is one of hard work and high integrity, although there's no denying that for many years they've pushed the "maximum control, limited capital" strategy aggressively, which a lot of people may not ever be comfortable with.

Bottom line: do you trust management to "do the right thing"?  I do.

Thoughts?
Title: Re: BAM - Brookfield Asset Management
Post by: ShahKhezri on March 12, 2013, 09:30:21 AM
Paperworld is the reason why I never got comfortable with BAM.  It was way too difficult for me to put my arms around it and just say "look at the P/B, look at the jockey, get comfortable"

So many entities, complicated org structure, lots of financial engineering. 

I'm not saying it's a fraud, just very difficult to invest for me not knowing all the moving parts.  MKL has family connections though, so they got comfortable.
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on March 12, 2013, 10:05:47 AM
Two worrisome articles on BAM.

giofranchi

Gio, thanks for posting these.

Worrisome is a good word to use in my opinion as, while I am inclined to temper the tone of both articles, nevertheless they raise a flag or two.

Regarding the "Second Wave" article, without knowing the full facts (which we'll probably never know), it would appear that the author is venting frustration at the poor share price over the last year or so.  Brookfield may have been fully justified in calling off a sale of the asset based on a "good faith" assessment by management of its long-term worth.  That the share price is (greatly) lower today could simply be a combination of changed facts in the intervening period plus a depressed Mr. Market, or perhaps just a mistake!  I would add too that Brookfield's Private Equity Group has an excellent long term track record and is motivated to generate long-term value for its investors.  Now if Brookfield was trying to engineer it so that Second Wave will ultimately be forced into bankruptcy (allowing Brookfield to pick up the pieces on the cheap), well that's a different story.  If anyone has evidence of the latter I would be very interested to hear about it.

As for the "Paper World" article, the author has obviously done a lot of work and has highlighted some "worrisome" issues.  However, I think it's a pity that he decided to take such a definite negative line of argument throughout the article, because it just looks like he's got an axe to grind (company said considering legal action would do that to you I suppose).  Anyone who's studied the Brookfield / Brascan / Edper story will know it has a history of wanting control for limited capital (Jack Cockwell, current board member and the driving force behind the group from the 70s through to the early 2000s, was the brains behind this strategy).  So the accusation of a pyramidal control structure, is well, about 40 years old.

The focus on the lack of cash flow relative to net profit, particularly in the last 3 years, is just too myopic in my opinion.  Net profit / total return is simply the amount that flows through the P&L to the balance sheet / intrinsic value of the company.  In assets such as real estate / infrastructure etc., cash flows do not typically reflect an increase or decrease in value.  If Brookfield buys a distressed asset on a 10% yield and a year later it's yielding 5%, with no change in cash flows, does this indicate a paper world in a sinister sense?  In my view, the pertinent questions are: can the company fund its obligations (mainly interest as capex tends to be minimal), how predictable are its cash flows and obligations and for how much could the company sell its assets, given a reasonable amount of time to find buyers.  As a reminder, management believes both book value and its estimate of intrinsic value are understated versus what it could achieve in an orderly wind-down of the company.

The author does however raise some interesting points about BIP and BREP, the infrastructure and renewable energy businesses, which I admit I haven't looked at in as fine a detail as BAM.  For instance, the renegotiation of the two power purchase contracts with related parties.  And they are playing silly games by suggesting that Trevor Eyton is independent, because he most certainly is not!

Neither do I much like that Brookfield decided to go down the legal route with the author.  Without knowing the specifics of this case, Brookfield has a history of secrecy and are prone to aggression when questioned about their integrity.  From Peter Bronfman to Jack Cockwell and then to Bruce Flatt, everything that I've read about them would support the view that Brookfield's culture is one of hard work and high integrity, although there's no denying that for many years they've pushed the "maximum control, limited capital" strategy aggressively, which a lot of people may not ever be comfortable with.

Bottom line: do you trust management to "do the right thing"?  I do.

Thoughts?

WhoIsWarren,
I like your analysis very much (as always!! :) ) and I definitely agree with it.

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes
Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on March 12, 2013, 10:16:21 AM
Paperworld is the reason why I never got comfortable with BAM.  It was way too difficult for me to put my arms around it and just say "look at the P/B, look at the jockey, get comfortable"

So many entities, complicated org structure, lots of financial engineering. 

I'm not saying it's a fraud, just very difficult to invest for me not knowing all the moving parts.  MKL has family connections though, so they got comfortable.

Yep ShahKhezri, I get what you're saying.

However, I believe most investors suffer from an illusion that they understand more than they really do.  Most companies are highly complex and we just don't understand the minutiae of what makes the company really special or indeed those at risk.

For example, take Coke.  A great brand right?  But how much is the brand and how much is distribution and other factors that we can't quite put our finger on?  Neville Isdell headed up Coke's Philippines operations in the early 1980s.  At the time, Pepsi dominated the Philippines and looked to have an unassailable lead.  Within a couple of years Isdell had turned the situation on its head and it is certain that his success had a lot to do with figuring out Coke's distribution (which I think involved poaching a few of Pepsi's larger distributors).  A more current example is how Pepsi looks to have lost its dominant position in Thailand because its distributor Serm Suk has stopped distributing its products and has instead launched a new cola brand Est.  Of course, it remains to be seen how Est fares in the long run, but my point is that companies are generally complex and our "System 1" (from Daniel Khaneman) is prone to jumping to overly-simplified analysis.

Brookfield Asset Management is in-your-face complex, but in reality perhaps not any more so than your average company.  And given how much stock that management owns, I judge that this complexity is for my benefit as a shareholder alongside them.

This is more than you can say for most companies!
Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on March 12, 2013, 10:17:26 AM

WhoIsWarren,
I like your analysis very much (as always!! :) ) and I definitely agree with it.

giofranchi


Thanks Gio, kind words!
Title: Re: BAM - Brookfield Asset Management
Post by: Yours Truly on March 12, 2013, 10:50:59 AM
I'm patiently waiting on their upcoming commercial REIT spin-off :)
Title: Re: BAM - Brookfield Asset Management
Post by: blainehodder on March 12, 2013, 11:07:57 AM
Yes.  I am interested in examining the spinoff. Does anyone know any details on the spin? 
Title: Re: BAM - Brookfield Asset Management
Post by: menlo on March 12, 2013, 12:39:23 PM
Anyone know anything about Dialectic Capital?  Looks like they've been short BAM for at least a few months:

http://www.valuewalk.com/2012/11/dialectic-presents-the-confusing-case-of-brookfield-asset-management/ (ftp://www.valuewalk.com/2012/11/dialectic-presents-the-confusing-case-of-brookfield-asset-management/)
Title: Re: BAM - Brookfield Asset Management
Post by: thepupil on March 12, 2013, 04:58:03 PM
I hope this gets totally blown out of proportion so that BAM can fall to more attractive prices.

Brookfield's "paper" gains represent real value creation. They buy from distressed sellers, own excellent assets through cycles, and create "pure-play" funds with generous (for the holdco) GP/LP structures.  What is not to like?

Their asset values are supported by market valuations as well as armies of creditors who lend to their subsidiaries on both a single-asset and company level.

If you think trophy real estate, utilities, and the like are expensive because of the search for yield, that is fine. But the author is not seeing the forest through the trees, in my humble opinion.

The spin-off is coming soon (see below). This will create the premier publicly traded property company in the world and will be used as expensive currency to grow BAM's franchise.

 If a holder owns Brookfield Asset Management Class A limited voting shares or Class B limited voting shares as of the close of business on the record date of the special dividend, which is expected to be March 26, 2013, a certificate reflecting the holder’s ownership of our units will be mailed to the holder, or the holder’s brokerage account will be credited for our units, on or about April 15, 2013.

http://www.sec.gov/Archives/edgar/data/1545772/000119312513092088/d498243d20fr12ba.htm


Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on March 13, 2013, 12:03:50 AM
Paperworld is the reason why I never got comfortable with BAM.  It was way too difficult for me to put my arms around it and just say "look at the P/B, look at the jockey, get comfortable"

So many entities, complicated org structure, lots of financial engineering. 

I'm not saying it's a fraud, just very difficult to invest for me not knowing all the moving parts.  MKL has family connections though, so they got comfortable.

Yep ShahKhezri, I get what you're saying.

However, I believe most investors suffer from an illusion that they understand more than they really do.  Most companies are highly complex and we just don't understand the minutiae of what makes the company really special or indeed those at risk.

For example, take Coke.  A great brand right?  But how much is the brand and how much is distribution and other factors that we can't quite put our finger on?  Neville Isdell headed up Coke's Philippines operations in the early 1980s.  At the time, Pepsi dominated the Philippines and looked to have an unassailable lead.  Within a couple of years Isdell had turned the situation on its head and it is certain that his success had a lot to do with figuring out Coke's distribution (which I think involved poaching a few of Pepsi's larger distributors).  A more current example is how Pepsi looks to have lost its dominant position in Thailand because its distributor Serm Suk has stopped distributing its products and has instead launched a new cola brand Est.  Of course, it remains to be seen how Est fares in the long run, but my point is that companies are generally complex and our "System 1" (from Daniel Khaneman) is prone to jumping to overly-simplified analysis.

Brookfield Asset Management is in-your-face complex, but in reality perhaps not any more so than your average company.  And given how much stock that management owns, I judge that this complexity is for my benefit as a shareholder alongside them.

This is more than you can say for most companies!

I think the idea very well expressed by WhoIsWarren here is extremely important. And I couldn’t agree with him more! I think many business owners understand this, but among investors it is more easily overlooked. Imo, with the consequence of running unjustified risks. That’s why my circle of competence is still so much narrow and limited!

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes
Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on March 13, 2013, 01:02:55 AM
Anyone know anything about Dialectic Capital?  Looks like they've been short BAM for at least a few months:

http://www.valuewalk.com/2012/11/dialectic-presents-the-confusing-case-of-brookfield-asset-management/ (ftp://www.valuewalk.com/2012/11/dialectic-presents-the-confusing-case-of-brookfield-asset-management/)

Not much, but here's a bit of background on Dialectic Capital from Valuewalk (including a short synopsis on the BAM short).

http://www.valuewalk.com/2012/05/dialectic-capital-short-cast-hlf-bam-china-and-canadian-housing/

Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on March 13, 2013, 04:07:29 AM
Anyone know anything about Dialectic Capital?  Looks like they've been short BAM for at least a few months:

http://www.valuewalk.com/2012/11/dialectic-presents-the-confusing-case-of-brookfield-asset-management/ (ftp://www.valuewalk.com/2012/11/dialectic-presents-the-confusing-case-of-brookfield-asset-management/)

Not much, but here's a bit of background on Dialectic Capital from Valuewalk (including a short synopsis on the BAM short).

http://www.valuewalk.com/2012/05/dialectic-capital-short-cast-hlf-bam-china-and-canadian-housing/


Doh!! Sorry Menlo, just realising that you already posted the valuewalk link!!  That's what happens when you try doing things in a hurry.

According to Bloomberg, there were 3.4 million shares reported short, or 0.7% of total outstanding, as of end-Feb 2013.  That's double the short interest as of 15th Feb.  Still small, but worth watching.

Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on March 17, 2013, 03:47:08 AM
Is It Fair To Attack Brookfield

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on March 17, 2013, 04:13:43 AM
I would like to remember that from page 149 to page 153 of “There’s Always Something to Do – The Peter Cundill Investment Approach” Mr. Risso-Gill describes Mr. Cundill’s large investment in Brascan, the former Brookfield Asset Management.
It seems that in 2000 and 2001 Mr. Cundill had great confidence in Brascan management.
Of course, I cannot say if in the 10 years since then things have significantly changed for the worse…

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on March 18, 2013, 12:08:54 AM
WhoIsWarren,
what bothers me about BAM is that I do not understand why it takes so much time to answer SIRF… I mean, BAM should understand how difficult it really is to know the true market value of the great majority of their assets, right? The market values of an office tower in Texas, a railroad or a port in Australia, an highway in Brazil, or an hydroelectric power plant in Canada, are not simply quoted on a stock exchange, right? So, their market values, estimated and reported by BAM, cannot easily be checked. Com’n! I have a hell of an hard time estimating the market value of a flat in downtown Milan… because it depends on a lot of different variables (the quality of the building, the development of its neighborhood, etc.). BAM should know that, if there is one thing which could attract criticism, it is how they estimate and report the market value of their assets. Therefore, if some doubts are raised, BAM should hasten to quell them! So, why are they so slow in answering SIRF publicly?

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes
Title: Re: BAM - Brookfield Asset Management
Post by: berkshiremystery on March 18, 2013, 01:33:27 AM
Is It Fair To Attack Brookfield

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes



Gio,...

I hadn't the time to read all of the most recent posts about BAM in this thread, but only seeing in the second paragraph of your uploaded file the author name "Roddy Boyd" of this mysterious research study send all my common sense alarm signs on. All old board members might still remember, that this Roddy Boyd was one of the reporters in the short and distort smear campaign of criminal hedge funds against Fairfax years ago. It seems to me that Boyd and his friends just try to hunt for an easy victim, a company with a complicated structure, that is for outsiders difficult to understand. You should make at first some deep research into the persona Roddy Boyd himself and his old activities in the Fairfax campaign years ago before you make any conclusion about BAM. To me Boyd's integrity seems tarnished forever with the same behavior patterns that he had in his old Fairfax campaign. Maybe he seems to stage another "Project Fairfax", only this time it's called "Project BAM", and Boyd's  hedge fund friends might have already profited handsomely by driving the share price down.

You might search his name on this board...

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/deepcapture's-final-chapters-on-dendreon/msg8008/#msg8008

http://www.cornerofberkshireandfairfax.ca/forum/fairfax-financial/ffh-news-on-lawsuit/msg86436/#msg86436

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/another-overstock-hatchet-job/msg14675/#msg14675

http://www.cornerofberkshireandfairfax.ca/forum/fairfax-financial/the-miracle-on-wellington-street/msg78352/#msg78352


-----

Here I might add the links to Body's report about BAM

http://seekingalpha.com/article/1263461-the-paper-world-of-brookfield-asset-management?source=yahoo

http://sirf-online.org/2013/03/11/paper-world-of-brookfield-asset-management/

Title: Re: BAM - Brookfield Asset Management
Post by: Christopher1 on March 18, 2013, 03:10:47 AM
Attached the detailed answer to Mr. Boyd by BAM.
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on March 18, 2013, 03:32:01 AM
Thank you berkshiremystery and Christopher1! You both have been very useful to me and to all BAM shareholders on the board!
Very much appreciated!  :)

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes
Title: Re: BAM - Brookfield Asset Management
Post by: Sportgamma on March 18, 2013, 03:59:24 AM
Quote
Should you require any further information, we would be pleased to put you in touch with an accounting professional that is knowledgeable in equity accounting matters.

haha
Title: Re: BAM - Brookfield Asset Management
Post by: berkshiremystery on March 18, 2013, 04:02:23 AM
Quote
Should you require any further information, we would be pleased to put you in touch with an accounting professional that is knowledgeable in equity accounting matters.

haha

1+

LMAO,... you made my day...
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on March 19, 2013, 08:32:50 AM
Attached the detailed answer to Mr. Boyd by BAM.

As it should be very clear reading their answer to question n.4, one must completely trust management in their assessment of the market value of many assets owned by BAM.
And I was getting a bit nervous, when it seemed they were putting back a very important, at least imo, answer to Mr. Boyd…
Now that I have read their answer, I know they have done the right thing, and I am much more comfortable.  :)

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes
Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on March 19, 2013, 08:54:46 AM
WhoIsWarren,
what bothers me about BAM is that I do not understand why it takes so much time to answer SIRF… I mean, BAM should understand how difficult it really is to know the true market value of the great majority of their assets, right? The market values of an office tower in Texas, a railroad or a port in Australia, an highway in Brazil, or an hydroelectric power plant in Canada, are not simply quoted on a stock exchange, right? So, their market values, estimated and reported by BAM, cannot easily be checked. Com’n! I have a hell of an hard time estimating the market value of a flat in downtown Milan… because it depends on a lot of different variables (the quality of the building, the development of its neighborhood, etc.). BAM should know that, if there is one thing which could attract criticism, it is how they estimate and report the market value of their assets. Therefore, if some doubts are raised, BAM should hasten to quell them! So, why are they so slow in answering SIRF publicly?

giofranchi

Hi giofranchi, apologies for delay in responding (St. Padrick's day here yesterday so I was off work!).

Well I guess berkshiremystery and christopher1 have suggested one good reason why BAM have been slow to respond to SIRF  ;D ;D  Thanks for highlighting this, really appreciated!

I also hadn't previously seen the Brookfield response to SIRF (I printed the article and missed the hyperlink).  The answers are comprehensive in my opinion, fully explaining any and all Boyd's concerns.  In fact, having received that response, Boyd should have at that point realised he didn't have a (negative) article anymore!

Anyway gio you're right -- of course it's got to be pretty difficult to estimate market values for their assets! Brookfield shouldn't be shy about admitting so -- and to be fair I don't think they are really.  Fair value is generally calculated by taking 10-20 years of expected future cash flows, thereafter applying a terminal cap rate, and discounting everything back.  They can project cash flows out 10-20 years with reasonable certainty because of the long-term, high-quality nature of their tenants / contracts, but then......what discount rates, what terminal cap rates?

Not only that, but their auditors are the ones that determine the fair value of their assets, with the help of outside valuers of course.  But the outside valuers will certainly not know the assets as well as management.  And auditors (should) always go for the most conservative estimate.  This is why the 2011 shareholder letter stated "we estimate that the underlying value of the assets of our business is conservatively valued...."

But even at that, chances are that Brookfield management don't know the 'value' of each of their assets to within plus or minus 10% or more, because it depends on the number of potential buyers and the general availability of credit.  And we shouldn't forget that Brookfield is roughly 2x leveraged......







Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on March 19, 2013, 08:57:00 AM
While we're on the subject of valuation, anyone have any thoughts about how Brookfield values their asset management business ($4.8bn, or 17% of intrinsic value at year end 2012)? 

Just for a bit of background, management fully recognises that this number is finger in the air stuff, that they're just putting a number down in order to highlight the issue to analysts.  In fact they've more than hinted that they believe a more realistic valuation of the AM business would be much higher.

The basic assumptions underlying their valuation are that capital under management grows at 10% a year for 10 years and that the gross margin increases to 150bps without a commensurate increase in expenses.  It then capitalises the resultant earnings ten years out, applies a 15x multiple and discounts the cash flows and terminal value at 15%.

How reasonable is this?  It would appear that management believes there is still a lot of runway ahead of them, speculating that “real assets” is becoming a significant asset class in its own right for pension and investment funds.  While I’m sure Brookfield gets a lot of feedback from clients / potential clients, that’s really just a guess on their part.  If they cannot entice new equity and debt investors to put money into its four platforms, Brookfield will not likely grow at 10% a year for 10 years.

I’ve tried to backing out the underlying performance / performance fee assumptions of management’s appraisal value.  Using the 10% growth for 10 years assumption, I calculate an implied gross fund performance of around 12.5% (hurdle rate of 10%) and a net performance fee of 0.4% (after direct expenses of c.15%, which is roughly what they accrue for bonuses).  That doesn’t sound totally outrageous, certainly not in the context of their historic numbers.

In calculating a ‘base case’ value for the asset management business, I have to take into account the stickiness of their client base.  Using 2011 numbers (I haven't got around to updating for 2012), of the $40bn of 3rd party fee-bearing AuM, $10bn was from the listed issuers – perpetual clients!  Also, don’t forget that BPY is being spun out and over time will be sold down (that’s $11bn net asset value – and growing – of perpetual money). The remaining $30bn is from funds with around 8 years or so of committed capital.  Even if they end up generating mediocre returns over the next 5 or 10 years I would speculate that they’ll nevertheless mange to grow their asset base on the back of their excellent track record to date.  Putting that all into the mix – assuming no performance fee, 3% annual growth for 10 years and discounted at 15% (as before) yields a valuation of $1bn, or about $1.5 a share.  Chunky, but no death nail.

The 'bull case' is simply that they gather more AuM, at higher margins. I haven't spent any time on this scenario.

Anyone anything else to add?
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on March 19, 2013, 09:16:06 AM
Anyone anything else to add?

Nope! It seems you always have the “bad” habit of writing everything, so that there’s nothing left to say!!  ;D ;D

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes
Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on March 19, 2013, 09:55:51 AM
 :)

Yeah, I probably do have a tendency to rabbit on......
Title: Re: BAM - Brookfield Asset Management
Post by: mankap on March 19, 2013, 10:17:13 AM
I do not know if you have looked at BIP, a sub of BAM.
I bought it two years ago.It has steady and growing cashflow and has been increasing dividend.
The company's stated goal is to increase dividend by 7% every year, they have been increasing dividend by 15% every year.
Many of their project will go live soon and cashflow will start flowing in soon.
Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on March 19, 2013, 01:01:40 PM
I do not know if you have looked at BIP, a sub of BAM.
I bought it two years ago.It has steady and growing cashflow and has been increasing dividend.
The company's stated goal is to increase dividend by 7% every year, they have been increasing dividend by 15% every year.
Many of their project will go live soon and cashflow will start flowing in soon.

I haven't given BIP (or BREP, the renewable energy entity) a thorough going over, because their partnership structures causes me too much of a tax headache (same story for OAK unfortunately), though I quickly read their 10-Ks as part of my BAM research.

However, quite apart from the tax issue, I think I would be more comfortable holding BAM than the listed funds.  I haven't really figured out for whom the incentivisation structures on the partnerships is advantageous, but I strongly suspect BAM holds the better cards.  I prefer to align myself alongside the insiders!

As a reminder to those less familiar with the incentivisation structures, BAM gets paid 1.25% of BIP/BREP's EV (market cap plus non-recourse debt).  In addition, it receives 15-25% of distributions above pre-determined hurdle rates.

All said and done however, I'm sure all of the listed funds will do just fine over the long term.  And for investors who need income (without tax issues!), BIP, BREP and BPY (the upcoming global property entity) are probably an excellent choice.
Title: Re: BAM - Brookfield Asset Management
Post by: augustabound on March 20, 2013, 02:22:15 AM
Brookfield investing in Mexico with partner Ross Perrot.  (http://online.wsj.com/article/SB10001424127887323639604578370711565652952.html?mod=ITP_moneyandinvesting_0)

Quote
The price paid by Brookfield and its partner, Ross Perot Jr.'s Hillwood Development Co., to buy the company: $13.85 a share.

Or Google, "Canada Firm Places Bet on Mexico Border" to bypass the wsj paywall.
Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on March 21, 2013, 09:22:25 AM
Bronte Capital weighing in behind the report by our friend Roddy Boyd.

http://www.brontecapital.blogspot.ie/2013/03/promising-yield-roddy-boyd-on.html

He compares Brookfield to the Babcock & Brown and Macquarie infrastructure funds, both of which blew up or almost blew up in the crisis.  He also throws in a mention or two of Bernie Madoff for good measure.

I haven't looked closely at the reason why B&B went bust, but I suspect they were highly leveraged and short term funded.  Anyone have any experience with it?

For reference, BAM is roughly twice geared, has locked in funding about 5 years out.

Title: Re: BAM - Brookfield Asset Management
Post by: Kiltacular on March 21, 2013, 08:59:15 PM
BAM made it through the crisis not only swimmingly but awesomely.

I don't own if (now) but have in the past.

Big respect for Bruce Flatt.  Hell, insiders own 20% of this company and it is run for the benefit of shareholders.

In another thread we were discussing what you might want to own in inflation.  Assuming Flatt is still there and insiders continue to have such a large ownership percentage, BAM is well positioned to handle an inflationary period for the reasons discussed in that thread.

Come on shorts, drive this thing down...beep, beep, beep.
Title: Re: BAM - Brookfield Asset Management
Post by: Myth465 on March 21, 2013, 09:37:32 PM
To be honest that was a good short article and highlights why I dont feel comfortable with BAM.
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on March 22, 2013, 12:09:53 AM
To be honest that was a good short article and highlights why I dont feel comfortable with BAM.

Myth465,
what about BAM answers to Mr. Boyd’s questions? I thought they were timely and clear enough. Do you have a different view?

Thank you,

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on March 28, 2013, 02:34:41 AM
Valuation Model For Brookfield Asset Management

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes
Title: Re: BAM - Brookfield Asset Management
Post by: thepupil on March 28, 2013, 03:40:32 AM
Please see my comment on the article. Mr Grossi does not deduct liabilities, double counts the property interests and overstates the GGP stake's value by about 100%. As a shareholder, I wish his estimate of NAV was correct, but it is not.
Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on March 28, 2013, 07:39:08 AM
Please see my comment on the article. Mr Grossi does not deduct liabilities, double counts the property interests and overstates the GGP stake's value by about 100%. As a shareholder, I wish his estimate of NAV was correct, but it is not.

Hi the pupil,

Would you mind posting up your reply in here....for those who don't have a seeking alpha login.

Cheers
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on March 28, 2013, 07:59:04 AM
Please see my comment on the article. Mr Grossi does not deduct liabilities, double counts the property interests and overstates the GGP stake's value by about 100%. As a shareholder, I wish his estimate of NAV was correct, but it is not.

Well, that’s exactly why we require a margin of safety! Because our calculation of NAV could be wrong! To sell below NAV means to be worthy more dead than alive… To sell 42% below NAV means to be 42% worthier dead than alive… It would be a HUGE margin of safety for a company that can boast a compounded annual return of 19% for the last 20 years… Even considering those valuation errors you have mentioned, I guess we are left with a good bargain anyway!  :)

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence.” - John Maynard Keynes
Title: Re: BAM - Brookfield Asset Management
Post by: thepupil on March 28, 2013, 09:35:08 AM
Below is my reply on SA. Grossi's work is sloppy.  I have my own calc of NAV that I'll send later after some tweaking. Calcing BAM's NAV is not easy.

What about corporate level preffered, debt and other liabilities? This is about $7B+ you don't appear to be deducting. I own BAM and think its worth more than it is trading for, but not accounting for those liabilities is too aggressive.

Also, aren't you double counting their property interests? BPY holds BAM's interest in BPO, GGP, RSE etc. So you can't count both.

Also BAM has a ~20% interest in GGP, that is worth 3.8B. I think you are including the portion BAM controls thropugh a fund but does not own.
Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on March 28, 2013, 01:30:11 PM
Below is my reply on SA. Grossi's work is sloppy.  I have my own calc of NAV that I'll send later after some tweaking. Calcing BAM's NAV is not easy.

What about corporate level preffered, debt and other liabilities? This is about $7B+ you don't appear to be deducting. I own BAM and think its worth more than it is trading for, but not accounting for those liabilities is too aggressive.

Also, aren't you double counting their property interests? BPY holds BAM's interest in BPO, GGP, RSE etc. So you can't count both.

Also BAM has a ~20% interest in GGP, that is worth 3.8B. I think you are including the portion BAM controls thropugh a fund but does not own.

the pupil, thanks for posting that and I look forward to your NAV sheet.  Grossi's work very sloppy for sure, but if you're not careful with BAM the best of us can make mistakes with NAV adjustments due to the group's complexity.

Also, do you know where his valuation of the asset management business comes from?  He references "two-year average fee generation of about $410 million", but I can't reconcile this.  Besides, deciding on exactly which figure you use is a bit of a minefield -- should you include performance fees and capitalise these at 10x??  What about the advisory services and (net) construction service fees -- I'm not even sure these are included in management's own intrinsic value calculation. Anyone know?

Thanks
Title: Re: BAM - Brookfield Asset Management
Post by: thepupil on March 28, 2013, 05:18:27 PM
After calling someone else's work sloppy I am posting an incomplete spreadsheet that is a little sloppy itself. I apologize but I hope this helps everyone get a better handle on BAM. I am sure some fellow shareholders can help fill in some gaps.

So on the right side of the sheet you will see BAM's calculation of intrinsic value* using their calculation for the IV of their assets and liabilities. On the left side you will see where I substitute publicly traded components for each of BAM's categories or as they like to call them "Operating Platforms".

According to BAM's estimates, they have ~$36B of assets and ~$7B of liabilities and common equity over $28B. When I substitute publicly traded components for BAM's divisions, I get common equity of $22B. I've tried to put in explanations of the various gaps and inconsistencies but I need the annual report and a little more time to finish it all.

*I don't know why but I can't replicate the value per share exactly even though I do have the exact same common equity. I am using 658MM common shares, as do most of BAM's Q4 info so this is a bit confusing. I get $43.54. BAM gets $44.93
Title: Re: BAM - Brookfield Asset Management
Post by: Hielko on March 28, 2013, 05:38:26 PM
Check page 11 in this document: http://www.brookfield.com/_Global/42/img/content/File/Investor%20Relations/Supplemental%20Information/2012/Supplemental%20Information%202012_F1.pdf

Shows how they calculated the $44.93 number
Title: Re: BAM - Brookfield Asset Management
Post by: thepupil on March 28, 2013, 05:44:47 PM
yep, that's what I was using but 28,649/658 = 43.54 so either they are using a different (lower) share count or something is off. That's why I'm confused by that.

I think a lot of the difference is in the property division. Hopefully BPY will unlock the value that BAM has in its non GGP, non BPO holdings such as 22% of Canary Wharf (a huge office development in London), 35% of Brazil Retail Fund (one of the bigger owners of nice shopping malls in Brazil) etc.


Title: Re: BAM - Brookfield Asset Management
Post by: Hielko on March 28, 2013, 06:28:17 PM
The probably used average shares outstanding during the period?
Title: Re: BAM - Brookfield Asset Management
Post by: peterism on March 29, 2013, 02:07:54 AM
Shares outstanding at 31.12.2012 - 619,6
Unexercised options - 38,4
Total diluted shares at end of year - 658
Title: Re: BAM - Brookfield Asset Management
Post by: mranski on March 30, 2013, 09:34:09 AM
Appx 7% of total shares as outstanding options?
If that is correct, the share options seem a bit excessive for my liking.
I like to see it under 5% for large caps, closer to 1 or 2 is good.

Title: Re: BAM - Brookfield Asset Management
Post by: Yours Truly on April 11, 2013, 01:47:32 PM
Has anyone read the BPY spin-off 20F/A on it's site?
http://www.brookfield.com/content/investor_presentations/brookfield_property_partners-33952.html

Currently only on 50 pages of 350 pages.. anyone know how they come out with the value of $25 per share which targets a 4% yield ($1 a year)..

The price on TSE: BPY.UN is currently $22.50 and NYSE:BPY is $22

I still have time until the spin-off occurs on Monday to decide

But judging by past past BAM spin-offs such as Infrastructure and Pipeline, this should be a winner as well especially given that BAM will still control 92% of the voting rights and diversification of its Commercial RE properties
Title: Re: BAM - Brookfield Asset Management
Post by: Yours Truly on April 12, 2013, 08:21:45 AM
OK, $25.00 represents the BV as of Dec. 31, 2012

Here's a great presentation from the folks at BAM regarding the new BPY spin-off
http://www.brookfield.com/_Global/42/img/content/File/Investor%20Relations/Presentations/2013/F_BPY_Corporate_Profile_April_9_2013.pdf

It shows a nice highlight of their successful track record on their corporate spin-offs
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on April 19, 2013, 05:38:43 AM
Quote
8:32 AM Brookfield Asset Management (BAM) receives regulatory approval to proceed with a plan to purchase more than 53M shares - about 10% of the public float. The maximum daily purchase allowed in Toronto will be about 195K shares, representing 25% of the average daily volume. The company bought more than 2M shares on the NYSE over the last year.

giofranchi

“As time goes on I get more and more convinced that the right method in investment is to put fairly large sums into enterprises which one thinks one knows something about and in the management of which one thoroughly believes. It is a mistake to think that one limits one’s risk by spreading too much between enterprises about which one knows little and has no reason for special confidence. One’s knowledge and experience is definitely limited and there are seldom more than two or three enterprises at any given time which I personally feel myself entitled to put full confidence.” - John Maynard Keynes
Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on April 19, 2013, 08:32:27 AM
Quote
8:32 AM Brookfield Asset Management (BAM) receives regulatory approval to proceed with a plan to purchase more than 53M shares - about 10% of the public float. The maximum daily purchase allowed in Toronto will be about 195K shares, representing 25% of the average daily volume. The company bought more than 2M shares on the NYSE over the last year.

giofranchi

giofranchi, this isn't really "news".

Here are some snippets from the Q4:12 earnings call (mid-Feb 2013):

Brian Lawson (CFO):
"The board also approved a normal course issuer bid that permits us to repurchase approximately 55 million shares and
Bruce will speak further on this in his remarks."

Today's "news" is that they have received regulatory approval from the Toronto Stock Exchange.

Other snippets from the earnings call were the following:

Bruce Flatt:
"In addition, as a result of this cash generation, we will also likely use portions of it to repurchase common shares in the
company. Brian just mentioned the renewal of our common share issuer bid which often we authorize, but don't use.
But depending on price and other opportunities, we may use a large portion of this 50 million plus share issuer bid over
the next year to repurchase common shares with this excess cash."

And in answer to a question:
"I guess, Michael, these are all capital allocation decisions and to answer this question, one that was asked earlier, our business is about capital allocation at the most senior corporate level and all we do is decide whether we should take money out of one thing and put it into another. There is no doubt our shares are we believe are a good investment compared to other things, some other things today. And as we harvest cash, one of the places we'll look to – is to pull in stock. I don't think we should specifically say whether we're going to be in the market buying at these levels are not, but it's very possible over the next year that as I said in my notes, that we'll use a portion or a significant portion of our allotments."

So I would be surprised if there wasn't a meaningful number of shares bought back over the next year.  But, as I say, this isn't "news".

Hope this helps.

P.S. Gio, were you at the Fairfax AGM?  I was there and was keeping an eye out for you to have a chat......alas!  So many people, so little time.....

Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on April 19, 2013, 09:49:24 AM
Quote
8:32 AM Brookfield Asset Management (BAM) receives regulatory approval to proceed with a plan to purchase more than 53M shares - about 10% of the public float. The maximum daily purchase allowed in Toronto will be about 195K shares, representing 25% of the average daily volume. The company bought more than 2M shares on the NYSE over the last year.

giofranchi

giofranchi, this isn't really "news".

Here are some snippets from the Q4:12 earnings call (mid-Feb 2013):

Brian Lawson (CFO):
"The board also approved a normal course issuer bid that permits us to repurchase approximately 55 million shares and
Bruce will speak further on this in his remarks."

Today's "news" is that they have received regulatory approval from the Toronto Stock Exchange.

Other snippets from the earnings call were the following:

Bruce Flatt:
"In addition, as a result of this cash generation, we will also likely use portions of it to repurchase common shares in the
company. Brian just mentioned the renewable of our common share issuer bid which often we authorize, but don't use.
But depending on price and other opportunities, we may use a large portion of this 50 million plus share issuer bid over
the next year to repurchase common shares with this excess cash."

And in answer to a question:
"I guess, Michael, these are all capital allocation decisions and to answer this question, one that was asked earlier, our business is about capital allocation at the most senior corporate level and all we do is decide whether we should take money out of one thing and put it into another. There is no doubt our shares are we believe are a good investment compared to other things, some other things today. And as we harvest cash, one of the places we'll look to – is to pull in stock. I don't think we should specifically say whether we're going to be in the market buying at these levels are not, but it's very possible over the next year that as I said in my notes, that we'll use a portion or a significant portion of our allotments."

So I would be surprised if there wasn't a meaningful number of shares bought back over the next year.  But, as I say, this isn't "news".

Hope this helps.

P.S. Gio, were you at the Fairfax AGM?  I was there and was keeping an eye out for you to have a chat......alas!  So many people, so little time.....

Hi WhoIsWarren,
I never have the ambition to give you “news”… you are always one step ahead!!  ;D ;D
I haven’t read the conference call transcript yet (I think it is stacked under a thick pile of other documents… I am always late!!), and I didn’t know Mr. Flatt had talked about “50 million plus” shares buyback!
I think it is an important number, that speaks loud about what management thinks IV really is.
Thank you!

No, unfortunately I could not be there… I would have liked it very much, just to meet you and other very thoughtful investors I have come to know on this board… I will surely arrange things so that I get the chance next year!!  :)

Gio
Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on April 20, 2013, 11:47:08 AM
Hi WhoIsWarren,
I never have the ambition to give you “news”… you are always one step ahead!!  ;D ;D
Eh....flattery will get you everywhere, but I don't think so! In fact, when you originally posted the buyback "news" I got quite excited and thought the share price would react positively.  When this didn't happen, I thought some more and remembered the conference call share buyback discussion!

No, unfortunately I could not be there… I would have liked it very much, just to meet you and other very thoughtful investors I have come to know on this board… I will surely arrange things so that I get the chance next year!!  :)

Yes maybe next year -- I look forward to it already  :D

In the meantime, keep your posts coming.  You've got to be one of the most prolific contributors to the board!  From what I remember, you only joined the group a few months before me but have....emmm....well....made just a few more posts than me  :o :o
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on May 09, 2013, 08:13:20 AM
Q1 2013 Letter to shareholders

giofranchi
Title: Re: BAM - Brookfield Asset Management
Post by: nnayyar on May 09, 2013, 08:36:51 AM
Any thoughts on BPY spinoff? trading ~23, stated BV was $25 and projecting 4% yield. Previous poster had link to investor presentation with much higher (though mgmt projected!) value...
Title: Re: BAM - Brookfield Asset Management
Post by: nnayyar on May 20, 2013, 06:35:31 PM
Good writeup on BPY here:

http://www.valuebygeorge.com/2013/04/17/brookfield-property-partners-bpy/

Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on May 21, 2013, 04:51:23 AM
Good writeup on BPY here:

http://www.valuebygeorge.com/2013/04/17/brookfield-property-partners-bpy/

I agree. And I also like the blog! :) Here is a good summing up on BAM Q1 2013 results:

http://www.valuebygeorge.com/2013/05/10/brookfield-asset-management-bam-1q13-results-ffo-up-34-more-to-come/

giofranchi
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on May 26, 2013, 05:54:23 AM
http://www.valuebygeorge.com/2013/05/23/brookfield-asset-management-bam-investment-thesis-part-ii

giofranchi
Title: Re: BAM - Brookfield Asset Management
Post by: nnayyar on May 30, 2013, 09:23:34 AM
There's an obvious rotation out of yield, partially led IMO by Japan. This article in particular highlights the risk from Japanese investors in US REITS:

    http://online.wsj.com/article/SB10001424127887324010704578419041839826094.html


Below is an argument on the sensitivity of REIT's to Interest Rates, it seems sometimes it matters and sometimes it doesn't"
http://t.co/YVMLoEADE6

I was just wondering if anyone had some thoughts if there is a real shift in business fundamentals or simply a re-allocation / de-leveraging going on? Tks!

Title: Re: BAM - Brookfield Asset Management
Post by: indythinker85 on June 04, 2013, 05:41:40 AM
Same hedge fund now targeting BPY calling it a Ponzi Scheme. They dont have the greatest track record, but then again few short funds have decent performance this year http://www.valuewalk.com/2013/05/dialectic-brookfield-a-ponzi-scheme/
Title: Re: BAM - Brookfield Asset Management
Post by: nnayyar on June 04, 2013, 07:51:12 AM
Tks for the link. Definitely sounds like they have an axe to grind. I went searching through their prospectus and finally found the reference to cash shortfall:

In particular, our
proposed distribution amounts are significantly greater than our
projected cash flow from operations based on dividend policies
currently in place at our operating entities and our projected
operating cash flow from our direct investments. Despite our
intention to use the proceeds of sales of certain of our direct
investments or borrowings to fund any shortfall in distributions, we
may not be able to do so on a consistent and sustainable basis.

Pg 13 of Prospectus:
http://www.brookfield.com/_Global/42/img/content/File/Investor%20Relations/Presentations/2013/BPY_Prospectus_E_March_15_2013.pdf

It sounds to me like they planned on using asset sales to cover some of the distribution? Is this normal?
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on June 04, 2013, 08:05:56 AM
Tks for the link. Definitely sounds like they have an axe to grind. I went searching through their prospectus and finally found the reference to cash shortfall:

In particular, our
proposed distribution amounts are significantly greater than our
projected cash flow from operations based on dividend policies
currently in place at our operating entities and our projected
operating cash flow from our direct investments. Despite our
intention to use the proceeds of sales of certain of our direct
investments or borrowings to fund any shortfall in distributions, we
may not be able to do so on a consistent and sustainable basis.

Pg 13 of Prospectus:
http://www.brookfield.com/_Global/42/img/content/File/Investor%20Relations/Presentations/2013/BPY_Prospectus_E_March_15_2013.pdf

It sounds to me like they planned on using asset sales to cover some of the distribution? Is this normal?

Well, one way BAM creates value for its shareholders follows:
Quote
As an investor and capital allocator, we strive to invest at attractive valuations, particularly in distressed situations that create opportunities for superior valuation gains and cash flow returns, or by monetizing assets at appropriate times to realize value;
In other words, they certainly strive to buy low, but also have no problem to sell, once valuations have recovered and the assets they own are no longer cheap.
Then, why not to distribute the proceeds? Of course, it is not a predictable source of cash, and that’s why they warned against the fact they
Quote
may not be able to do so on a consistent and sustainable basis.
But, when the cash is actually there, why not to use it?

giofranchi
Title: Re: BAM - Brookfield Asset Management
Post by: nnayyar on June 04, 2013, 12:37:57 PM
Gio,

You are a large holder of BAM it seems? What are your thoughts/feelings on the move in Interest Rates and the effect on BAM, BPY? Feels very much like de-leveraging but more and more articles popping up on the 'expensiveness' of the group. Appreciate it!

Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on June 04, 2013, 01:46:58 PM

In other words, they certainly strive to buy low, but also have no problem to sell, once valuations have recovered and the assets they own are no longer cheap.

giofranchi

gio, you're right.

However, as they sell assets they'll have to pay capital gains taxes.  The company's own calculation of intrinsic value excludes net deferred income taxes (adjusted for non-controlling interests).  I can't find this number for 2012 but the 2011 number was $3.4 per share.

It's not a deal breaker, but I've always adjusted downwards this source of intrinsic value.
Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on June 04, 2013, 02:14:14 PM
Gio,

You are a large holder of BAM it seems? What are your thoughts/feelings on the move in Interest Rates and the effect on BAM, BPY? Feels very much like de-leveraging but more and more articles popping up on the 'expensiveness' of the group. Appreciate it!

I'm not Gio, but here's my tuppence worth!

The company has spoken about rising interest rates on numerous occasions.  In essence, they say they're not buying assets on current yields and that their IFRS valuations are marked at discount rates a couple of percent higher.  In other words as rates rise, the first 200bps or so won't affect their IFRS valuations.

Then management goes on to say that they own real assets and as such rents / cash flows will eventually adjust to the higher yield environment, albeit with a lag.  So rising rates shouldn't affect the underlying intrinsic value, though of course the IFRS values will likely be hit.

This is a nice story and it's probably the most likely scenario.  However stagflation would present a pretty tough environment for BAM -- try increasing rents when the economy is shrinking.  And remember the company is twice geared.

The last thing to say is that no matter what the reality, the market will probably 'shoot first and ask questions later' as rates rise.  I don't think the stock is 'expensive' currently and I personally don't think that the underlying intrinsic value of the company will be significantly impaired by rising interest rates.  However, I'm hopeful that such an environment could present a nice opportunity for patient investors armed with good knowledge of the company.

Disclosure: long BAM
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on June 04, 2013, 11:52:51 PM
Well, here is one of the reason I love this board: by now I have come to the conclusion that, whenever I want to know something about an investment of mine, there is at least one person I know I must turn to: if I want to know something about Lancashire, twacowfca is undoubtedly the man! If I want to know something about Liberty Media, I always ask dcollon! (Also ItsAValueTrap has done great work on LMCA!). And as far as Brookfield Asset Management is concerned, whenever I want to know something about it, WhoIsWarren is the one I turn to! :)

And now I agree with him both on capital gains taxes and on rising interest rates.

Just a few words about those articles ‘popping up’: I have read all of them, and I have found them unfounded and unconvincing. I think I understand what BAM is doing, and has been doing for decades with great success! Culture hasn’t changed, goals haven’t changed, competitive advantages haven’t changed. Until something really changes for the worst, I see no reason to part ways with BAM, just because some articles have been published by short sellers.

giofranchi
Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on June 05, 2013, 01:30:23 AM
Well, here is one of the reason I love this board: by now I have come to the conclusion that, whenever I want to know something about an investment of mine, there is at least one person I know I must turn to: if I want to know something about Lancashire, twacowfca is undoubtedly the man! If I want to know something about Liberty Media, I always ask dcollon! (Also ItsAValueTrap has done great work on LMCA!). And as far as Brookfield Asset Management is concerned, whenever I want to know something about it, WhoIsWarren is the one I turn to! :)


Oh I think you're doing yourself a disservice Gio!  And don't be so sure I'm I'm your guy here.  'Course, I'll chip in where I can, but I am sure others on this board would put me to shame with their knowledge.
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on June 05, 2013, 03:43:08 AM
Well, here is one of the reason I love this board: by now I have come to the conclusion that, whenever I want to know something about an investment of mine, there is at least one person I know I must turn to: if I want to know something about Lancashire, twacowfca is undoubtedly the man! If I want to know something about Liberty Media, I always ask dcollon! (Also ItsAValueTrap has done great work on LMCA!). And as far as Brookfield Asset Management is concerned, whenever I want to know something about it, WhoIsWarren is the one I turn to! :)


Oh I think you're doing yourself a disservice Gio!  And don't be so sure I'm I'm your guy here.  'Course, I'll chip in where I can, but I am sure others on this board would put me to shame with their knowledge.

Always too humble! :)

Cheers!

Gio
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on June 06, 2013, 12:07:31 AM
Brookfield - Real Assets Real Returns

giofranchi
Title: Re: BAM - Brookfield Asset Management
Post by: nnayyar on June 10, 2013, 12:16:07 PM
Some insider purchasing of BPY. I find it interesting that BAM is a buyer of 750k since the idea was to reduce their holdings, perhaps a little of the value approach at work?

http://canadianinsider.com/node/7?ticker=BPY

Title: Re: BAM - Brookfield Asset Management
Post by: thepupil on June 10, 2013, 12:43:07 PM
In my opinion, the idea was not to reduce their holdings. BPY was formed as the third leg of the tripod of "flagship listed entities" that BAM manages in their three main areas: Property (BPY), Renewable Power (BRP) and Infrastructure (BIP).

BPY was not very tax efficient in terms of distributing value (one reason why the size of the spinoff was a small percentage of BPY's value ~7.5%) and is much more of a "strategic" move that will (hopefully) be a source of low-cost permanent capital for expanding BAM's crown jewel: the asset management business.

It gives Bruce Flatt and co another currency that can be bought when cheap and issued to fund expansion when dear. I would expect BPY to make a BIG acquisition in the multifamily or industrial space to complete the empire (Retail-GGP, Office-BPO, Multifamily-???). Newly issued BPY units will probably be a very important part of that acquisition.

Title: Re: BAM - Brookfield Asset Management
Post by: racemize on June 11, 2013, 08:26:23 AM
Hey guys, I've just started looking into this one in a bit more depth.  One thing that bothers me on BAM is that they are very sporadic about how they value their long-term results.  For example, in the initial letters (and from what I gather the old Brascan letters) focused on share price appreciation, which I am not a fan of.  Then, they later have a new intrinsic value measurement that they used; however, they are not consistent about showing what the value is or how it changes over time.  For example, there is a nice chart in the 2011 annual report that shows their calculation (and how it was gotten) of intrinsic value, but I didn't find it in the 2012.

For those that follow this company, have you just figured out how to do the adjustments yourselves and recalculate it each quarter/year, or am I missing something obvious?

I also read through valuebygeorge's write-up.  For anyone who has studied this a lot, did you find his analysis on-target?

Thanks very much!
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on June 12, 2013, 12:31:21 AM
Hey guys, I've just started looking into this one in a bit more depth.  One thing that bothers me on BAM is that they are very sporadic about how they value their long-term results.  For example, in the initial letters (and from what I gather the old Brascan letters) focused on share price appreciation, which I am not a fan of.  Then, they later have a new intrinsic value measurement that they used; however, they are not consistent about showing what the value is or how it changes over time.  For example, there is a nice chart in the 2011 annual report that shows their calculation (and how it was gotten) of intrinsic value, but I didn't find it in the 2012.

For those that follow this company, have you just figured out how to do the adjustments yourselves and recalculate it each quarter/year, or am I missing something obvious?

I also read through valuebygeorge's write-up.  For anyone who has studied this a lot, did you find his analysis on-target?

Thanks very much!

Quote
The total return for each Brookfield share was $5.39 in 2012, a 12.4% return on our calculated intrinsic value of the business, in line with our long-term goals. There are two components to this performance: $1.4 billion ($1.94 per share) of funds from operations amounting to approximately a 5% return from cash generated; and a further $2.2 billion ($3.45 per share) or approximately 8% from the overall increase in the value of the equity of the company. Values of real assets generally increased across the board, with a substantial increase in our private equity investments in the housing industry, offset in part by investments impacted by the low natural gas prices.
Q4 2012 Letter

I think BAM has a stated goal of achieving in between 12% and 15% annual increase in the intrinsic value of the business. And at the end of each year they openly comment on what was the actual result for the 12 months just passed.
Then, of course, they keep track on the share performance:
Quote
   Investment Performance
   Brookfield NYSE   Brookfield Intrinsic Value   S&P 500      10 Year Treasuries
1 35%                                12%                        16%                           4%
3 20%                                12%                        11%                           9%
5 3%                                  n/a                           2%                            7%
10 22%                              n/a                           7%                            6%
20 19%                              n/a                           8%                            6%
Q4 2012 Letter

Personally, I would not know how to calculate intrinsic value by myself… how could you know the increase or decrease in value of a port, a railroad, or real estate scattered across the globe?! …That’s why I think that to invest in BAM you must trust management. :)

giofranchi
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on June 12, 2013, 06:31:05 AM
Hi Gio, I agree on needing to trust management, but I need to be sure I am buying at a decent price, e.g., I want to by FFH at ~1 of book, not 2.
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on June 12, 2013, 11:10:21 PM
Hi Gio, I agree on needing to trust management, but I need to be sure I am buying at a decent price, e.g., I want to by FFH at ~1 of book, not 2.

Hi Joel,
Of course you are right! What I actually meant is that, when management says at year end 2012 that fair value has increased to $44.93 from $40.99 at year end 2011, it is very difficult to check if that figure ($44.93) is correct or otherwise. So, either you trust what they say, or you don’t. If you trust management, it is plain to see that you now are able to buy something that might go on increasing in fair value 12%-15% annual for 0.77 x what it is actually worth today: so, it is a great bargain and you will invest! Instead, if you don’t trust management, you won’t invest no matter what!
The fact that management has more or less $5 billion invested in BAM should provide at least some comfort! :)

giofranchi
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on June 13, 2013, 05:24:10 AM
Hi Gio, I agree on needing to trust management, but I need to be sure I am buying at a decent price, e.g., I want to by FFH at ~1 of book, not 2.

Hi Joel,
Of course you are right! What I actually meant is that, when management says at year end 2012 that fair value has increased to $44.93 from $40.99 at year end 2011, it is very difficult to check if that figure ($44.93) is correct or otherwise. So, either you trust what they say, or you don’t. If you trust management, it is plain to see that you now are able to buy something that might go on increasing in fair value 12%-15% annual for 0.77 x what it is actually worth today: so, it is a great bargain and you will invest! Instead, if you don’t trust management, you won’t invest no matter what!
The fact that management has more or less $5 billion invested in BAM should provide at least some comfort! :)

giofranchi

Gio, I think I should have been more clear--I was actually just looking for where they consistently showed that calculation, e.g., it was not in the 2012 annual report.   I presume the 44.93 figure also came from the q4? 

Personally, I wish they had a chart like Buffett on the front of every annual!
Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on June 13, 2013, 07:07:11 AM
Personally, I wish they had a chart like Buffett on the front of every annual!

Racemize, you probably know this, but just in case, BAM changed how they account for the value of their assets in I think 2009 or 2010.  Previously everything accounted for at cost, under Canadian GAAP.  Now under IFRS they mark most assets to market, per the accounting rules, and for assets that aren't m2m they make adjustments to arrive at management's own estimate of intrinsic value.  You can dispute it, but as gio says if you trust them you should be willing to accept their aim is to give a conservative estimate of the worth of the company.

Anyway prior to the move to IFRS the company's 'long-term objective' was two-fold:
- Annual growth in operating cash flow per share (including disposition gains) of 12%
- Cash return on book equity per share of 20%

I just pulled up the 2008 AR and they show their achievements for the prior 5 years.  The 5-year numbers to 2008 were 20% (16% ex. disposition gains) and 26% respectively.  If you pull up the earlier ARs you'll be able to cobble together the company's historic numbers.  I did this at one time and the numbers were well-above targets.

Anyway the point I'm trying to make is that it is not possible to get BAM's historic intrinsic value track record because of the change in accounting treatment.



Title: Re: BAM - Brookfield Asset Management
Post by: racemize on June 13, 2013, 07:20:17 AM
Personally, I wish they had a chart like Buffett on the front of every annual!

Racemize, you probably know this, but just in case, BAM changed how they account for the value of their assets in I think 2009 or 2010.  Previously everything accounted for at cost, under Canadian GAAP.  Now under IFRS they mark most assets to market, per the accounting rules, and for assets that aren't m2m they make adjustments to arrive at management's own estimate of intrinsic value.  You can dispute it, but as gio says if you trust them you should be willing to accept their aim is to give a conservative estimate of the worth of the company.

Anyway prior to the move to IFRS the company's 'long-term objective' was two-fold:
- Annual growth in operating cash flow per share (including disposition gains) of 12%
- Cash return on book equity per share of 20%

I just pulled up the 2008 AR and they show their achievements for the prior 5 years.  The 5-year numbers to 2007 were 20% (16% ex. disposition gains) and 26% respectively.  If you pull up the earlier ARs you'll be able to cobble together the company's historic numbers.  I did this at one time and the numbers were well-above targets.

Anyway the point I'm trying to make is that it is not possible to get BAM's historic intrinsic value track record because of the change in accounting treatment.

Thanks WhoIsWarren, I was aware of the accounting change and the reason for switching over to Intrinsic Value, so I see how it would be difficult for them to put together a nice chart for us.  Perhaps they will be able to with the intrinsic value calculation over time, e.g., like the chart Gio quoted, but they don't post the value every year!

I will go download the brascan letters and see if I can make a long term chart myself, as you suggest.
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on June 16, 2013, 11:01:39 PM
http://seekingalpha.com/article/1503352-brookfield-property-partners-has-meaningful-upside-potential?source=email_investing_ideas&ifp=0

giofranchi
Title: Re: BAM - Brookfield Asset Management
Post by: nnayyar on June 18, 2013, 05:40:44 AM
ValuebyGeorge discussing some of short seller Dialect points:

http://www.valuebygeorge.com/2013/06/17/readers-question-on-brookfield-property-partners-bpy/
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on June 18, 2013, 06:17:30 AM
I put together a spreadsheet with some fundamental data (with the help of WhoIsWarren).  Here's my results:

https://docs.google.com/spreadsheet/ccc?key=0AhTPR9eP5nWedHZXZVBTMWlSa0pMRTFDc1ViN3B3a1E&usp=sharing


There were some really odd adjustments to BVPS throughout (wasn't just share adjustments, as far as I could tell)--not sure what to make of that.  In any event, I ended up with some rough adjustments to the BVPS, and then just used valueline's all the way back to 2003.  Hopefully this is helpful to others.
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on June 20, 2013, 11:03:59 AM
Not sure if this has been posted, but a friend of mine directed me to this video of Flatt:

http://apps.whitman.syr.edu/video/Video.aspx?vid=d24baee9-40e0-4ee2-b6f3-593382be2c50
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on June 20, 2013, 11:01:53 PM
Not sure if this has been posted, but a friend of mine directed me to this video of Flatt:

http://apps.whitman.syr.edu/video/Video.aspx?vid=d24baee9-40e0-4ee2-b6f3-593382be2c50

Thank you for posting this video, Joel!

I hadn't seen it yet, and I will watch it with much pleasure. :)

giofranchi
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on June 22, 2013, 01:35:34 AM
Value by George: Brookfield June 2013 Update.

http://www.valuebygeorge.com/2013/06/21/brookfield-bam-bpy-bip-bep-june-update/

giofranchi
Title: Re: BAM - Brookfield Asset Management
Post by: Kiltacular on July 10, 2013, 11:01:12 AM
Quote
July 09, 2013 07:55 ET

Brookfield Asset Management Announces Automatic Purchase Plan

TORONTO, ONTARIO--(Marketwired - July 9, 2013) - Brookfield Asset Management Inc. (NYSE:BAM)(TSX:BAM.A)(EURONEXT:BAMA) today announced that, in connection with its previously announced normal course issuer bid program, it will enter into an automatic purchase plan with its designated broker to allow for purchases of its Class A Limited Voting Shares when Brookfield ordinarily would not be active in the market due to its own internal trading black-out period, insider trading rules or otherwise. Outside of these periods, shares will be repurchased in accordance with management's discretion, subject to applicable law.

Under its normal course issuer bid which expires on April 22, 2014, Brookfield may purchase up to 53,571,157 Class A Limited Voting Shares. Purchases under the bid can be made through the facilities of the Toronto Stock Exchange (the "TSX"), the New York Stock Exchange and any other applicable stock exchange. In accordance with the rules of the TSX, any daily purchases on the TSX under this bid (other than pursuant to a block purchase exemption) will be limited to 195,080 Class A Limited Voting Shares.

http://www.marketwire.com/press-release/brookfield-asset-management-announces-automatic-purchase-plan-tsx-bam.a-1809191.htm
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on August 09, 2013, 06:46:47 AM
Ok, has the listing of intrinsic value per share disappeared again?  I can't find it in the most recent letter/report/supplemental...
Title: Re: BAM - Brookfield Asset Management
Post by: fareastwarriors on August 09, 2013, 10:42:16 AM
http://www.cnbc.com/id/100952444 (http://www.cnbc.com/id/100952444)

'Buffett of Canada' says he's a big bull on the US



(I thought the Buffett of Canada is Prem Wasta!)
Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on September 03, 2013, 08:46:39 AM
Ok, has the listing of intrinsic value per share disappeared again?  I can't find it in the most recent letter/report/supplemental...

Hi racemize, I missed this post of yours from a few weeks back.

You're right -- they didn't publish an intrinsic value for the most recent quarterly.  You might have noted they didn't report it in the Q1:13 report either.  And as you mentioned in an earlier post, finding the intrinsic value number for 2012 was not easy, certainly not compared to Q3:12 reports and earlier (quarterly and annual, back to 2008 when they first produced an intrinsic or 'underlying' value).

I don't think the SEC is totally comfortable with the use of intrinsic value.  Therefore, from the 2012 annual report onwards, Brookfield discloses the firm's intrinsic value on an annual basis only (i.e. not quarterly) and all discussion and derivation of intrinsic value will take place in the "Additional Information" report, which is released alongside the annual report.

http://www.brookfield.com/_Global/42/img/content/File/Investor%20Relations/Supplemental%20Information/2012/Supplemental%20Information%202012_F1.pdf

Hope this helps.
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on September 03, 2013, 11:53:21 AM
Ok, has the listing of intrinsic value per share disappeared again?  I can't find it in the most recent letter/report/supplemental...

Hi racemize, I missed this post of yours from a few weeks back.

You're right -- they didn't publish an intrinsic value for the most recent quarterly.  You might have noted they didn't report it in the Q1:13 report either.  And as you mentioned in an earlier post, finding the intrinsic value number for 2012 was not easy, certainly not compared to Q3:12 reports and earlier (quarterly and annual, back to 2008 when they first produced an intrinsic or 'underlying' value).

I don't think the SEC is totally comfortable with the use of intrinsic value.  Therefore, from the 2012 annual report onwards, Brookfield discloses the firm's intrinsic value on an annual basis only (i.e. not quarterly) and all discussion and derivation of intrinsic value will take place in the "Additional Information" report, which is released alongside the annual report.

http://www.brookfield.com/_Global/42/img/content/File/Investor%20Relations/Supplemental%20Information/2012/Supplemental%20Information%202012_F1.pdf

Hope this helps.

I was hoping that it would still be listed annually--did you get that confirmed?  I was mostly concerned that we would not get that information anymore.
Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on September 03, 2013, 03:44:41 PM
Yes Racemize, we should still get the annual info.  At least that's my understanding of it!

Incidentally, I'm only now getting to looking closely at the spreadsheet of historic BVPS that you posted up a few months back.  I carried out the same exercise and, I've not double-checked my work yet but, my numbers don't exactly tally with yours.  Not that we're a million miles out -- mostly plus or minus 5% each year -- but I'd still like to see your workings in case I've made mistakes.

I'm also not finding the "really odd adjustments to BVPS throughout" that you mentioned.  The group changed its reporting currency in 2003 from C$ to U$ and there were 3 for 2 share splits on 3 occasions.  Apart from that, the numbers were hardly ever restated, with the exception of the introduction of IFRS and intrinsic value, which the group first estimated in 2008 and later revised significantly upwards in 2009.

I'll hopefully get to post my spreadsheet up tomorrow and we can discuss these issues then.
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on September 03, 2013, 04:59:33 PM
Yes Racemize, we should still get the annual info.  At least that's my understanding of it!

Incidentally, I'm only now getting to looking closely at the spreadsheet of historic BVPS that you posted up a few months back.  I carried out the same exercise and, I've not double-checked my work yet but, my numbers don't exactly tally with yours.  Not that we're a million miles out -- mostly plus or minus 5% each year -- but I'd still like to see your workings in case I've made mistakes.

I'm also not finding that the "really odd adjustments to BVPS throughout" that you mentioned.  The group changed its reporting currency in 2003 from C$ to U$ and there were 3 for 2 share splits on 3 occasions.  Apart from that, the numbers were hardly ever restated, with the exception of the introduction of IFRS and intrinsic value, which the group first estimated in 2008 and later revised significantly upwards in 2009.

I'll hopefully get to post my spreadsheet up tomorrow and we can discuss these issues then.

When I did my sheet, I didn't notice the C$ to U$ change in 2003, which could have caused at least part of the issue.  I essentially had problems where I would restate the book value after adjustment and the ratios would not be the same as they were previously (e.g., if the adjustments were 1.5:1, two would match, but a previous one would not); by the end, I just started using BVPS from ValueLine, and then readjusted backward from there, using the same ratios.
Title: Re: BAM - Brookfield Asset Management
Post by: no_free_lunch on September 04, 2013, 07:22:35 PM
Thanks for bringing this one to my attention guys. 

Regarding rising rates, found this in the latest 10q.

Quote
Investors have been worried lately about the effect of rising interest rates on fixed income investments. The bottom line is that
we believe they should be concerned, as interest rates have no way to go but up over the longer term. As an indication of this
conviction, you may recall that we own no long-term bonds on our own balance sheet. Furthermore, over the last four years we
have been locking in as many long-term fixed rate financings as possible, and we have also hedged approximately 50% of the
financings across our companies that come due in the next three years.
But, contrary to being negative about real assets, we in fact believe that real assets are one of the great investments to own
in this
environment and while often confused with fixed income investments, they are very different. We will attempt to explain this in
more detail, but the main reasons are:

most real asset income flows adjust upward with positive business conditions, inflation or both;

interest rates for borrowing are still historically low, and fixed interest rate loans tied to real assets, enhance equity returns
as revenues increase;

expenses tend to grow more slowly than revenues on real assets, and therefore operating margins expand; and

the cash flows earned on real assets are substantially greater than government treasury securities. Furthermore, as interest
rates declined, and in anticipation of future interest rate increases capitalization rates did not go down as much as treasurie
s
over the last number of years. As a result spreads between the two are at historic highs. Consequently there is substantial
room to absorb increases in treasury rates without a commensurate deterioration in capitalization rates
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on September 05, 2013, 07:50:30 AM
WhoisWarren was having some difficulty getting the spreadsheet posted, and I couldn't get the spreadsheet to post (I got an error message), so I've posted it as a google spreadsheet (incidentally, it is fantastic):
https://docs.google.com/spreadsheet/ccc?key=0AhTPR9eP5nWedHdlN0dKcXlJU0ZPcmF4cExGQnNWOUE&usp=sharing

Here is his post:

See attached the spreadsheet on BAM that I've been working on.  If anyone has any questions figuring out what's what (or mistakes I may have made!), please let me know.

I've taken two approaches : one focusing on BVPS and the other on Intrinsic / Underlying values.

Typically the company has reported BVPS numbers for the year in question and the previous 4 or 5 years.  The earliest Annual Report I've been able to get my hands on is 2000, for which BAM reports comparable figures back to 1995.  Roll forward to 2001, figures for 2001 and the previous 4 years are reported, adjusted for any restatements (over the entire period I didn't find any restatements worthy of mention).  And so on; in this way I've created a matrix.  Issues to be aware of are the change in reporting currency in 2003, 3-for-2 stocks splits in 2004, 2006 and 2007, as well as the switch to IFRS from CGAAP in 2010, but everything is consistent.  For example, the company reported BVPS in 2003 of U$17.54.  In 2004 it reported BVPS of U$13.41 for 2004 and U$11.63 for 2003.  U$11.63 is (almost) equivalent to previously reported U$17.54, after taking account of the 3-for-2 split.

I've ended up with a BVPS series back to to 1995.  Note that this is a fully-diluted calculation, adjusted for the cash value of unexercised options.  This measure is more correct than shareholders' equity divided by ordinary shares outstanding.  Racemize -- this might explain for why your numbers don't quite tally with mine.  I've also added in dividends paid out along the way to come up with a dividend-adjusted BVPS series.  Using that series, adjusted-BVPS has compounded by 14% p.a. since 1995 and by 18% since 2001, when Bruce Flatt took over from Jack Cockwell.  However, this is not an apples-to-apples comparison, as the switch to IFRS since 2010 means that the majority of assets are calculated at fair value, whereas previously they were accounted at cost (and some assets they've held for a long time!).

The company's "intrinsic value" calculation, first reported in 2010, attempts to overcome the short-comings of IFRS (mainly, to revalue to fair value assets still held at cost, adding a franchise value for asset management, and excluding deferred income taxes).  You can argue the toss over these adjustments, but I believe it's closer to the truth than just taking the IFRS book value per share.  In addition, Brookfield quoted an "underlying value" of the company for years 1999 to 2003.  Essentially, this took stated BVPS and adjusted for the market value of large, publicly-quoted stakes in companies such as miner Noranda.  Again, the earlier "underlying" numbers and the more recent "intrinsic" numbers are not apples-to-apples, so a comparison is not very meaningful but for what it's worth the CAGR (including dividends) from 1999 to 2012 was 24% p.a.

Hope this helps.
Title: Re: BAM - Brookfield Asset Management
Post by: no_free_lunch on September 05, 2013, 06:53:10 PM
Racemize/WhoIsWarren,

First off this is fantastic.  Can I just ask whether this takes into account the spinoff of BIP in 2008?  It is not huge compared to the market cap but worth considering.

http://www.reuters.com/article/2008/01/03/brookfieldasset-spinoff-idUSN0322101120080103

EDIT : After thinking about this a bit, the simplest thing might be to treat the spinoff as a dividend.  The stock was spunoff in 2008, valued at $20 with 1 share per 25 BAM shares.  So it is just an $0.80 dividend.
Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on September 06, 2013, 02:02:02 AM
Racemize/WhoIsWarren,

First off this is fantastic.  Can I just ask whether this takes into account the spinoff of BIP in 2008?  It is not huge compared to the market cap but worth considering.

http://www.reuters.com/article/2008/01/03/brookfieldasset-spinoff-idUSN0322101120080103

EDIT : After thinking about this a bit, the simplest thing might be to treat the spinoff as a dividend.  The stock was spunoff in 2008, valued at $20 with 1 share per 25 BAM shares.  So it is just an $0.80 dividend.

Thanks no_free_lunch --

I thought about the BPY spinoff that occurred this year, worth about $1 per share (0.0574 BPY for every BAM share owned; BPY valued at $20 per share = $1.14), but I completely forgot about BIP.

Racemize, would you mind updating the spreadsheet for an additional $0.8 divi for 2008?
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on September 06, 2013, 06:16:43 AM
Racemize, would you mind updating the spreadsheet for an additional $0.8 divi for 2008?

done!
Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on September 06, 2013, 08:03:22 AM
Thanks Racemize!

And just to complete things.....

Offsetting the $1.14 per share BPY spin off earlier this year (and $0.44 per share of ordinary dividends year-to-date) is around $0.8 (or $0.5bn) of balance sheet gains from the termination of the AIG swap agreement, which was settled in August.  BAM had recorded the swap as a $1.4bn liability in June; they agreed to pay $0.9bn.

Q2:13 common equity per share $16,688m (BPY spin out and two divi payments already taken out)
Add: cash value of exercised options outstanding $900m (not up to date -- using year end 2012 figure)
Add: reserve release for AIG swap $500m
Add: taxes, incremental values, asset management franchise value $10,489m (year end 2012 figures)
Less: Quarterly dividend paid ($0.15 per share; Q2 avg shares o/s 616m) $92

Diluted shares o/s Q2:13 653m
Estimated intrinsic value per share Q2:13 $43.6

That's slightly down on the $44.93 at year end 2012, but doesn't take account of:
- the likely notable uplift in management's intrinsic value of the AM business (now including BPY) since year-end
- possibly some uplift to those assets not accounted for at fair value under IFRS since year-end

I'd also point out that the fair value of Brookfield's assets increase with the passage of time and do not require constant upward revaluations of the assets.  Fair values are calculated using 10-year DCFs of what are mostly contracted (and increasing) cash flows, followed by a terminal value, all discounted at at various rates.  So roll forward a year, the fair value will increase by say 6%.  And as Brookfield is roughly 2x geared, that translates into 12% RoE.  On top of that the company expects it can, on average, buy assets cheaply.  Finally it believes that it can squeeze efficiencies out of its assets over time.  So that's where the management's target of 12-15% growth in intrinsic value comes from.

(I understand that growth in the intrinsic value of the Asset Management business is additive to this).

Hope this helps.


Title: Re: BAM - Brookfield Asset Management
Post by: no_free_lunch on September 06, 2013, 06:26:01 PM
WhoIsWarren,

Appreciate the extensive valuation you did.  I am still not 100% sure on it all but between their track record and buying at a discount to book, I feel the odds are in my favor.

For my own part I am still trying to understand just how BAM values the various subsidiaries.  Given the term 'common equity per share' it sounds as though they are using their portion of the market cap of the subsidiaries, as opposed to say the book value of the subsidiaries.  When I did the math this seemed to work for BIP & BREP but their equity number for BRP was too low.  They own 65% of BRP with a mcap of $2.3B, equity should be $1.5B.  In the latest 10Q they only list their equity in BRP at $894M.  Any idea what's going on?

Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on September 07, 2013, 02:51:59 PM
WhoIsWarren,

Appreciate the extensive valuation you did.  I am still not 100% sure on it all but between their track record and buying at a discount to book, I feel the odds are in my favor.

For my own part I am still trying to understand just how BAM values the various subsidiaries.  Given the term 'common equity per share' it sounds as though they are using their portion of the market cap of the subsidiaries, as opposed to say the book value of the subsidiaries.  When I did the math this seemed to work for BIP & BREP but their equity number for BRP was too low.  They own 65% of BRP with a mcap of $2.3B, equity should be $1.5B.  In the latest 10Q they only list their equity in BRP at $894M.  Any idea what's going on?

no_free_lunch

Getting your head around Brookfield and how it accounts and values assets is tougher than for your average company, primarily due to its control of separately listed entities.  If you haven't already done it, I suggest you go spend time going through at least one (or better, a few) of their annual reports.

I'll try to outline how the group's assets are valued.

By moving to IFRS in 2010, the company was required to mark many (not all) of the assets under its control to fair value.  Fair value is not to be confused with market values.  Fair value here means projecting out cash flows, mostly 10 years, adding a terminal value and discounting it all back.

Just to make clear, even though BIP, BREP, BPY and General Growth Properties are quoted (and therefore "independently" valued by the market), market values do not input into BAM's accounts.  This is not a criticism of BAM management (this was an angle taken by the critical Roddy Boyd article a few months back) -- they are merely following the accounting rules and investors are free to make their own adjustments, up or down, to BAM's published accounts.

Now as I said already, not all BAM's assets are marked at fair value.  Some, such as those owned within the private equity portfolios or residential property assets, are not permitted to be marked at fair value under IFRS and are instead marked at cost. 

The IFRS "common equity" valuation is the rough and ready value of the group's net assets, per the accounting rules -- mixing 'fair value' and 'at cost' values together. Don't forget, shareholders' equity includes all equity types, including preference shares and non-controlling interests (the share of fully-consolidated businesses not owned).  It's a very important distinction; common equity was less than half of total equity in 2012.

In order to provide a clearer picture of the true value of the group, management provides an estimate of the fair value of these assets required to be accounted for at cost.  It calls these "Incremental Values" and they're found across all divisions, though mainly in Asset Management and Private Equity.  It's no 'rounding' exercise -- it added nearly 20% to the IFRS common equity number in 2012.

Management makes two more adjustments to get to it's estimate of "intrinsic value".  Firstly it adds back deferred taxes.  Deferred taxes is a calculation of the tax that would be payable on assets were they sold today at the values on the balance sheet.  Management argues that this is a 'going concern' business and the assets will likely be held for a long time.  At the very least, it's a liability that should be discounted heavily (perhaps 10-15 years out), but management chooses to completely remove the tax liability from their intrinsic value calculation (why they do this is something I would like to get to the bottom of).  Taxes added back gives another 13% to 2012 IFRS common equity. 

The last adjustment is the value it puts on the asset management business, which management openly acknowledges is really a finger-in-the-air estimate and is put into the mix more to highlight to investors the business and its potential.  This added a quarter to 2012 IFRS common equity.

I say all this because in you mentioned that you can currently buy the stock at a "discount to book".  The IFRS common equity number in Q2:13 was $27, fully diluted.  So actually on that basis the stock is trading at a c.30% premium to book, but I think that is being far too conservative.  The 2011 annual letter mentioned that management believed that an orderly winding down of the company would likely yield even more than the then $41 intrinsic value estimate.

I hope that answers your questions.
Title: Re: BAM - Brookfield Asset Management
Post by: no_free_lunch on September 07, 2013, 08:19:25 PM
WhoIsWarren,

You are an exteremely prolific analyst!  Really, this is just fantastic, thanks for taking the time.

I definitely misspoke on book value, I really meant something analogous to what they call "intrinsic value" and which you calculated for the most recent quarter. 

Based on this, getting the company for a discount to intrinsic seems like a great deal.  It is difficult to compare (as we don't know the numbers) but it seems likely that it was trading substantially above intrinsic in the 2006/2007 time frame.  Other high quality investment conglomerates (FFH,BRK,LUK) will routinely trade above intrinsic so why not bam?

I would still like to build up the valuation based on the equity prices, maybe push it into a spreadsheet so it's easy to update the prices.  There would still need to be some assumptions regarding the asset management and the investment business as their are components which aren't listed.  Still, my quick and dirty analysis indicated that it is likely trading somewhere around the book as valued by the market.  Of course the number you plug in for the asset management business is critical but you can always fall back on brookfield's own number from year end. 

The one thing I would like to see is the asset management business to be valued independently.   With the recent property spinoff it seems that this would be on the table but I am not sure that management has in any way committed to it.  If their estimates are correct, it seems that alone could unlock some extra value.
Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on September 07, 2013, 11:55:19 PM
I see what you're trying to get at.  It's a pretty complicated calculation.  the_pupil made a stab at this back in March and posted up a spreadsheet; that's after gio posted a seeking alpha (I think) article by someone who had double counted some assets / omitted certain liabilities, resulting in a nonsensical 'market value of BAM'.

I haven't double-checked the_pupil's numbers, so cannot tell if they are right or not, but you should definitely use that as a base.  I may try my hand at this exercise at some stage, but then maybe not -- I'm not sure if it's worth the effort as I'm not looking to 'arb' or switch between the various quoted entities.

I don't imagine BAM has any intention of floating the asset management business.  Taking a step back, BAM in the process of transforming itself from a capital intensive property / other assets operator, which it was for all of its history up to 10-12 years ago, to a less capital intensive asset manager.  Your typical asset manager has virtually no money invested in the assets it manages.  Brookfield aims to invest substantially alongside outside investors and thus will ultimately own roughly a quarter of BIP, BREP and BPY.  It also owns other assets, notably Private Equity, which are not floated and will likely never be.

Another thing that occurred to me -- that I should have mentioned in my previous post -- is that part of the intrinsic value calculation is made up of 'carried interest' in assets managed on behalf of 3rd parties.  In other words, were these assets to be sold today, Brookfield would be entitled to certain performance fees (net of expenses).  The accounting rules don't allow their inclusion until likelihood of collection of fees is very high.  I think these values are included in the 'Incremental Values' part of the intrinsic value calculation.
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on September 08, 2013, 01:43:26 AM
WhoIsWarren,

You are an exteremely prolific analyst!  Really, this is just fantastic, thanks for taking the time.

I agree 100%! Thank you WhoIsWarren & racemize! Great job! :)

giofranchi
Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on September 08, 2013, 02:56:02 AM
No problem. That's the beauty of this board.  I rely on many others to educate me in various other areas.  Where I feel I can add some value (not very often!), I'm more than happy to do so.
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on September 08, 2013, 06:33:27 AM

The IFRS "common equity" valuation is the rough and ready value of the group's net assets, per the accounting rules -- mixing 'fair value' and 'at cost' values together. Don't forget, shareholders' equity includes all equity types, including preference shares and non-controlling interests (the share of fully-consolidated businesses not owned).  It's a very important distinction; common equity was less than half of total equity in 2012.

I followed and/or knew about most of what you said (and agree regarding discounting the dta), but wanted to follow up on the above.  Should we modify book value to common before adding the incrementals and other adjustments?  Do they do this in their intrinsic value calculation?  Perhaps I did not follow what you meant as well.
Title: Re: BAM - Brookfield Asset Management
Post by: thepupil on September 08, 2013, 07:10:13 AM
Hi guys,
Good to see more work being done on BAM. It is a complex beast! Here is the spreadsheet I started back in march when BPY was still trading in the when issued market. It needs to be updated, but I do think it is a good framework for looking at how BAM values itself and then looking at market values of the corresponding assets.

A couple of remarks:

BPY is most likely undervalued because you are most likely getting the non-publicly traded core for free at these prices (BPY less its interes in GGP, RSE, and BPO). You have to decide what holdco discount is deserved due to the fee structure (and if GGP, BPO and RSE are under/fairly/overvalued) to get an idea of what BPY is worth to an outside investor. That's obviously not easy. I've considered going long BPY against GGP BPO and RSE which would be positive carry and create a stub that owns Atlantis, 22% interest in Canary Wharf, recent industrial acquisitons, etc. for a very low price, but I haven't finalized what the valuation of that stub is; if anyone wants to do the dirty work on that, it may be interesting.

The recent monetizations of Ainsworth Lumber and Longview Timber  at Brookfield Capital have been nice confirmations of the embedded value on the Private Equity side. I think this is what you get "for free" when you buy BAM. No one focuses on this and it doesn't have a publicly listed entity and it is small but still material.

BAM has its naysyers ( www.valuewalk.com/2013/05/dialectic-brookfield-a-ponzi-scheme/ ) and its cheerleaders ( Marty Whitman, Tom Gayner, Lou Simpson, etc.) <--my money is on them. I bought BAM putting full trust in management's value of its own assets and admittedly put little work into it. The short sellers' accusations made me look further into some transactions and overall valuation of the holdco but at some point, as with all complex financial companies, you either have to trust management or not. It's a judgement call. In my opinion, they are amazingly savvy purchasers/sellers of assets AND also somewhat devious in terms of financial engineering (creating BPY is a great example since it allows them a lucrative very advantaged fee stream on assets they already owned).
Title: Re: BAM - Brookfield Asset Management
Post by: no_free_lunch on September 08, 2013, 12:01:45 PM
BPY is interesting.  I tried, briefly, to do the valuation but it is just very difficult due to the large number of properties.  For instance, the office side has equity of $7B, we know they own 50% of BPO which has a market cap of $9.4B, so is canary wharf and the various other properties worth $2.3B?  It's really a lot of work.

At any rate, based on what I can figure out, I think at a 25% discount to stated book/intrinsic you are at worst paying fair market value.

The way I am thinking about BPY is that based purely on the earnings it is yielding about 14%.  Now the earnings include substantial fair value adjustments so you need to consider if the adjustments can be maintained.  When you compare the adjustments to the assets, the adjustments annualized are only 2.75-3% of assets.  This doesn't seem aggressive, in fact there is likely considerable upside from there if the market turns.

At this point I have about 10% invested in BAM.  I am thinking about converting some of that or deploying new cash into BPY as well. 
Title: Re: BAM - Brookfield Asset Management
Post by: no_free_lunch on September 08, 2013, 12:07:35 PM
Regarding the dialectic attack, I don't quite get the logic. 

Quote
The hedge fund calls BPY a Ponzi scheme, as the IPO was was used to raise money from new investors to pay off old ones.
..
We estimate they are $150-250 mm short and the shortfall will have to be made up with future debt or equity offerings. This is part of the essential nature of a Ponzi scheme – raise money from new investors to pay out old investors

BPY was a spinoff to existing BAM shareholders, what money was raised?  Was there a preceding IPO as well?
Title: Re: BAM - Brookfield Asset Management
Post by: thepupil on September 08, 2013, 12:30:23 PM
No new money was raised, but BPY committed to a 1.00/Year dividend which as Dialectic points out is not completely covered by cash flow according to Brookfield's own statements. I can see Dialectic's point.

The lion's share of BPY's equity are in REITs which distribute almost all their cash flow and have much lower than 5% dividend yields: GGP (2.7%), BPO (3.4%) and RSE (2.7%)

So the balance of cash for distributions has to come from the other non listed properties.  BPY's own disclosures say their is not enough cash flow from the properties to maintain the distro without future equity/debt raises, hence the ponzi comparison.

In my opinion Brookfield wanted to use an expensive BPY (one that traded close to its generous 25.00 NAV estimate) with a slightly unsustainable distribution as expensive currency to make a big acquisition. The sell off in REITs and BPY at 20.00 makes that less attractive.

This is what I mean by "devious financial engineering". Creating BPY gave  them new management fees out of thin air to extract and they are starting it out with an unsustainable distribution. In the end I think it will create lots of value for BAM, but some may be uncomfortable with the means to that end.
Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on September 09, 2013, 07:51:50 AM

The IFRS "common equity" valuation is the rough and ready value of the group's net assets, per the accounting rules -- mixing 'fair value' and 'at cost' values together. Don't forget, shareholders' equity includes all equity types, including preference shares and non-controlling interests (the share of fully-consolidated businesses not owned).  It's a very important distinction; common equity was less than half of total equity in 2012.

I followed and/or knew about most of what you said (and agree regarding discounting the dta), but wanted to follow up on the above.  Should we modify book value to common before adding the incrementals and other adjustments?  Do they do this in their intrinsic value calculation?  Perhaps I did not follow what you meant as well.

Racemize, not sure if I'm catching your question correctly -- are you asking if we need to adjust the book value to account for prefs / capital securities / non-controlling interests?  If so, no adjustment needed; the book value per share figure is based off common equity (after prefs / capital securities / non-controlling interests).

Let me know if you meant something else.
Title: Re: BAM - Brookfield Asset Management
Post by: nnayyar on September 09, 2013, 08:24:22 AM
FWIW,

BPO is also trading at substantial discount to stated book value (20.76 vs ~16.50 last) On the conference call, mgmt believed this discount was due to large tenant (Merryll) lease expiring at the World Financial Center. I believe they used the words "when not if" a new tenant is found, they believe the overhang and hence discount to book should contract.
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on September 09, 2013, 08:40:16 AM

The IFRS "common equity" valuation is the rough and ready value of the group's net assets, per the accounting rules -- mixing 'fair value' and 'at cost' values together. Don't forget, shareholders' equity includes all equity types, including preference shares and non-controlling interests (the share of fully-consolidated businesses not owned).  It's a very important distinction; common equity was less than half of total equity in 2012.

I followed and/or knew about most of what you said (and agree regarding discounting the dta), but wanted to follow up on the above.  Should we modify book value to common before adding the incrementals and other adjustments?  Do they do this in their intrinsic value calculation?  Perhaps I did not follow what you meant as well.

Racemize, not sure if I'm catching your question correctly -- are you asking if we need to adjust the book value to account for prefs / capital securities / non-controlling interests?  If so, no adjustment needed; the book value per share figure is based off common equity (after prefs / capital securities / non-controlling interests).

Let me know if you meant something else.

I apologize, I wasn't very clear; I'm also a little confused, so perhaps I can rephrase in a better way.  I was trying to understand what your comments on IFRS common equity related to, e.g., do the adjustments to get to intrinsic value start with IFRS common equity?  Or said another way, I wanted to make sure that intrinsic value they are listing applied to common shareholders and not the entire capital structure.
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on September 09, 2013, 08:42:49 AM
Quote
Quick pace of fundraising for new Brookfield infrastructure fund 11:38 AM
•Brookfield Asset Management (BAM +1.3%) is set to hit its hard cap of $7B on its second infrastructure fund, reports PEHub, making it one of the largest private infrastructure funds ever raised. The fund's initial fundraising target was $5B.
•Brookfield itself is a significant investor and is said to have kicked in about $2B. An investor presentation says the fund plans to make 15-25 investments in the range of $200M-$500M each. It will focus on the U.S, but can invest globally.

giofranchi
Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on September 09, 2013, 09:28:09 AM

I apologize, I wasn't very clear; I'm also a little confused, so perhaps I can rephrase in a better way.  I was trying to understand what your comments on IFRS common equity related to, e.g., do the adjustments to get to intrinsic value start with IFRS common equity?  Or said another way, I wanted to make sure that intrinsic value they are listing applied to common shareholders and not the entire capital structure.

Ok, yeah I think I understood you first time.  Intrinsic value indeed relates to the common equity only.  So no more adjustments necessary.

Reading back over my post, I don't even know why I brought up the common equity / total shareholders' equity distinction......I think I just confused things!
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on September 18, 2013, 12:22:05 AM
Analyst/Investor Day September 2013


giofranchi
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on September 18, 2013, 11:35:39 PM
Quote
Vale sells $1.2B in cargo stakes, lines up further sales • 6:52 PM

- Vale (VALE) is selling stakes in its VLI cargo unit totaling nearly 36% for ~$1.2B to Japan’s Mitsui and a Brazilian government fund, and says it is in exclusive talks with Canada’s Brookfield Asset Management (BAM) to sell ~26% of VLI; Vale's stake would drop to less than 40% after all the deals.
- VLI, which controls ports, terminals and more than 10K km of railroads in Brazil, plans to invest 9B reais through 2017 to expand capacity.
- Vale is selling assets, suspending projects and focusing on its more profitable iron ore business as it tries to recover profit margins amid lower commodities prices.

giofranchi
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on September 18, 2013, 11:47:51 PM
CIBC 12th Annual Eastern Institutional Investors Conference (Transcript)


giofranchi

Title: Re: BAM - Brookfield Asset Management
Post by: jeffmori7 on September 19, 2013, 07:16:35 PM
Analyst/Investor Day September 2013


giofranchi

Thanks Gio for this. And here is the presentation that goes along:

http://www.brookfield.com/_Global/42/img/content/File/Investor%20Relations/Presentations/2013/BAM_Investor_Day_Presentation_2013_Sept17.pdf
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on September 19, 2013, 11:47:58 PM
Thanks Gio for this. And here is the presentation that goes along:

http://www.brookfield.com/_Global/42/img/content/File/Investor%20Relations/Presentations/2013/BAM_Investor_Day_Presentation_2013_Sept17.pdf

Thank you! :)

giofranchi
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on September 21, 2013, 05:56:20 AM
Quote
WSJ: Brookfield among bidders for Weyerhaeuser's homebuilding unit • 5:34 PM

- Weyerhaeuser's (WY) homebuilding division is attracting interest from Brookfield Residential Properties (BRP), the land developer and home builder controlled by Brookfield Asset Management (BAM), WSJ reports.
- Weyerhaeuser Real Estate Co. executives reportedly have met with bidders to answer questions about its operations; while some bidders are interested in only a portion of the unit, BRP is said to be interested in buying the entire group.
- BAM's size - $180B in assets - might prove an advantage vs. other interested parties since WY wants to sell the homebuilding division in a reverse Morris trust, a tax-free method of spinning off a division to be merged with an acquirer.

giofranchi
Title: Re: BAM - Brookfield Asset Management
Post by: nnayyar on September 30, 2013, 06:06:03 AM
Interesting move, BPY buys BPO:

http://finance.yahoo.com/news/brookfield-property-partners-proposes-acquire-121500734.html

Title: Re: BAM - Brookfield Asset Management
Post by: thepupil on September 30, 2013, 06:44:47 AM
I assume the motivation is :

1. Increase liquidity at BPY which will presumably help valuation and BAM wants BPY to be an expensive currency for issuance funded acquisitions

2. Bring BPO's assets under the BPY fee structure which over time will benefit the holdco. inflation and a little growth will increase BAM's share of BPY's cash flows without increasing its capital contribution proportionally. Over time BPY will increase distributions and eventually the GP/LP fee structure will be in "high splits" like some MLPs.

BPO shareholders should be angry, they owned a pure play office REIT and are being offered to choose between Scylla (unforeseen tax event) and Charybdis (ownership in a more complex, fee-heavy vehicle)

it should be good for BAM though.


Title: Re: BAM - Brookfield Asset Management
Post by: thepupil on September 30, 2013, 07:23:24 AM
Incentive Distribution Fee
15% of dividends over $1.10 per share
25% of dividends over $1.20 per share

For clarification, above is BPYs incentive fee structure. with this move BAM is migrating more assets directly into BPY's fee structure.  inflation + a little growth should help BPY grow into its currently unsustainable per unit distribution, and a few good acquisitions should then grow it to the levels where BPY is extracting the incentive fees. 

BPY is a very favorable way for BAM to manage assets with permanent captive capital.  they have complete control thanks to GP/LP structure and will eventually receive 25% of the upside of long term ownership without contributing any additional capital. it is almost certain that rents for the types of assets BPY manages will go up by at least inflation, and with no adjustments to the per unit distribution incentive fee calcs, it is almost certain that BAM will extract lots of value from its LPs.

Imagine if BPY buys out all its subsidiaries over the next few years without BAM contributing additional capital and then grows assets from there at a decent rate. It is not difficult to envision a scenario where BAM is receiving 25% of rent/income growth on a $100B+ property portfolio in 15 years.

Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on October 02, 2013, 06:00:20 AM

Does The Best Brookfield Come In A Small Box?

http://seekingalpha.com/article/1718742-does-the-best-brookfield-come-in-a-small-box?source=email_investing_ideas&ifp=0


giofranchi
Title: Re: BAM - Brookfield Asset Management
Post by: tripleoptician on November 09, 2013, 04:02:16 PM
Reviewing the Q3 Report/shareholder letter:

"Following the BPO/BPY merger, and this transaction(GGP reorganization), BAM will own 68% of BPY and other shareholders will own 32% of BPY. The market cap will be +\- 15 billion with a +\- 5 billion float."

This seems like a massive reorganization as current market cap for BPY is about $1.5 billion. BAM currently owns about 90% of BPY. Shouldnt the increased market cap size and available float significantly affect BPY's weighting in index funds based on Murray Stahl's observations of indexing?

This could be interesting....
Title: Re: BAM - Brookfield Asset Management
Post by: nnayyar on January 08, 2014, 09:06:30 AM
BAM, BPO, BPY seem to be off quite considerably past few days, is there anything specific news out there that I missed? Perhaps something CAD specific? IYR seems to be relatively stable and GGP is actually green at time of this post.

Thanks!
Title: Re: BAM - Brookfield Asset Management
Post by: nnayyar on January 10, 2014, 12:11:27 PM
Good article on BPY:

http://seekingalpha.com/article/1936481-brookfield-property-partners-fair-value-or-inflated-value?source=feed_f

Even though its negative! lol I am a bull on the name. I left a response, my value of the units using MARKET prices still gives me a value in the 25's. The uncertain portion of my valuation is the Finance Development, RE Finance Fund, and Sector RE funds which I have at 2.3B. As stated in comment, if i knock 1B off the price I still get ~22 in NAV. The other prices are taken directly from publicly traded market prices and ownership %'s.

 
Title: Re: BAM - Brookfield Asset Management
Post by: james22 on April 21, 2014, 10:08:08 AM
Brookfield Asset Management (BAM +0.3%) receives approval from the Toronto Stock Exchange to buy back up to 53.5M shares or 10% of its outstanding shares over the next year. Stock may also be purchased on the NYSE.

http://seekingalpha.com/news/1682653-brookfield-asset-management-to-buy-back-up-to-10-percent-of-float
Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on April 22, 2014, 08:45:06 AM
Brookfield Asset Management (BAM +0.3%) receives approval from the Toronto Stock Exchange to buy back up to 53.5M shares or 10% of its outstanding shares over the next year. Stock may also be purchased on the NYSE.

http://seekingalpha.com/news/1682653-brookfield-asset-management-to-buy-back-up-to-10-percent-of-float

This is something BAM receives approval for on an annual basis.  That's not to say they won't buy back a chunk of shares, but the approval in itself is not very newsworthy.
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on May 18, 2015, 05:23:57 AM
GrafTech Enters Into Definitive Transaction Agreement with an Affiliate of Brookfield Asset Management

http://seekingalpha.com/pr/13537206-graftech-enters-into-definitive-transaction-agreement-with-an-affiliate-of-brookfield-asset-management


Gio
Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on June 02, 2015, 02:31:02 AM
Brookfield Property Partners agrees to buy Centre Parcs

http://www.brookfieldpropertypartners.com/content/2015_press_releases/brookfield_agrees_to_acquire_center_parcs_from_bla-42310.html

The purchase price has not been disclosed though is reported in the press as £2.4bn (not clear whether this is the equity value or inclusive of debt).  When I read that Blackstone bought for just £265m in 2006 (i.e. close to the last market peak!), I almost choked on my porridge!  Digging a bit more I read that Blackstone invested at least £1bn in the business (reversing a 2002 sale-and-leaseback costing £825m, opening a new facility in Woburn costing £250m).....perhaps more than this as it seems like the business was previously under-invested.

http://www.thisismoney.co.uk/money/markets/article-2666305/CITY-FOCUS-Center-Parcs-road-flotation-stock-market-return-12-months-away.html

For me Centre Parcs looks to me a bit of a departure from the core BPY model, namely:
1. Real assets with low obsolescence risk (tick.....though these types of holidays are quite fashionable these days, could reverse in time; in which case I would question value of alternative use)
2. High visibility of cash flows (tick......5-year occupancy rate of 97% is good, though likely highly seasonal and somewhat weather-dependent)
3. Low operating costs and maintenance expenditure (I would think less so the case with Centre Parcs). 

That said, I see the Brookfield group already owns a couple of similar resorts in Las Vegas / The Bahamas.

Valuation-wise, it's difficult to say anything definitive as I don't have complete information.  According to a Telegraph article the other day, Centre Parcs made £147m EBIT in the year to April 2014.  This excludes earnings from Woburn, which was opened in June 2014; I expect this site to be a major success given its proximity to London.

I also imagine Brookfield will avoid paying taxes here as they have a complex web of international holding companies and large NOLs.

I would expect there are opportunities to invest more in the business over time.  It recently announced it would spend E200m on a park in Ireland, opening 2019.
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on June 09, 2015, 05:04:48 AM
http://seekingalpha.com/article/3241826-brookfield-asset-managements-fee-growth-bodes-well-for-the-future?auth_param=7i5hb:1andlah:c31926acd78c5d91609b1bd13785922e&uprof=25


Cheers,

Gio
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on June 10, 2015, 11:44:29 PM
http://seekingalpha.com/article/3250785-brookfield-asset-management-top-notch-alternative-asset-manager-a-steal-in-current-market?auth_param=7i5hb:1anhoat:a402df91073ff543240d5b2cbee4650f&uprof=25


Gio
Title: Re: BAM - Brookfield Asset Management
Post by: Liberty on June 20, 2015, 04:05:09 AM
http://brooklyninvestor.blogspot.com/2015/06/brookfield-asset-management-bam.html
Title: Re: BAM - Brookfield Asset Management
Post by: giofranchi on July 27, 2015, 11:26:41 PM
BAM: Misunderstood 83% Free Cash Flow Machine: Brookfield Asset Management


Gio
Title: Re: BAM - Brookfield Asset Management
Post by: notorious546 on October 07, 2015, 07:05:00 AM
At its investor day in NYC this morning, BAM announced they are spinning off a 35% stake in Brookfield Business Partners to BAM shareholders, worth approx $500mm.  This is their property and construction services businesses unit, and will be dual listed in the US and Canada.  Watch for a special dividend in shares worth about $0.50/share in Q1/16.
Title: Re: BAM - Brookfield Asset Management
Post by: thefatbaboon on October 14, 2015, 09:25:13 AM
http://www.bloomberg.com/news/articles/2015-10-14/ubs-sees-sovereign-assets-shrinking-by-1-2-trillion-by-year-end

Title: Re: BAM - Brookfield Asset Management
Post by: notorious546 on October 14, 2015, 09:50:00 AM
http://www.bloomberg.com/news/articles/2015-10-14/ubs-sees-sovereign-assets-shrinking-by-1-2-trillion-by-year-end

this could be a nice little tailwind, will be interesting to see how this unfolds
Title: Re: BAM - Brookfield Asset Management
Post by: thefatbaboon on October 14, 2015, 09:56:40 AM
http://www.bloomberg.com/news/articles/2015-10-14/ubs-sees-sovereign-assets-shrinking-by-1-2-trillion-by-year-end

this could be a nice little tailwind, will be interesting to see how this unfolds

You think tailwind?
Title: Re: BAM - Brookfield Asset Management
Post by: notorious546 on October 14, 2015, 10:40:55 AM
http://www.bloomberg.com/news/articles/2015-10-14/ubs-sees-sovereign-assets-shrinking-by-1-2-trillion-by-year-end

this could be a nice little tailwind, will be interesting to see how this unfolds

You think tailwind?

might be some good assets to pick up from these sellers no? Seems like they will be attempting to create liquidity in a fairly short time frame
Title: Re: BAM - Brookfield Asset Management
Post by: Adam on January 06, 2016, 08:29:07 AM
Can anyone comment on BAM?

What do you think of the recent sell off?
Title: Re: BAM - Brookfield Asset Management
Post by: karthikpm on January 06, 2016, 09:22:57 AM
I'm adding to BAM. I think they will do well over the next decade. They're good operators though commercial real estate looks like a bubble in NA. They have been adding in Brazil and other markets
Title: Re: BAM - Brookfield Asset Management
Post by: Aurelius on January 15, 2016, 05:57:57 PM
Bruce Flatt Bloomberg Best interview:

http://www.bloomberg.com/news/videos/2016-01-16/bloomberg-best-brookfield-ceo-bruce-flatt?cmpid=yhoo.headline
Title: Re: BAM - Brookfield Asset Management
Post by: marcowelby on January 16, 2016, 06:05:32 PM
I like the interview.

The best part for me is “If you can buy [assets] at a discount to replacement cost you have a huge margin of safety”

Hard to argue with that!

I like also the very long term value investment philosophy.

Marc





Title: Re: BAM - Brookfield Asset Management
Post by: sys on January 16, 2016, 09:41:25 PM
i always like what he has to say.  but why is flatt giving interviews now?
Title: Re: BAM - Brookfield Asset Management
Post by: notorious546 on January 27, 2016, 03:20:17 PM
https://webcasts.welcome2theshow.com/cibcwhistler2016/brookfield-renewable
Title: Re: BAM - Brookfield Asset Management
Post by: LongTermView on January 27, 2016, 04:19:43 PM
I like the interview.

The best part for me is “If you can buy [assets] at a discount to replacement cost you have a huge margin of safety”

Yeah, that Bloomberg interview was nice!
Title: Re: BAM - Brookfield Asset Management
Post by: KCLarkin on April 04, 2016, 10:23:29 AM
There is some discussion of BAM on another thread. Please be aware that some shorts are circling this name.

It is safe to assume that Bill Alpert didn't decide to write an article on obscure IFRS accounting at BAM without prompting:
https://www.google.ca/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwjwmMTHi_bLAhUhmoMKHXcKB2MQqQIIHTAA&url=http%3A%2F%2Fwww.barrons.com%2Farticles%2Fhow-fair-are-brookfields-fair-value-estimates-1459570693&usg=AFQjCNEZKbCsUHtBRphUmlWUwXZownCL9w

And Roddy Boyd:
http://sirf-online.org/2013/11/18/brookfields-looking-glass-world/

Both these guys are friendly with some prominent short sellers.

So longs should be prepared for a potential bear raid. Or there could be some real problems here.

Disclosure: I own some BAM at a low cost base, but the company is way too complex for me to analyze.
--
Modified Barron's link to use Google backdoor.
Title: Re: BAM - Brookfield Asset Management
Post by: Jurgis on April 04, 2016, 10:49:05 AM
Disclosure: I own some BAM at a low cost base, but the company is way too complex for me to analyze.

Right.
Title: Re: BAM - Brookfield Asset Management
Post by: notorious546 on April 04, 2016, 11:16:57 AM
There is some discussion of BAM on another thread. Please be aware that some shorts are circling this name.

It is safe to assume that Bill Alpert didn't decide to write an article on obscure IFRS accounting at BAM without prompting:
http://www.barrons.com/articles/how-fair-are-brookfields-fair-value-estimates-1459570693?mod=BOL_hp_highlight_6

And Roddy Boyd:
http://sirf-online.org/2013/11/18/brookfields-looking-glass-world/

Both these guys are friendly with some prominent short sellers.

So longs should be prepared for a potential bear raid. Or there could be some real problems here.

Disclosure: I own some BAM at a low cost base, but the company is way too complex for me to analyze.

Is it really surprising that people don't use the same accounting treatment for the same assets? I'd be surprised if you really found management team's who own portions of assets arrived at the same exact value.
Title: Re: BAM - Brookfield Asset Management
Post by: Og on April 04, 2016, 11:59:24 AM
Is this article less of a concern to those when you consider that asset sales have an impressive track record of being ABOVE what was stated on the books?

BAM does have a history of being conservative on the balance sheet. So to those who are bearish on BAM -- I ask what is different now?
Title: Re: BAM - Brookfield Asset Management
Post by: 100 Shares on April 04, 2016, 02:21:05 PM
Is there a way to read te Barron's article without an account or can someone repost here?

Thank you!
Title: Re: BAM - Brookfield Asset Management
Post by: notorious546 on April 04, 2016, 02:38:28 PM
Is there a way to read te Barron's article without an account or can someone repost here?

Thank you!
google the title, click the first link, worked for me
Title: Re: BAM - Brookfield Asset Management
Post by: 100 Shares on April 04, 2016, 02:54:45 PM
Thank you that worked. The link brought me to a locked article for some reason.
Title: Re: BAM - Brookfield Asset Management
Post by: sae85400 on April 04, 2016, 02:58:53 PM
It will be available tomorrow or the next day to read for free if the google thing doesn't work(works for WSJ too)
Title: Re: BAM - Brookfield Asset Management
Post by: augustabound on April 04, 2016, 03:55:04 PM
Thank you that worked. The link brought me to a locked article for some reason.

Your referral link has to come from google.
The Google backdoor works for WSJ and Barron's.
Title: Re: BAM - Brookfield Asset Management
Post by: 100 Shares on April 07, 2016, 06:44:01 PM
At year end 2015, common equity was $21,568M. This is the IRFS or "mark-to-market" value of their assets. Is there a way to figure out what the equity would be at cost?
Title: Re: BAM - Brookfield Asset Management
Post by: longlake95 on September 09, 2016, 10:21:20 AM
anyone adding to this as it gets back to the low 40's? The Brazilian pipeline deal seems right up Flatt's alley.
Title: Re: BAM - Brookfield Asset Management
Post by: longlake95 on September 09, 2016, 10:57:58 AM
just some back of the envelope tinkering...if you buy BAM.a at 42.50 and they grow BV at 8% p.a. vs. 18% over the past 10 years, then you'll see a all in return of 12%-19% CAGR. Assuming the market values BAM.a at NAV or a bit of premium to NAV at some point, like the market did in 2007, when BAM.a was priced at 1.4*NAV. That's a stretch, I've used 1.2* NAV for the high bar. They seem to have no trouble raising capital lately. I wonder, though, if as rates tick up in the US, will that pull institutional fee bearing capital away from the a asset managers like BAM, or will they stay as they are looking for higher/stable returns?

Title: Re: BAM - Brookfield Asset Management
Post by: plato1976 on September 14, 2016, 08:13:24 AM
how do you define BV? BAM's book value per share is below 30 now

just some back of the envelope tinkering...if you buy BAM.a at 42.50 and they grow BV at 8% p.a. vs. 18% over the past 10 years, then you'll see a all in return of 12%-19% CAGR. Assuming the market values BAM.a at NAV or a bit of premium to NAV at some point, like the market did in 2007, when BAM.a was priced at 1.4*NAV. That's a stretch, I've used 1.2* NAV for the high bar. They seem to have no trouble raising capital lately. I wonder, though, if as rates tick up in the US, will that pull institutional fee bearing capital away from the a asset managers like BAM, or will they stay as they are looking for higher/stable returns?
Title: Re: BAM - Brookfield Asset Management
Post by: Yours Truly on September 14, 2016, 09:22:33 AM
how do you define BV? BAM's book value per share is below 30 now

just some back of the envelope tinkering...if you buy BAM.a at 42.50 and they grow BV at 8% p.a. vs. 18% over the past 10 years, then you'll see a all in return of 12%-19% CAGR. Assuming the market values BAM.a at NAV or a bit of premium to NAV at some point, like the market did in 2007, when BAM.a was priced at 1.4*NAV. That's a stretch, I've used 1.2* NAV for the high bar. They seem to have no trouble raising capital lately. I wonder, though, if as rates tick up in the US, will that pull institutional fee bearing capital away from the a asset managers like BAM, or will they stay as they are looking for higher/stable returns?

Morningstar show BV at 1.5 right now? Are you using some adjusted NAV figure?
Title: Re: BAM - Brookfield Asset Management
Post by: plato1976 on October 02, 2016, 01:31:33 PM
how do you define BV? BAM's book value per share is below 30 now

In the latest shareholder presentation, they still maintain a $160 fair value in 10 years and $90-$110 in 5 years
Not sure how many folks here agree with this prediction and what's the biggest risk?

just some back of the envelope tinkering...if you buy BAM.a at 42.50 and they grow BV at 8% p.a. vs. 18% over the past 10 years, then you'll see a all in return of 12%-19% CAGR. Assuming the market values BAM.a at NAV or a bit of premium to NAV at some point, like the market did in 2007, when BAM.a was priced at 1.4*NAV. That's a stretch, I've used 1.2* NAV for the high bar. They seem to have no trouble raising capital lately. I wonder, though, if as rates tick up in the US, will that pull institutional fee bearing capital away from the a asset managers like BAM, or will they stay as they are looking for higher/stable returns?

Morningstar show BV at 1.5 right now? Are you using some adjusted NAV figure?
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on December 17, 2016, 04:58:21 PM
Is this article less of a concern to those when you consider that asset sales have an impressive track record of being ABOVE what was stated on the books?

BAM does have a history of being conservative on the balance sheet. So to those who are bearish on BAM -- I ask what is different now?

Eric,

I'm sorry for the very long ping/response time here. This has caught my attention, based on the topic you started not so long ago in the general discussion forum, with responses from among others Uccmal and Jurgis.

What matters here is that  [historical] cost accounting is of no relevance doing financial and performance reporting for this kind of investment for the short term, when the investment is for the long term, and at the same time not-listed.

IFRS reporting is the only way to go with a thing like this, for short term financial reporting.

The first question I ask my self with this thing is: Is the discount rate for each kind of investment - used in the calculation of the net present value of each type project - reasonable?

It's in the financials for 2015 for BAM, p. 29, [if I remember correctly], and to me the individual discount rates does not only seem reasonably, but also - in them selves - provides a margin of safety.

The above mentioned does not imply, that the comments and links from KCLarkin does not need attention. [Thanks, KCLarkin].

I will get back to that here.
Title: Re: BAM - Brookfield Asset Management
Post by: no_free_lunch on December 24, 2016, 06:33:12 AM
Can anyone comment on BAMs history over the past decade?  Just trying to reconcile the relatively flat share price with their growth claims.  It looks like their funds from operations per share have been flat over the past decade so I don't know that the valuation has become any more attractive.   I assume their was some dilution from the financial crisis?
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on December 24, 2016, 07:01:33 AM
Well, the past 10 years included the financial crisis, but probably more importantly the transformation into the asset management company it is now.  So all of those investments are into very high growth fees as well as the carry on the partnerships that are not booked until completion of each fund.  Add to that that outside of the fees, the sales of assets are a bit lumpy and you get where we are right now.
Title: Re: BAM - Brookfield Asset Management
Post by: sys on December 24, 2016, 12:20:33 PM
trying to reconcile the relatively flat share price with their growth claims.

are you accounting for splits and spinoffs?
Title: Re: BAM - Brookfield Asset Management
Post by: no_free_lunch on December 24, 2016, 07:28:20 PM
sys,

No, and that is a problem.  It looks like there was a 3/2 split so based on that AFFO is up by 50%.  It looks like there were at least 2 spinoff's, the more recent one was relative minor, like a regular dividend.  The earlier one I haven't found the info on yet.  I also found that they do not include their carried interest in FFO and given the huge surge in investment management that is material.  I am also looking at USD values and much of their investment is non-US so there has been a substantial currency drag as well.  So as I am learning more it does appear they have grown ffo/share but not sure exactly how much.

I found a post on brooklyn investor laying out a fairly simple methodology to value BAM.  It is very dependent on the multiple assigned to the asset management business but it looks like the company is more or less fairly valued:

$22/share equity
$8.5-12.5/share asset management business

$30.5-34.5/share value vs a $33 share price?  I think there might be $1/share accrued carried interest so a touch higher but kind of in-line with current price.  Do people agree, see reason for a higher valuation?   I realize they are growing their asset management business like mad so perhaps it is more of a GARP candidate?
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on December 24, 2016, 08:07:34 PM
It is definitely GARP.  You can get fair values up to $40 or so, but most of it is based on the growth they will get over the next 10 years.  Their investor day presentations lay out the plan pretty well.  They usually meet their targets.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on February 21, 2017, 05:09:33 AM
I am still trying to understand all of the nuances about the business.  Funds from operations (FFO) have gone up ~27% from 2015 to 2016. With the recent run up in share price, the share/FFO is ~11.8.  Is that an accurate metric?

It sounds like the realized carried interest should grow and contribute more as the capital they have invested matures? 
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on February 21, 2017, 06:30:23 AM
I just helped edit an article on BAMs valuation that might help. This guy uses BAMs previous technique to get to the intrinsic value.

http://seekingalpha.com/article/4047597-brookfield-asset-management-valuation-2016
Title: Re: BAM - Brookfield Asset Management
Post by: vinod1 on February 21, 2017, 01:08:01 PM
I just helped edit an article on BAMs valuation that might help. This guy uses BAMs previous technique to get to the intrinsic value.

http://seekingalpha.com/article/4047597-brookfield-asset-management-valuation-2016

Thanks Race. Good writeup.

One minor quibble, the author removes the "Brookfield Capital portion of earnings".

A reason for including them is that the publicly traded partnerships are worth what  they are based on the present value of their cash flows which includes the expense associated with fees that the parent asset management company charges. So to BAM the fees represent additional source of value even though some of it is coming from its own capital.

So if you want to exclude the fees fine. Then you should increase the value of the publicly traded partnerships since the portion of the fees attributable to the parent asset management company are no longer an expense.

Not sure if I am explaining it well enough.

Vinod
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on February 21, 2017, 03:50:30 PM
I didn't quite follow that.  Perhaps I kind of get it.  Anyway, he had contacted Brookfield about his method and they seemed to think it was pretty good (though there was quite a bit of debate on the taxes, which I was quibbilng with). 

They also used to have some right-ups for lower than book value and "franchise value" which might have offset the fee earnings adjustment.  He doesn't make that adjustment as it is too hard to do from the outside.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on February 21, 2017, 04:21:26 PM
Thank you racemize, that was very informative.

Do you see any issue with the ability to continually create new funds, allocate more and more capital, while still maintaining a high ROIC?  Their future business is determined by their ability to produce high returns today, right?

Flatt in an interview did mention that this shouldn't be an issue due to the significant cost of real assets but I am curious what your thoughts are.  Is any concern on dilution of the brand name if BAM isn't able to continue their high returns?
Title: Re: BAM - Brookfield Asset Management
Post by: vinod1 on February 21, 2017, 07:26:57 PM
I didn't quite follow that.  Perhaps I kind of get it.  Anyway, he had contacted Brookfield about his method and they seemed to think it was pretty good (though there was quite a bit of debate on the taxes, which I was quibbilng with). 

They also used to have some right-ups for lower than book value and "franchise value" which might have offset the fee earnings adjustment.  He doesn't make that adjustment as it is too hard to do from the outside.

In every one of the the company's presentations they value the asset management company by including the fees from its own capital contribution. So I am surprised they did not point it out.

Take a simple example of a parent company (PA) which owns 100% an operating company (OP) and 100% of an asset management company (AM).

AM invests the PA capital and OP runs the operating assets.

operating company (OP)  has revenue of $5, expenses of $3 and a pre-tax profit of $2. Included in the expenses are $1 in management fees that it pays to the asset management company (AM).

asset management company (AM) has revenue of $1 and no expenses so it has a pre-tax profit of $1.

Now assuming the market values both companies at a pre-tax earnings multiple of 10, OP would be worth $20 and AM would be worth $10.

Now you can argue that OP paying $1 in management fees is a wash for the parent company (PA) and hence should not be included in the calculation. In that case OP would be worth $30, if you make that adjustment.

We have the same situation with BAM, except that it is not 100% ownership and it manages outside capital as well. But the logic remains the same.

I had the same first impression as the author when I first tried to understand why BAM is valuing fees that are generated on its own capital. If we do a pure earnings based valuation on all assets, this would be easy to see. But it is easier to do an asset based valuation on the subs and put an earnings multiple on the asset management firm. This obscures the economics of the business.

I might be wrong but that is how I understand why the company is valuing the fees on its own capital.

Vinod
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on February 21, 2017, 07:42:59 PM
Thanks for the explanation Vinod, I'll keep thinking about it.

Thank you racemize, that was very informative.

Do you see any issue with the ability to continually create new funds, allocate more and more capital, while still maintaining a high ROIC?  Their future business is determined by their ability to produce high returns today, right?

Flatt in an interview did mention that this shouldn't be an issue due to the significant cost of real assets but I am curious what your thoughts are.  Is any concern on dilution of the brand name if BAM isn't able to continue their high returns?

BAM invests along side the funds, so I hope that they will only raise funds to the extent that they can successfully invest it.  I tend to trust them that they will keep investing intelligently, but if they didn't, yes it would be a risk.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on February 22, 2017, 03:35:06 PM
Ah yes, that makes sense.
Title: Re: BAM - Brookfield Asset Management
Post by: Sionnach on March 01, 2017, 08:17:26 PM
Not sure if it's been posted before but happened to come across this:

http://sirf-online.org/2013/03/11/paper-world-of-brookfield-asset-management/

Some valeant-like accusations in the article. Anyone have any thoughts on it's validity?

Is it the Lou Simpson curse?
Title: Re: BAM - Brookfield Asset Management
Post by: Jurgis on March 01, 2017, 08:18:33 PM
Not sure if it's been posted before but happened to come across this:

http://sirf-online.org/2013/03/11/paper-world-of-brookfield-asset-management/

Some valeant-like accusations in the article. Anyone have any thoughts on it's validity?

Is it the Lou Simpson curse?

There were accusations in Barron's last year too. FWIW. No comment on content.
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on March 02, 2017, 04:16:01 AM
THe article is from March 2013. So far, the house of cards still stands
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on March 02, 2017, 05:31:30 AM
Since 2013 they have split off BBBU, BIP, BEP, and BPY to make the structure more easy to understand.  Investors are more comfortable with the business now that it is more transparent.
Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on March 02, 2017, 05:42:03 AM
There was a discussion on the BAM thread about SIRF / Roddy Boyd back when the article came out.....late Feb 2013.  It includes a link to / some discussion of Brookfield's own response to the SIRF article.  You might find this useful
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on March 02, 2017, 09:22:45 AM
That SIRF article resurfaces (and apparently resurfaces again) whenever BAM is analyzed. Last I checked, it didn't feel very compelling to me, as BAM has talked fairly about its business and have been fairly transparent.  Then again, I don't deep dive regularly.
Title: Re: BAM - Brookfield Asset Management
Post by: karthikpm on May 02, 2017, 11:06:27 AM
https://www.forbes.com/sites/antoinegara/2017/05/02/brookfields-bruce-flatt-billionaire-toll-collector-of-the-21st-century/#6bf6b62c792d
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on May 05, 2017, 08:12:39 AM
Here's a Bloomberg video interview:

https://www.bloomberg.com/news/videos/2017-05-02/brookfield-s-flatt-excited-about-the-u-s-overall-video

BAM hasn't been my greatest stock investment - though it's hard to keep track with the spinoffs - as I tend to jump in at the temporary peaks.  But it's been pretty good.  However, the lessons I learned from Flatt has shaped a lot of my personal, professional and investing style.  Love the guy.
Title: Re: BAM - Brookfield Asset Management
Post by: Aurelius on May 05, 2017, 08:53:13 AM
If you'd like to share, I'd be curious to hear what those lessons are?
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on May 05, 2017, 10:20:10 AM
Sure.  In my pre-30s, I had decent career path that I squandered because I didn't work that hard.  I invested in a way that relied heavily on leverage (options mostly) that I hoped would result in big gains (without doing much due diligence), I was frugal but it was more due to laziness.

Today, I work harder and more than I ever imagined, but it doesn't feel like work, it just feels like a thing that I can excel at doing (related to real estate).  I got more into real estate.  I got more into value-ish, outsider-isa, quality-focused investment - that even though my due diligence skills aren't that great, I have a greater grasp of what and why I'm investing.  I look at cash flow a lot more.  Realizing stabile-ish 12% return is amazing in the long run.

A lot of it is just being mature, hard working, diligent, and so forth.  I'm far from meaningfully successful, though I feel ultimately I will be moderately so.  But the goal is more being mature, hard working, diligent, etc. that success itself.
Title: Re: BAM - Brookfield Asset Management
Post by: LesPaul on May 05, 2017, 11:33:38 AM
Sure.  In my pre-30s, I had decent career path that I squandered because I didn't work that hard.  I invested in a way that relied heavily on leverage (options mostly) that I hoped would result in big gains (without doing much due diligence), I was frugal but it was more due to laziness.

Today, I work harder and more than I ever imagined, but it doesn't feel like work, it just feels like a thing that I can excel at doing (related to real estate).  I got more into real estate.  I got more into value-ish, outsider-isa, quality-focused investment - that even though my due diligence skills aren't that great, I have a greater grasp of what and why I'm investing.  I look at cash flow a lot more.  Realizing stabile-ish 12% return is amazing in the long run.

A lot of it is just being mature, hard working, diligent, and so forth.  I'm far from meaningfully successful, though I feel ultimately I will be moderately so.  But the goal is more being mature, hard working, diligent, etc. that success itself.

I admire this line of thinking and I personally find purpose and worth in this pursuit as well!
Title: Re: BAM - Brookfield Asset Management
Post by: sys on May 05, 2017, 08:34:26 PM
i've very gradually been convinced by flatt (although it can still be hard for me to put into practice) that it is often wise to pay up for premium assets - which may never become available cheap.

obviously not a unique insight from bam, but watching them is what has helped convince me.
Title: Re: BAM - Brookfield Asset Management
Post by: doughishere on May 13, 2017, 06:05:18 AM
https://bam.brookfield.com/~/media/Files/B/BrookField-BAM-IR/press-releases-related-links/2017/F%20-%20BAM%20Q1_2017_Ltr_to_Shareholders.pdf

Title: Re: BAM - Brookfield Asset Management
Post by: karthikpm on May 13, 2017, 10:41:14 AM
Need many more 245 Park Street kind of deals. Interesting take on retail
Title: Re: BAM - Brookfield Asset Management
Post by: LongTermView on May 13, 2017, 12:05:21 PM
Need many more 245 Park Street kind of deals.

Ohgodyeah!

For those who haven't yet gone through the letter:
Quote
In 1996, we purchased the property as part of the acquisition of a New York real estate company that was in bankruptcy. At that time, we allocated $430 million of the total purchase price to this property. It came with a $290 million mortgage, meaning that we invested $140 million to acquire the equity. In 2001, the value of the property had increased substantially, due to our renovation and subsequent re-leasing of the property with higher rents and stronger credit tenants. This enabled us to refinance the property with a $500 million mortgage and withdraw $200 million of cash.

In 2003, we sold a 49% equity interest to a client for a further $200 million. At the time, a $900 million total value for the property seemed high, and this allowed us to redeploy the capital elsewhere. Over the years, further leasing success, capital improvements and higher rental rates increased the value of the property further and we increased the mortgage on the property again to $800 million. We received another $150 million of cash from this financing. Finally, in this latest transaction we sold the entire building for $2.2 billion. Net of the $800 million mortgage, we received proceeds of $1.4 billion, which was distributed to us and our client.

In total, we received $1.5 billion of cash from our initial $140 million investment – or more than 10 times our initial equity investment. This included refinancing proceeds of $350 million, sale proceeds of $850 million, and $300 million of cash distributions from this property, which are net of tenant inducement and capital expenditures invested back into the property.
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on May 13, 2017, 07:14:45 PM
Quote

In 2003, we sold a 49% equity interest to a client for a further $200 million. At the time, a $900 million total value for the property seemed high, and this allowed us to redeploy the capital elsewhere. Over the years, further leasing success, capital improvements and higher rental rates increased the value of the property further and we increased the mortgage on the property again to $800 million. We received another $150 million of cash from this financing. Finally, in this latest transaction we sold the entire building for $2.2 billion. Net of the $800 million mortgage, we received proceeds of $1.4 billion, which was distributed to us and our client.

In total, we received $1.5 billion of cash from our initial $140 million investment – or more than 10 times our initial equity investment. This included refinancing proceeds of $350 million, sale proceeds of $850 million, and $300 million of cash distributions from this property, which are net of tenant inducement and capital expenditures invested back into the property.

Hmm... I wonder what the difference would have been if they never sold that 49% interest.  Was the redeployed money put to better use than just leaving it in the property?
Title: Re: BAM - Brookfield Asset Management
Post by: no_free_lunch on May 13, 2017, 08:06:29 PM
They would have made 3x their money if they hadn't sold that interest.  However if they had invested the $200M in 2003 into BAM stock they would have made an additional 6-7x their money.  Or to look at the actual number, in 2003 they sold for $200M a $70M initial investment, invested subsequently in bam stock it would have grown to $1.2-1.4B, plus spinoffs and any dividends.  I don't know if that's what they did with the money but using their stock as a proxy seems reasonable.  I think they made a good capital allocation decision there.
Title: Re: BAM - Brookfield Asset Management
Post by: doughishere on May 14, 2017, 05:58:13 AM
Yeah it was interesting. Buffett was asked about Retail RE the other weekend. This and I think Third ave was not bullish on the sector but said they were hunting there.

I think even amazon is opening up stores here in chicago. Edit: http://www.chicagotribune.com/business/ct-amazon-bookstore-chicago-opening-0320-biz-20170318-story.html

Edit: There are stores opening up. http://www.businessinsider.com/retailers-opening-new-stores-this-year-2017-5

Third Ave: http://thirdave.com/wp-content/uploads/2017/04/Q1-2017-Real-Estate-March-31-2017-1.pdf
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on May 15, 2017, 02:33:43 PM
Anyone actively following or owning Brookfield group of companies, I have a question?  BBU recently closed on water facility in Brazil that - I guess - fits right in to BIP's wheelhouse.  BIP bought a water utility in Peru recently.  Does this seem odd allocation of which company buys the Brazil water management company?
Title: Re: BAM - Brookfield Asset Management
Post by: bearprowler6 on May 15, 2017, 04:03:04 PM
BIP vs BBU----different aspects of water focused businesses.

This recent Motley Fool article may be of interest:

https://www.fool.com/investing/2017/04/05/i-still-cant-believe-brookfield-infrastructure-par.aspx


Bottom line---buy all the Brookfield related entities and keep buying---BAM, BBU, BIP, BEP and BPY.
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on May 15, 2017, 05:04:32 PM
BIP vs BBU----different aspects of water focused businesses.

Different aspect but the Peru and Brazil water biz both seem much closer to infrastructure than ... I'm not sure what BBU's focus is.

?
Title: Re: BAM - Brookfield Asset Management
Post by: bearprowler6 on May 15, 2017, 06:14:28 PM
BIP vs BBU----different aspects of water focused businesses.

Different aspect but the Peru and Brazil water biz both seem much closer to infrastructure than ... I'm not sure what BBU's focus is.

?

Why doyou presume that BBU has a focus? BBU is the publically traded private equity partnership of the Brookfield Group. Expect a wide variety of quality businesses to make their way into BBU over time without any specific focus which differs from BIP (infrastructure), BEP (renewable energy) and BPY (real estate).

It may be worth asking Brookfield (they have very helpful investor relations teams) why the Brazilian water infrastructure was bought by BBU and not by BIP? Although water infrastructure has not been a main focus of BIP up until now. The BIP web site is very helpful in understanding BIP's infrastructure focus and geographic emphasis.

 
Title: Re: BAM - Brookfield Asset Management
Post by: Gregmal on May 15, 2017, 06:59:36 PM
Just curious as this seems to be a popular name here; what is the case for this vs a BX or KKR?
Title: Re: BAM - Brookfield Asset Management
Post by: Jurgis on June 22, 2017, 11:13:48 AM
Reposting annual webcast and notes link from http://www.cornerofberkshireandfairfax.ca/forum/events/bam-annual-meeting-in-toronto-on-friday-june-16/ :

http://boards.fool.com/annual-meeting-webcast-32748772.aspx?sort=whole#32748772
https://bam.brookfield.com/en/events-and-presentations

Anyone has plans for Trisura spinoff? Hold, buy, sell?
Title: Re: BAM - Brookfield Asset Management
Post by: LongTermView on June 22, 2017, 12:53:04 PM
Thanks for the link, I enjoyed listening. Not sure what I'll be doing with Trisura.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on August 09, 2017, 01:24:55 PM
WSJ published an article today about possible inconsistent valuing of their Brazilian toll road:

https://www.wsj.com/amp/articles/brookfields-toll-road-to-riches-1502271002

Didn't have any impact on BAM or BIP share price today. Earnings are out tomorrow and I'm sure it will be discussed.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on August 09, 2017, 01:25:18 PM
WSJ published an article today about possible inconsistent valuing of their Brazilian toll road:

https://www.wsj.com/amp/articles/brookfields-toll-road-to-riches-1502271002

Didn't have any impact on BAM or BIP share price today. Earnings are out tomorrow and I'm sure it will be discussed.
Title: Re: BAM - Brookfield Asset Management
Post by: LongTermView on August 09, 2017, 04:52:28 PM
WSJ published an article today about possible inconsistent valuing of their Brazilian toll road:

https://www.wsj.com/amp/articles/brookfields-toll-road-to-riches-1502271002

Didn't have any impact on BAM or BIP share price today. Earnings are out tomorrow and I'm sure it will be discussed.

This is a lot like the http://www.barrons.com/articles/how-fair-are-brookfields-fair-value-estimates-1459570693 article from April of last year.

Neil Downey asked about this during the call and Brian Lawson answered noting that it is a rehash from Barron's with a number of fundamental inaccuracies and that it is misleading.

Here are some of the things Brian said:
Quote
...the management fees that Brookfield earns are based on the stock market capitalization of our listed affiliates, and not based on the IFRS valuations or book values.

And in fact if you look at the company that owns those assets that you referred to, Brookfield Infrastructure Partners, most of the assets owned by BIP are not actually mark-to-market at all because they are concessions. And so the IFRS value is only a fraction of what the value of the company is. And this is clearly evidenced by the fact that BIP has sold many businesses over the past number of years [for proceeds] significantly above IFRS values. We’ve observed that when investors look at a company like BIP, they’re really looking at the ability of it to increase its cash flows and therefore pay a good dividend [(reliable) and one that increases steadily over time] and again none of this is influenced by the IFRS valuations.

And again, the other point we’d like to make and this comes to your comment on the questions raised about the values of our tariffs, which is our Brazilian toll road operations, in particular. And the suggesting that we had widely [differing] values [that] we [assign] to it and again, that’s just not true. We did not revalue this asset over that time period. In fact, this is an even -- we don’t even use fair value accounting or for our tariffs. Just to clarify the confusion around that one. The increase in the value of our tariffs was due to two factors and two factors only; first, we invested another $700 million of cash in the business to fund capital projects and purchase in our interest; and second, the exchange rate for the Brazil currency went up by over 20% during [the] period. So this had nothing to do with our change in our valuation of the business.

Here is the transcript: https://seekingalpha.com/article/4097663-brookfield-asset-managements-bam-ceo-bruce-flatt-q2-2017-results-earnings-call-transcript?part=single
Title: Re: BAM - Brookfield Asset Management
Post by: LongTermView on September 23, 2017, 12:50:09 PM
https://www.wsj.com/articles/amazon-inks-office-space-deal-on-manhattans-far-west-side-1506011956
Quote
The retail giant signed a 15-year lease to take about 360,000 square feet at Five Manhattan West, a revamped building that is part of Brookfield Property Partners L.P.’s new eight-acre development, Brookfield said Thursday.

Amazon said it plans to open its office at Five Manhattan West in 2018, creating a primary location for the company’s advertising division with teams in marketing, product design and engineering.

Amazon will invest $55 million to build out its new office space located at 450 W. 33rd St., which Brookfield has rebranded as Five Manhattan West.

...

The lease will bring the building’s occupancy to 99%, Brookfield said.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on September 29, 2017, 03:55:39 PM
BAM predicts a 22% return over the next 5 years.  Current share price is ~$41 and they are estimating $104 in 2022. 

The numbers in their presentations documenting the past growth of pretty much every aspect of the company are simply amazing.  We will see what the future holds!

https://bam.brookfield.com/en/events-and-presentations
Title: Re: BAM - Brookfield Asset Management
Post by: LongTermView on September 29, 2017, 05:28:17 PM
That slide on page 87 of the first presentation is the one that caught my eye. The footnote says that the estimated total return includes dividends.
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on September 29, 2017, 05:34:23 PM
BAM predicts a 22% return over the next 5 years.  Current share price is ~$41 and they are estimating $104 in 2022. 

The numbers in their presentations documenting the past growth of pretty much every aspect of the company are simply amazing.  We will see what the future holds!

https://bam.brookfield.com/en/events-and-presentations

It's intrinsic value at 104.  Who knows how that it translate to share price?
Title: Re: BAM - Brookfield Asset Management
Post by: scorpioncapital on September 30, 2017, 02:50:33 AM
In that $104 slide, they have a line for
carried interest and fee related interest
but no line for the 'distributions received' which is a line item on page 64...Is that included in the first two?

I see they generated 1.8 billion free cash flow today.
The 2022 prediction would be (if outflows grow a little slower and the distributions received stay the same) $2.7 billion + $1.4 billion = $3.8 billion - ~$800m outflows = $3 billion/year.

At blended average of 15x that's $45 billion in 5 years based on multiple of fcf ($40 billion today's market cap)
or at 20x = $60 billion.

It'd be nice to know what they are predicting for the distributions . But it seems but I don't see more than a double in 5 years or an 80 billion market cap either way.
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on September 30, 2017, 06:59:16 AM
In that $104 slide, they have a line for
carried interest and fee related interest
but no line for the 'distributions received' which is a line item on page 64...Is that included in the first two?

I see they generated 1.8 billion free cash flow today.
The 2022 prediction would be (if outflows grow a little slower and the distributions received stay the same) $2.7 billion + $1.4 billion = $3.8 billion - ~$800m outflows = $3 billion/year.

At blended average of 15x that's $45 billion in 5 years based on multiple of fcf ($40 billion today's market cap)
or at 20x = $60 billion.

It'd be nice to know what they are predicting for the distributions . But it seems but I don't see more than a double in 5 years or an 80 billion market cap either way.

Generally, I'd say a two column approach of net invested capital and some multiple of asset management fees is more appropriate.  Using FCF only doesn't give them full credit for compounding invested capital as the increasing value largely doesn't show up in earnings/FCF.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on October 22, 2017, 10:27:09 AM
I started yesterday to dive into this investment. It's just daunting. As already posted earlier in this topic, it's a complicated beast. Thanks for all contributions so far in this topic [I have read and studied the whole topic today, back from the original starting post] - they seem to be of great help, to get at least some kind of grip - [perhaps even a firm one] on this thing.
Title: Re: BAM - Brookfield Asset Management
Post by: cubsfan on October 22, 2017, 12:54:33 PM
Just a suggestion - after reading the BAM thread of course, as you have.
 I found the last 2 capital market day presentations to be very helpful.
I think the 2016 is still posted on the BAM website, and the most recent one was done last month.
As you say, understanding BAM financials is indeed daunting, not unlike Berkshire. I just found it easier to see the
Forest from the Trees with the care that BAM management takes to explain their view of BAM's intrinsic value. Whether you
believe or not is another story. But I view BAM, like Berkshire, as somewhat a bet on management and their alignment
with shareholders. BAM is my 2nd largest position next to BRK.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on October 22, 2017, 02:36:14 PM
Thank you for guidance here, cubsfan. I'll follow it.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on October 24, 2017, 12:21:34 PM
All right, I'm down - laying straight out on the canvas - on technical knock-out.

BAM vs me, right now: 1 - 0.

Lesson learned [so far]: Start being aware of what kind of fight you are getting into: Is it boxing [, or - perhaps: kickboxing?]? - So far, I have got it really wrong, thereby getting kicked both in my balls, and in my butt.

This is the perfect stock to get a lesson about, if there are flaws to your way of work. Mine: I get carried away about what I read - here, there and everywhere - so, I do not take the time to properly document my findings properly, and because the "thing" is so complicated, I simply loose track, and end up out in the weeds, with no properly documented track backwards in my findings, thereby unable to connect the company specific dots.

The real question here - to stir your own personal pot - is: How do you define your personal "Too hard pile"?

- - - o 0 o - - -

This is so embarrasing to me. I hope it's at least entertaining to you.

- - - o 0 o - - -

- For me, time to get up on the horse again, for a round two, to get it right next time. - Soon [just a few days break]. I'm just as stubborn and persistent as a donkey.
Title: Re: BAM - Brookfield Asset Management
Post by: Og on October 24, 2017, 12:27:08 PM
With BAM, I think it comes down to if you trust management or not. Otherwise, a lot of it is very black boxy.

For full disclosure, I'm a unit-holder in Partners Value Investments LP which has the majority of it's book value in Brookfield Asset Management.
Title: Re: BAM - Brookfield Asset Management
Post by: cubsfan on October 24, 2017, 01:15:28 PM
With BAM, I think it comes down to if you trust management or not. Otherwise, a lot of it is very black boxy.


I could not agree more with what Eric just said.

But I do also think you can see the revenue/profit/BV build from funds being raised and LT contractual fee arrangements.
'Bookings' turn into revenues - and the LT recurring nature becomes more obvious if you go at it a few times.

And if you believe that management is aligned with you with their 30% stake in the ongoing projects - it raises the comfort
factor on the "black box".

If not - then you toss it into the too hard pile.
Title: Re: BAM - Brookfield Asset Management
Post by: Og on October 24, 2017, 01:16:15 PM
With BAM, I think it comes down to if you trust management or not. Otherwise, a lot of it is very black boxy.


I could not agree more with what Eric just said.

But I do also think you can see the revenue/profit/BV build from funds being raised and LT contractual fee arrangements.
'Bookings' turn into revenues - and the LT recurring nature becomes more obvious if you go at it a few times.

And if you believe that management is aligned with you with their 30% stake in the ongoing projects - it raises the comfort
factor on the "black box".

If not - then you toss it into the too hard pile.

exactly
Title: Re: BAM - Brookfield Asset Management
Post by: Uccmal on October 25, 2017, 06:39:27 AM
BAM and its subsidiaries will deliver.  To an extent it is a black box but no more than Berkshire, or Fairfax.  Bruce goes to great lengths to try to explain the company but it is so vast. 

With BAM you can see the real assets (actual pictures) and understand them.  You can see how cheaply they get their debt.  You can see how easily they raise equity and money for their funds. 

Bruce Flatt and company is the closest thing I can imagine to a 52 year old Buffett which is when Berk. shifted to owning more and more full businesses. 

I think the platform they have built over the last 15 years is just hitting the sweet spot.  The fee income or carried interest is growing at a real quip.

But do I understand the whole company.  Not a chance.  They have said they will deilver 20% growth going forward for five years based on existing projects and money raises.  This does not even include larger future raisings. 

If you were to try and project economic growth areas, outside tech, I would say that BAM is right on target.  Energy, Urbanization, and Infrastructure would be my choices for future growth. 

Between BAM and BEP it is my largest position. 
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on October 25, 2017, 06:45:45 AM
BAM and its subsidiaries will deliver.  To an extent it is a black box but no more than Berkshire, or Fairfax.  Bruce goes to great lengths to try to explain the company but it is so vast. 

With BAM you can see the real assets (actual pictures) and understand them.  You can see how cheaply they get their debt.  You can see how easily they raise equity and money for their funds. 

Bruce Flatt and company is the closest thing I can imagine to a 52 year old Buffett which is when Berk. shifted to owning more and more full businesses. 

I think the platform they have built over the last 15 years is just hitting the sweet spot.  The fee income or carried interest is growing at a real quip.

But do I understand the whole company.  Not a chance.  They have said they will deilver 20% growth going forward for five years based on existing projects and money raises.  This does not even include larger future raisings. 

If you were to try and project economic growth areas, outside tech, I would say that BAM is right on target.  Energy, Urbanization, and Infrastructure would be my choices for future growth. 

Between BAM and BEP it is my largest position.

Ditto.  ~20% position.
Title: Re: BAM - Brookfield Asset Management
Post by: longlake95 on October 25, 2017, 10:22:02 AM
I like BAM. A a lot. Big fan of Flatt & Co. But, I think it's fully valued here in the low 50's. For anyone buying at these levels - there's no margin of safety - or am I out to lunch on the fair value of BAM? What do you think it's worth?

Title: Re: BAM - Brookfield Asset Management
Post by: racemize on October 25, 2017, 11:07:13 AM
I like BAM. A a lot. Big fan of Flatt & Co. But, I think it's fully valued here in the low 50's. For anyone buying at these levels - there's no margin of safety - or am I out to lunch on the fair value of BAM? What do you think it's worth?

Mostly buying on the tailwinds and growth at these price levels.  Cheapest growth stock I know of.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on October 25, 2017, 11:27:34 AM
I bought a bit today, to get started. That actually feels good in my stomach.

Basically, and at least to me, it's all explained in the post by Al [Uccmal] earlier today in this topic. [When I grow up, I hope to be able to do posts like Al here on CoBF, short, comprehensive & cut to the bone].

It's all about the understanding of the franchise - as it is right now - and its prospects going forward.

You can go on a wild goose chase - like I have within the last few days, and likely you'll just end up confused without any conviction [like I did].

We sit as investors and look at this enormous balance sheet and this quite complicated capital structure.

The most important asset: The economic value of the client base - by BAM doing its thing - it absolutely nowhere to see in the balance sheet. That is also what makes this thing GARPy [ref. earlier post in this topic by Joel [racemize]].

The economic value of the franchise/the client base is booked at zero value, because it's built up internally [not bought] - over many ears. All the costs related to building it up have historically been expensed in the year the cost were spent. Think tons of hours related to meetings, travel expenses, preparations before meetings, representative costs and so on. No actual client to charge, but costs spent to get a new client in the stable.

I think I read somewhere - again, poor documentation for my part - that the client base was 450 clients - most likely all with deep pockets, and most likely quite some of them with really, really deep pockets, their clients again asking/demanding for a return on capital.

And BAM has already proved its ability to scale up their business materially, during the last years.

- - - o 0 o - - -

This is also just another way to phrase the guidance I've got from cubsfan earlier in this topic. Again, thank you.
Title: Re: BAM - Brookfield Asset Management
Post by: walkie518 on October 25, 2017, 03:11:35 PM
Have owned shares for a couple of years now on the basis that they have a wonderful platform with fabulous client retention. 

The one part with which I struggle is how the company values its real assets. 

In theory, BAM should mark everything to market.  In practice, BAM might be marking to cost.  This means that some properties are vastly understated while others might be somewhat overstated. 

Where this argument might break down is how much the portfolio has appreciated over time, how Flatt et al. are true bad news buyers, and how well the market has perceived the underlying value of the stock?
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on October 25, 2017, 04:56:01 PM
walkie518,

Stated with all due respect for you, you have to distinguish between market value and fair value for the assets of BAM, according to IFRS. They are certainly not the same - for some certain BAM assets, market value - in the short run - does not even have some kind of concept.

The ability to hold on to the asset through thick and thin is absolutely crucial, though.

There are some posts by fellow board member WhoIsWarren in this topic covering it.
Title: Re: BAM - Brookfield Asset Management
Post by: walkie518 on October 25, 2017, 05:34:33 PM
By that logic, one trusts management to be honest and fair with the accounting.

According to GAAP, when the price of oil goes down, Exxon has to mark an impairment of underground reserves. 

According to IFRS, when the price of a real asset goes down, Brookfield can opt not to disclose.  This isn't comforting if I am correct. 

Again, I own shares and think they're doing a terrific job, but I'm not sure how to reconcile? 
Title: Re: BAM - Brookfield Asset Management
Post by: Uccmal on October 25, 2017, 06:08:16 PM
I like BAM. A a lot. Big fan of Flatt & Co. But, I think it's fully valued here in the low 50's. For anyone buying at these levels - there's no margin of safety - or am I out to lunch on the fair value of BAM? What do you think it's worth?

Funny, I discussed this with Racemize privately a few months ago.  We sort of concluded that you could buy it at 50 ish, or sit and hope that it gets cheaper.  I just bought it in and around 50 ish.  Sometimes it aint worth the trouble to earn a few extra points when the runway is so long.  In time paying 45 or 52 wont matter when the stock is in the hundreds.

I got BEP 25% cheaper a year, year and a half ago. 
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on October 26, 2017, 04:42:55 AM
This board turned me onto BAM about a year ago and I held a small position until liquidating it to buy more FFH as I thought one was fairly valued and fairfax was not. 

Since then, I have read more of the earnings calls, all of the partnerships presentation and transcripts from last month.  I am slightly in awe of the whole operation and looking to build a substantial position to hold for a very long time.

BPY has been buying shares for the past year or two and state that they are undervalued.  They belive their retail holdings are not dead in the water although this is priced in.

Similar to what uccmal said, I plan to buy a good amount over the next year or so as the business is going to be worth more in several years.

Bruce Flatt follows this logic in his closing statement for the BAM presentation:

"
 I think what always gets under-estimated in any great business, and when we look at other businesses to buy, what always gets under-estimated, and every one out of four people does the exact same thing, including myself, is that you under-estimate—you look at the business, you see what it’s worth today, but you under-estimate the fact that if it’s growing and it’s a good business, it’s going to be worth so much more in five, 10, 15, 20 years from today. I think the company has that capability and the franchise value is significant. It can’t really be arithmetically calculated in Brian’s calculations, but that’s really the value of what the franchise at Brookfield.
"
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on October 26, 2017, 07:16:03 AM
For folks investing in the partnership, anyone does it via tax advantaged accounts?  I've read a lot of pros and cons regarding that. Any opinions? 
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on October 26, 2017, 07:52:47 AM
I'll elaborate with regards to the partnership and pros and cons for different regular vs tax advantaged accounts.

Foreign tax issues

UBTI - though it might be minimal and partnerships actively seek to avoid it

K1 - never had an issue with this, but not sure how it effects tax advantage account.

Reduction of cost - I heard that if it's long term hold, is it return of capital might several reduce capital basis? Which would be a reason for inclusion in tax advantage account.

I might be missing something.


Title: Re: BAM - Brookfield Asset Management
Post by: racemize on October 26, 2017, 07:58:45 AM
I'll elaborate with regards to the partnership and pros and cons for different regular vs tax advantaged accounts.

Foreign tax issues

UBTI - though it might be minimal and partnerships actively seek to avoid it

K1 - never had an issue with this, but not sure how it effects tax advantage account.

Reduction of cost - I heard that if it's long term hold, is it return of capital might several reduce capital basis? Which would be a reason for inclusion in tax advantage account.

I might be missing something.

When do you get your K-1s?  I've always been paranoid they will come in late.
Title: Re: BAM - Brookfield Asset Management
Post by: Jurgis on October 26, 2017, 08:02:02 AM
I'll elaborate with regards to the partnership and pros and cons for different regular vs tax advantaged accounts.

Foreign tax issues

UBTI - though it might be minimal and partnerships actively seek to avoid it

K1 - never had an issue with this, but not sure how it effects tax advantage account.

Reduction of cost - I heard that if it's long term hold, is it return of capital might several reduce capital basis? Which would be a reason for inclusion in tax advantage account.

I might be missing something.

I think UBTI over $1K is the only issue in general for tax advantaged accounts ( https://www.investingdaily.com/18785/avoiding-taxes-on-your-ira ). So if it's minimal, it should be OK. I am not an expert though.

Foreign taxes is a cost if they are charged, but not as much pain as UBTI potentially.
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on October 26, 2017, 08:56:42 AM
I'll elaborate with regards to the partnership and pros and cons for different regular vs tax advantaged accounts.

Foreign tax issues

UBTI - though it might be minimal and partnerships actively seek to avoid it

K1 - never had an issue with this, but not sure how it effects tax advantage account.

Reduction of cost - I heard that if it's long term hold, is it return of capital might several reduce capital basis? Which would be a reason for inclusion in tax advantage account.

I might be missing something.

When do you get your K-1s?  I've always been paranoid they will come in late.

I only have BIP and the final K1 comes later, usually around March.  There is an initial one earlier in the year, but there's almost always an amended final one. I don't recall if there is any substantial difference cause I don't pay close attention to the earlier k1s.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on October 26, 2017, 01:42:43 PM
Thanks for bringing the taxation of Brookfield L.P.s up here. They are "no-go"s for me, also PVF.UN mentioned by Eric, alone because of  "flow through" taxation of the unit holders.

- - - o 0 o - - -

I have been thinking a bit about BAM competitors today. I found a Willis Tower Watson report called "Global Alternatives Survey 2017". There seems to be a yearly edition of it.

Link (https://www.willistowerswatson.com/en-IE/insights/2017/07/Global-Alternatives-Survey-2017).

[There is a download button to press on the page, to get the report.]
Title: Re: BAM - Brookfield Asset Management
Post by: gokou3 on October 26, 2017, 02:19:00 PM
Eric, may I ask why are you invested in Partners Value instead of directly in BAM?  Is it a leveraged play or was there a discount to NAV when you got in?
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on October 28, 2017, 03:19:44 PM
gokou3,

PVF.UN is levered with preferred stock also, in layers.


Title: Re: BAM - Brookfield Asset Management
Post by: karthikpm on October 29, 2017, 10:02:10 AM
http://www.pressreader.com/canada/the-globe-and-mail-alberta-edition/20171027/281784219345476

BAM is buying some expensive canadian commercial real estate ( google now showed me the link as I was staying at this hotel, little scary when I think about how these topics appear )
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on October 29, 2017, 10:57:15 AM
This afternoon I did my self the favour to listen to the 27th September 2017 Brookfield Asset Management Investor Day  2017 MP3 (https://bam.brookfield.com/~/media/Files/B/BrookField-BAM-IR/audio/bam20170927_final.mp3) while at the same time having the presentation (https://bam.brookfield.com/~/media/Files/B/BrookField-BAM-IR/events/BAM%202017%20Investor%20Day_FINAL.pdf) open on my monitor, while listening.

Great experience, I will just say, and I'll recommend doing so to everyone interested just a bit in BAM.

On the Brookfield main webpage there is a link (http://files.parsintl.com/eprints/S041798.pdf) to a Forbes interview and article about Mr. Flatt and BAM in the 16th May 2017 edition of Forbes.

Especially one sentence in that article has a lot of appeal to me - the last one ... - I suppose it has to you, too:

Mr. Flatt, for the record:

Quote
Over the next 20 years, we are going to make an enormous amount of money.

- - - o 0 o - - -

Push back, please. [Financial reporting matters has already been mentioned in this topic by fellow board members.]
Title: Re: BAM - Brookfield Asset Management
Post by: plato1976 on October 29, 2017, 09:31:25 PM
I may be making a mistake here, but I don't understand the valuation, even after this year's run-up.
So from this year's investor's presentation we have:

($millions)                            2017 2016
Fee related earnings            $ 732 $ 639
Distributions received          1,385 1,251
Realized carried interest         152 15
Total                               $ 2,269 $ 1,905

I believe this earning number 2.2B doesn't include the appreciation of BAM's own capital invested, it only includes the distribution from these invested capital, which is 1385M above.

In another slides it's mentioned that the total return from its own capital is 18% (5% is the distribution and 13% is capital appreciation, I assume). Even if we assume this 18% number won't sustain and assume a more realistic 5%/5% in the future and add back the capital appreciation back to the earning I get 3.6B earning power. This doesn't assume an esp rosy capital appreciation prospects, and doesn't take the carry increase potential into consideration. Compared with a 40B market cap, this seems pretty cheap (even doesn't consider a few well-know growth factors)

Any mistake in my calculation/logic?

In that $104 slide, they have a line for
carried interest and fee related interest
but no line for the 'distributions received' which is a line item on page 64...Is that included in the first two?

I see they generated 1.8 billion free cash flow today.
The 2022 prediction would be (if outflows grow a little slower and the distributions received stay the same) $2.7 billion + $1.4 billion = $3.8 billion - ~$800m outflows = $3 billion/year.

At blended average of 15x that's $45 billion in 5 years based on multiple of fcf ($40 billion today's market cap)
or at 20x = $60 billion.

It'd be nice to know what they are predicting for the distributions . But it seems but I don't see more than a double in 5 years or an 80 billion market cap either way.

Generally, I'd say a two column approach of net invested capital and some multiple of asset management fees is more appropriate.  Using FCF only doesn't give them full credit for compounding invested capital as the increasing value largely doesn't show up in earnings/FCF.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on October 30, 2017, 02:37:32 AM
Yes, Plato,

I understand it the same way as you. Furthermore - as also mentioned earlier by racemize -, I think the capital appreciation of 15 percent that you are referring to is progress in the stock price, not progress in book value per share.

Personally, I'm contemplating to do a calculation of the BAM track record since introduction of IFRS accounting for BAM ['09] the Berkshire/Fairfax/Markel way, with dividends reinvested.
Title: Re: BAM - Brookfield Asset Management
Post by: Uccmal on October 30, 2017, 04:23:32 AM
Article in Bloomberg about Buffett that relates to what BAM does.

https://www.bloomberg.com/news/articles/2017-10-29/everybody-wants-to-invest-like-buffett-here-s-what-it-takes

Talks about the time and expertise involved in making long term whole company investments.  Buffett implemented this style over decades.  BAM has been at it for generations but has really refined its focus under Bruce Flatt as an asset manager and long term owner. 

Private equity and hedge funds want to copy this style but just dont have the resources or long term expertise to do it very well. 
Title: Re: BAM - Brookfield Asset Management
Post by: plato1976 on October 30, 2017, 05:27:14 AM
I suppose eventually the capital appreciation has to be reflected on the book value, when the investment is sold, the gain is realized and/or the fund is due&closed? On average what's their funds' life cycle?

Yes, Plato,

I understand it the same way as you. Furthermore - as also mentioned earlier by racemize -, I think the capital appreciation of 15 percent that you are referring to is progress in the stock price, not progress in book value per share.

Personally, I'm contemplating to do a calculation of the BAM track record since introduction of IFRS accounting for BAM ['09] the Berkshire/Fairfax/Markel way, with dividends reinvested.
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on October 30, 2017, 06:16:22 AM
I believe Eric has just posted or will post a seeking alpha article for the recent presentation, which may be of use.  He also has old ones from the last two years.

Moreover, if you use BAMs method from the presentation, you get around $50 a share.

Plato, I think you are missing that there is a margin associated with those fees / overhead costs to subtract.
Title: Re: BAM - Brookfield Asset Management
Post by: plato1976 on October 30, 2017, 09:59:14 AM
Hi, Racemize:

These numbers are earnings, and also the cash flow items used to calculate FCF in their presentation, so I assume all costs are already deduced. I could be wrong. The only other item in the FCF calculation is an item called "OUTFLOW" which brings FCF to 1.8B from the earning number I posted in my original post which is sth like 2.2B

So, I don't see the cost not included. But, may I know Eric's full seekingalpha ID?
Thanks and appreciate!
/P

I believe Eric has just posted or will post a seeking alpha article for the recent presentation, which may be of use.  He also has old ones from the last two years.

Moreover, if you use BAMs method from the presentation, you get around $50 a share.

Plato, I think you are missing that there is a margin associated with those fees / overhead costs to subtract.
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on October 30, 2017, 12:41:19 PM
Here's the new one:
https://seekingalpha.com/article/4112673-brookfield-asset-management-value-growth-next-5-years
Here's last years:
https://seekingalpha.com/article/3962940-2015-intrinsic-value-brookfield-asset-management

I feel like something isn't quite right with that calculation, as it is coming out too high it seems like, but I'm having trouble putting my finger on it.  Maybe I can try to figure it out in more detail tonight.
Title: Re: BAM - Brookfield Asset Management
Post by: OnTheShouldersOfGiants on November 01, 2017, 02:23:24 PM
I came across the 13f for BAM:

https://whalewisdom.com/filer/brookfield-asset-management-inc#/tabholdings_tab_link

Why does BAM have such a large equity portfolio?
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on November 01, 2017, 02:58:27 PM
BAM is the owner of the General Partner [who controls the individual partnerships] in the following partnerships:

Brookfield Property Partners [BPY.UN],
Brookfield Renewable Partners [BEP.UN],
Brookfield Infrastructure Partners [BIP.UN], and
Brookfield Business Partners [BBU.UN].

Add to to that, material economic interest in each of these partnerships mentioned above.

- - - o 0 o - - -

Furthermore, a  large position in GGP.
Title: Re: BAM - Brookfield Asset Management
Post by: cubsfan on November 01, 2017, 03:25:03 PM
At one time, they owned 30% of GGP, not sure if that still holds...
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on November 01, 2017, 05:30:03 PM
I believe they have increased their position in GGP recently
Title: Re: BAM - Brookfield Asset Management
Post by: OnTheShouldersOfGiants on November 02, 2017, 06:33:04 AM
I appreciate the replies but I'm not sure that explains why BAM has an equity portfolio with over 150 names.
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on November 02, 2017, 08:19:18 AM
I appreciate the replies but I'm not sure that explains why BAM has an equity portfolio with over 150 names.

I believe they have various funds and through their PE stuff?
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on November 02, 2017, 09:42:12 AM
I appreciate the replies but I'm not sure that explains why BAM has an equity portfolio with over 150 names.

I believe they have various funds and through their PE stuff?

They have a public equities fund, which I imagine is being reported through the 13-F.
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on November 02, 2017, 11:16:04 AM
I appreciate the replies but I'm not sure that explains why BAM has an equity portfolio with over 150 names.

I believe they have various funds and through their PE stuff?

They have a public equities fund, which I imagine is being reported through the 13-F.


How does it perform?
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on November 02, 2017, 11:35:37 AM
I appreciate the replies but I'm not sure that explains why BAM has an equity portfolio with over 150 names.

I believe they have various funds and through their PE stuff?

They have a public equities fund, which I imagine is being reported through the 13-F.


How does it perform?

I'm not sure, they talk about it occasionally, but I don't think I've seen what the performance was.  It might be somewhere in one of the investor days.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on November 02, 2017, 12:53:00 PM
Actually, it's - in principle - simple, we just have to drill down the whole BAM thing, top-down. There are 213 legal Brookfield entities on EDGAR (https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&company=Brookfield&owner=exclude&match=&start=0&count=40&hidefilings=0), which we could start with.
Title: Re: BAM - Brookfield Asset Management
Post by: gokou3 on November 02, 2017, 12:57:06 PM
I believe they have increased their position in GGP recently

That's right:

https://web.tmxmoney.com/article.php?newsid=5633276542017897&qm_symbol=BPY.UN

Quote
In addition, subsequent to quarter-end, we exercised all of the outstanding GGP warrants that were set to expire on November 9, 2017, resulting in the acquisition of 68 million GGP shares for approximately $462 million.  As a result, our common equity ownership of GGP increased from 29% to 34%.
Title: Re: BAM - Brookfield Asset Management
Post by: sleepydragon on November 02, 2017, 01:11:43 PM
https://www.timeout.com/newyork/blog/a-dazzling-light-installation-is-coming-to-brookfield-place-this-month-110217
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on November 03, 2017, 04:03:11 AM
I believe they have increased their position in GGP recently

They exercised some GGP warrants that became due and I believe their position in GGP is about 34% now.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on November 11, 2017, 08:17:47 AM
BAM 2017Q3 (https://bam.brookfield.com/en/reports-and-filings) out Thursday this week. In short, just growth all over the place, while the company continues to do its thing.

I get dizzy when I start to think about what this behemoth might look like 10 years from now. I'm still on the school bench with regard to finding a way to study and follow this company going forward.
Title: Re: BAM - Brookfield Asset Management
Post by: Cigarbutt on November 11, 2017, 09:07:38 AM
Hi John,
Disclosure: not up to date, on my watch list, may eventually put a high % of funds into BAM.

An "easy" way is to look a the long term track record and jump in the train.
My own bias would be to understand better before a long term commitment.

A while back, because looking at BAM, I followed a course offered by Coursera and used the below mentioned document.
Thought it was useful, learned a lot and the time invested helped to start reduce the dizziness looking at BAM and what it may become.
To each his/her own way.

https://www.coursera.org/learn/infrastructure-investing#
http://www.untag-smd.ac.id/files/Perpustakaan_Digital_1/FINANCE%20Project%20Finance%20in%20Theory%20and%20Practice.pdf
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on November 11, 2017, 10:15:36 AM
Thanks a lot for guidance, Cigarbutt!

It's actually very much appreciated.

Personally, and so far, I have come to the interim conclusion, that the problem here, with BAM, for my part, most likely is inside my head: The brain wash, that took place when I was younger, to become a CPA, and thereby - by definition - a nitpicker.

I have now been fighting this propensity & bias for more than 5 years, with the aim to become better at investing.
Title: Re: BAM - Brookfield Asset Management
Post by: plato1976 on November 11, 2017, 11:36:39 AM
Is this one a sure double in 5 years?

BAM 2017Q3 (https://bam.brookfield.com/en/reports-and-filings) out Thursday this week. In short, just growth all over the place, while the company continues to do its thing.

I get dizzy when I start to think about what this behemoth might look like 10 years from now. I'm still on the school bench with regard to finding a way to study and follow this company going forward.
Title: Re: BAM - Brookfield Asset Management
Post by: flesh on November 11, 2017, 12:10:31 PM
Thanks a lot for guidance, Cigarbutt!

It's actually very much appreciated.

Personally, and so far, I have come to the interim conclusion, that the problem here, with BAM, for my part, most likely is inside my head: The brain wash, that took place when I was younger, to become a CPA, and thereby - by definition - a nitpicker.

I have now been fighting this propensity & bias for more than 5 years, with the aim to become better at investing.

Great insight John!
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on November 11, 2017, 04:17:01 PM
Is this one a sure double in 5 years?

BAM 2017Q3 (https://bam.brookfield.com/en/reports-and-filings) out Thursday this week. In short, just growth all over the place, while the company continues to do its thing.

I get dizzy when I start to think about what this behemoth might look like 10 years from now. I'm still on the school bench with regard to finding a way to study and follow this company going forward.

Personally, I do not take this question of yours, Plato, too literally - because of your post in this topic earlier [post #257 in this topic, of October 30th 2017]. At least I have to relate to the questions, that you posted that particular day. Your questions are - at least to me - relevant. It's to me about thinking of the downside scenario of the BAM growth story.

Growth stories may - or may not - be a great tool to do the magic to make capital disappear.

Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on November 11, 2017, 04:50:24 PM
Thanks a lot for guidance, Cigarbutt!

It's actually very much appreciated.

Personally, and so far, I have come to the interim conclusion, that the problem here, with BAM, for my part, most likely is inside my head: The brain wash, that took place when I was younger, to become a CPA, and thereby - by definition - a nitpicker.

I have now been fighting this propensity & bias for more than 5 years, with the aim to become better at investing.

Great insight John!

It's the sad truth, flesh. At least I'm now very much aware of it, so there is plenty of room for improvement.

- - - o 0 o - - -

Now back to BAM.
Title: Re: BAM - Brookfield Asset Management
Post by: james22 on November 11, 2017, 06:44:33 PM
https://www.coursera.org/learn/infrastructure-investing#
http://www.untag-smd.ac.id/files/Perpustakaan_Digital_1/FINANCE%20Project%20Finance%20in%20Theory%20and%20Practice.pdf

Thanks for this.

(On my watch list, may eventually put a high % of funds into as well.)
Title: Re: BAM - Brookfield Asset Management
Post by: bookie71 on November 12, 2017, 12:14:23 PM
Quote
Thanks a lot for guidance, Cigarbutt!

It's actually very much appreciated.

Personally, and so far, I have come to the interim conclusion, that the problem here, with BAM, for my part, most likely is inside my head: The brain wash, that took place when I was younger, to become a CPA, and thereby - by definition - a nitpicker.

I have now been fighting this propensity & bias for more than 5 years, with the aim to become better at i
.
Being a CPA and having had my own firm for over 45 years, you are not unique other than you recognize the problem.  It seems to go with the profession.  We aren't caused "bean counters" for nothing.

We want to rely on ratios and "rules of thumb" such as working capital should be at least 2.  Then we ignore the "exceptions" such as fast food etc.

I'm not sure if there is a cure other than being aware of the problem and working at it all the time.
 
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on November 14, 2017, 04:46:27 AM
What do people think about BPY buying the rest of GGP?  As they owned ~1/3 of the business anyway it is not too much of a leap.  They are obviously very familiar with GGP's operations and comfortable with what they see.

BAM believes BPY is undervalued, and BPY believes GGP is also undervalued.  BPY has a yield of 5+ while GGP has 4%.  It is stated that BPY is willing to pay for the rest of the deal with cash or BPY shares.  If they issue BPY shares that they believe are undervalued, how accretive is the deal? 

BPY mentioned on the recent call that they are recycling 1-2 billion, and possibly more, in northeast US office space.  I am assuming they would use some recycled assets and money from funds.  BAM at the investor day mentioned they are creating a fixed income like fund, using lower but stable yields for their clients and that there is quite a bit of demand for it.  Could work for this.

In the most recent call it was mentioned that buying anchor properties and converting them realized 20% levered returns with minimal risk.  The end goal I am guessing would be to recycle individual malls somewhere down the road.
Title: Re: BAM - Brookfield Asset Management
Post by: Uccmal on November 14, 2017, 06:56:19 AM
What do people think about BPY buying the rest of GGP?  As they owned ~1/3 of the business anyway it is not too much of a leap.  They are obviously very familiar with GGP's operations and comfortable with what they see.

BAM believes BPY is undervalued, and BPY believes GGP is also undervalued.  BPY has a yield of 5+ while GGP has 4%.  It is stated that BPY is willing to pay for the rest of the deal with cash or BPY shares.  If they issue BPY shares that they believe are undervalued, how accretive is the deal? 

BPY mentioned on the recent call that they are recycling 1-2 billion, and possibly more, in northeast US office space.  I am assuming they would use some recycled assets and money from funds.  BAM at the investor day mentioned they are creating a fixed income like fund, using lower but stable yields for their clients and that there is quite a bit of demand for it.  Could work for this.

In the most recent call it was mentioned that buying anchor properties and converting them realized 20% levered returns with minimal risk.  The end goal I am guessing would be to recycle individual malls somewhere down the road.

I just bought some shares in BPY last week.   Just a few with cash I had in my registered accounts, and TFSA.  Just in time for the stock to drop on this bid.  They did mention recycling urban malls into offices and so forth.  They appear to have a plan in mind for these spaces. 
Title: Re: BAM - Brookfield Asset Management
Post by: bizaro86 on November 14, 2017, 02:53:15 PM
From BAM perspective, BPY pays fees and GGP doesn't, so increasing BPY size is a benefit.
Title: Re: BAM - Brookfield Asset Management
Post by: LongTermView on November 17, 2017, 08:48:31 PM
https://www.wsj.com/articles/a-global-real-estate-giant-whispers-were-number-one-1510937012
Title: Re: BAM - Brookfield Asset Management
Post by: no_free_lunch on November 18, 2017, 08:04:43 AM
From BAM perspective, BPY pays fees and GGP doesn't, so increasing BPY size is a benefit.

I think this really nails it.  I recall earlier in this thread somebody mentioned that it is best to hold BAM over the subs.  It just seems you have the most options/flexibility with the parent.
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on November 18, 2017, 11:26:47 AM
From BAM perspective, BPY pays fees and GGP doesn't, so increasing BPY size is a benefit.

I think this really nails it.  I recall earlier in this thread somebody mentioned that it is best to hold BAM over the subs.  It just seems you have the most options/flexibility with the parent.

Owning BAM. Is like skimming froth from the top. If there is enough froth and there is going to be more froth in the future, it is quite obvious what is the best vehicle to own.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on November 18, 2017, 11:39:47 AM
... Is like skimming froth from the top. If there is enough froth and there is going to be more froth in the future, it is quite obvious what is the best vehicle to own.

Hilarious, Spekulatius. Serious note here: Yes, the fees for BAM in this whole system actually matters a lot. Discussed at length earlier in this topic.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on November 19, 2017, 08:45:31 AM
This topic started on October 11 2011. For those fellow board members who have caught interest in BAM after that date [certainly includes me], there is actually a topic in the General Discussion forum under the topic title "BAM BAM" running active in the period October 20 2010 to January 20 2011. (http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/bam-bam/) [ * ]

There are a lot goodies posts in that particular topic [absolutely also good mood and good humor!], incuding a link to an old interview of Mr. Flatt, which tries to reveal some shades of him on a personal [and private] level.

- - - o 0 o - - -

How about GGP? - I mean should we discuss GGP in this topic, based on the actual situation with an offer from BAM? GGP is mentioned in many topics here on CoBF, but not in its own separate topic in the Investment Ideas forum.

I have been reading up on GGP three evenings within the least week or so.

- - - o 0 o - - -

[ * ] That's actually the nickname for the cat here used by the Lady of the House.
Title: Re: BAM - Brookfield Asset Management
Post by: WhoIsWarren on November 20, 2017, 03:18:07 AM
In today's Financial Times, article mainly about BIP (sorry if this is posted in the wrong place).

Specifically, the article highlights a natural gas pipeline asset that is owned jointly by BIP and Kinder Morgan, where BIP values the asset 70% higher than its partner.  When asked to explain the differential, BIP management explains the difference between IFRS v's US GAAP accounting (fair value v's at cost).  This isn't the first time we've seen this.  In theory this makes sense and all could be dandy, but it does raise the prospect of aggressive accounting valuations.

Author also mentions BIP's Bermudan incorporation, which affords less protections to investors.  Overall the tone of the article is negative, without having anything concrete.

https://www.ft.com/content/7efb9a6a-cbbc-11e7-aa33-c63fdc9b8c6c
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on November 20, 2017, 04:11:45 AM
This same piece has come up in Barron's and WSJ. it is addressed during BIP earnings call in the summer. Q2 I guess
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on November 20, 2017, 02:04:30 PM
John,

I plan on digging back into those old threads.  Thanks for mentioning BAM BAM.

BPY is becoming pretty interesting at these prices.  It has done nothing but drop since the announcement. 

This is an interesting article about how GGP got to where they are:

https://turnaround.org/sites/default/files/5.%20Paper%20-%20GGP%20-%20NYU.pdf

Their problems for the past 10+ years have only been due to debt and not the quality of their properties.

Last tuesday night I went to a GGP mall.  It was about 7pm and the mall was active considering the day and time.  The areas were very well decorated for the holiday season. The food court had ~75% of the tables occupied.  Didnt see a single vacancy or sign of distress.  This particular mall has been renovated extensively over the past 5 years to include the eating, entertainment, and residential living that BPY/GGP so frequently discuss. 

I do not feel comfortable investing in particular brick and mortar retailers but that is where Brookfields experience comes into play.  I can see why institutional funds are willing to give them so much $$$
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on November 26, 2017, 10:57:30 AM
Thank you a lot for sharing that particular piece from the turnaround site, chrispy.

Finally, I had the time this afternoon to read it in whole. It's an awesome study of a friggin' big blow up. Almost like reading a very good novel or a crime story.

Somehow, I love when professors, not eating canteen food, because they are too cheap, and bringing their lunch boxes forth to work and back every day [with no skin in the game, with fixed salaries, fixed pensions schemes - most likely devoted to indexing] - devote all their time into an in depth study like this, with absolutely no time constraints on the study - in the name of "science", thereby providing all the nitpicking with regard to sources in notes etc. [ * ]

- - - o 0 o - - -

One of the best descriptions I have ever read about how bad things can go, if you operate in to a turmoil with a balance sheet mismatch.

- - - o 0 o - - -

[ * ] Perhaps I should add "[<-?]" after "skin in in the game" and several other places in this post. - And more professor slapping here: I remember many years ago, when I was a B.Sc. student in economics, I had a meeting with my law professor, knocked on the door to his office - at time, and got invited in by him, despite he was in the middle of something. He started the meeting out with saying - with a big smile! : "This is my most important research tool!" [holding his scissors in his right hand...].
Title: Re: BAM - Brookfield Asset Management
Post by: maxthetrade on December 12, 2017, 05:05:29 AM
Good Interview with Bruce Flatt on Bloomberg:
https://finance.yahoo.com/video/brookfield-asset-management-trying-more-223839733.html
Title: Re: BAM - Brookfield Asset Management
Post by: cubsfan on December 12, 2017, 06:16:57 AM
Max - thanks for posting. Excellent interview. I love this guy!
Title: Re: BAM - Brookfield Asset Management
Post by: longlake95 on December 12, 2017, 08:09:41 AM
Flatt is truly a cut above most CEO's.
Title: Re: BAM - Brookfield Asset Management
Post by: LongTermView on December 12, 2017, 08:41:26 AM
Nice video, Max! Some cliffs:
###
What sets you apart? Operational focus from how we started.

Advantages:
1. size
2. global scale
3. operating capabilities


In 2009 we put every dollar to work. Today is not one of those times.
###

At about the 9:50 mark, the first of two charts is shown. It is noted that the first chart dates back to when Bruce started as CEO. It shows BAM outperforming Berkshire and the S&P.

It is noted that the charts are simple price appreciation, not total return.

Bruce is asked what the second chart [between BAM and the S&P over the past 5 years] is telling us?
Quote
I would say that in an up market we do ok but not as well as some others.

And what you've seen in the past 5 years is a tremendous bull market in capital appreciation of stocks and we've gone along with it but we haven't outperformed that.

Bruce is asked what will change that.
Quote
I think the next downturn. And it always does.
We have a lot of capital sitting on the  balance sheet today.

I'm surprised Bruce didn't talk about the difference between simple price appreciation and total return. The value of spinoffs is substantial and it doesn't show up in the charts. Recent examples are Trisura and BBU.
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on December 12, 2017, 09:03:54 PM
Definitely good interview.  Better than average, with surprisingly adequate questions, and nice responses.

This is the first time I noticed, but the amount of time Flatt starts his response with "look" is noticeable though.   
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on December 15, 2017, 02:49:23 PM
Posted by Uccmal in another topic here on CoBF on December 12, 2017 - to me, absolutely worth the time to pursue and follow up on, with the aim to get to better understanding of BAM:

... It also speaks volumes in how people can get enraptured by numbers and by the story.  We all do this.  I have a similar reverence for BAM and its subs.  I think the difference is that BAM and subs have real assets that you can go visit, and real fee income, and a long track record under current management.  I get around my rapture by buying on dips and sizing my position accordingly, and genrally handicapping my expectations. ...

I don't know the exact name of this bias mentioned here by Uccmal [perhaps, it's actually also an anti bias], but I'm surely aware of it with regard to BAM [like Uccmal is], while trying to stay rational going forward. Perhaps it's somehow related to the Halo Effect (https://en.wikipedia.org/wiki/Halo_effect) around Mr. Flatt. [I think there is a such.]

I think a way to [try to] stay rational towards BAM would be to discuss the moaty aspects af BAM [BAM's enduring & long term competitive advantages in its operational space].

So, what do you consider to be the moats of BAM? [, basically, based on your own opinion? ... we can all read the BAM website ...] How do you weigh them up against each other? - And especially: Do you consider some of the moats presented by BAM as actually also being concerning, disadvantages and / or disqualifying going forward?

Thank you in advance. The more pushback, the better.
Title: Re: BAM - Brookfield Asset Management
Post by: Uccmal on December 16, 2017, 08:51:53 AM
General Growth Properties - GGP

I see that they have rejected Brookfields current proposal which was shares and cash for 23.  Allegedly the NAV of GGP is 28 US.  Without Brookfields plans and ingenuity is it really worth that much? 

I am considering it as an arbitrage opportunity.  Bruce Flatt has been quoted as saying that these type of negotiations can be a long process. 

I am just thinking out loud:

1) If Brookfield sweetens the offer then easy money is made by me.

2) If Brookfield drops the offer then GGP stock will likely tank.  Then:

2a) Brookfield either sits on their position and initiates a potentially lower offer at a later date.

2b) Brookfiled never makes another offer, and sits on their position, and the stock and company languish for the foreseeable future.  I see this as the least likely outcome.  BAM has plans for this asset and if they cannot execute them I dont see them wasting resources to make money for the 64% shareholders. 

2c) Brookfield decides to sell their stake to someone else at an unknown price.  It could be higher, lower, or the same. 

I dont want to colour anyones opinion with my thoughts and I have not spent alot of time on this.  The last good arbitrage I had was making 40k when FFH took ORH private again. 

Positions in BAM, and BPY, but not GGP

Title: Re: BAM - Brookfield Asset Management
Post by: sampr01 on December 16, 2017, 10:12:27 AM
You also have to look at recent MAC take out offer around 4.5 cap rate and and So they have to  around that to acquire with out litigation quote author=Uccmal link=topic=5462.msg318478#msg318478 date=1513443113]
General Growth Properties - GGP

I see that they have rejected Brookfields current proposal which was shares and cash for 23.  Allegedly the NAV of GGP is 28 US.  Without Brookfields plans and ingenuity is it really worth that much? 

I am considering it as an arbitrage opportunity.  Bruce Flatt has been quoted as saying that these type of negotiations can be a long process. 

I am just thinking out loud:

1) If Brookfield sweetens the offer then easy money is made by me.

2) If Brookfield drops the offer then GGP stock will likely tank.  Then:

2a) Brookfield either sits on their position and initiates a potentially lower offer at a later date.

2b) Brookfiled never makes another offer, and sits on their position, and the stock and company languish for the foreseeable future.  I see this as the least likely outcome.  BAM has plans for this asset and if they cannot execute them I dont see them wasting resources to make money for the 64% shareholders. 

2c) Brookfield decides to sell their stake to someone else at an unknown price.  It could be higher, lower, or the same. 

I dont want to colour anyones opinion with my thoughts and I have not spent alot of time on this.  The last good arbitrage I had was making 40k when FFH took ORH private again. 

Positions in BAM, and BPY, but not GGP
[/quote]
Title: Re: BAM - Brookfield Asset Management
Post by: Shane on December 18, 2017, 06:29:59 AM
Question for the group - what are your thoughts if inflation is unexpectedly high?

On one hand, cost of capital is likely to go up so the assets will be devalued and the accommodating credit environment would end, growth will likely slow dramatically....

However - management has commented that the cash flow streams are largely protected from inflation via the contracts.... so cash flows should keep up with inflation without an issue.

What would happen with the value of the floated subs?  I would assume market cap comes down in this environment meaning the stream of cash flows declines as well (~125bps X market cap is the formula, off memory).

Thoughts?  I don't think the market is considering inflation so this could be interesting.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on December 18, 2017, 12:50:53 PM
Shane,

Personally & right now, I consider BAM antifragile to inflation, from what I've read so far. Analysis of the total debt in the group balance sheet for BAM is however required [terms, rates [fixed [for how long etc.] or not, recourse etc.].

I expect to do some work on that in the coming period.
Title: Re: BAM - Brookfield Asset Management
Post by: Shane on December 18, 2017, 05:50:10 PM
Hi John,

Can you elaborate a little more on why it is antifragile?  It is a little perplexing to me as many forces counteract.  Maybe I should spend the time and try to model it while I have some free time over the holidays.
Title: Re: BAM - Brookfield Asset Management
Post by: cubsfan on December 18, 2017, 06:20:17 PM
It would seem to me that in periods of inflation, real assets, like real estate are going to inflate substantially.
Replacement costs go up, existing assets will as well.
Title: Re: BAM - Brookfield Asset Management
Post by: no_free_lunch on December 18, 2017, 07:50:03 PM
This is an interesting conversation.  This is what the annual report says on the subject:

Quote
Our business is positioned to thrive in a higher interest rate environment; there are three simple reasons for this. First, and most important, we own “real return” assets that increase their cash flow generating capacity over time, either through contractual rights, our ability to operate them better, or an expansion of the operation. These enhancements should far outpace any extra interest costs, in particular in a more inflationary environment. Second, we generally earn total returns on equity of 10% to 20%. This is much greater than treasury yields and therefore a few percentage increases aren’t material. And third, much of our debt is fixed rate debt; therefore, cash flows until maturity of that debt will not change at all.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on December 19, 2017, 01:59:53 AM
Hi John,

Can you elaborate a little more on why it is antifragile?  It is a little perplexing to me as many forces counteract.  Maybe I should spend the time and try to model it while I have some free time over the holidays.
It would seem to me that in periods of inflation, real assets, like real estate are going to inflate substantially.
Replacement costs go up, existing assets will as well.

Hi Shane,

Basically, what cubsfan said.
Title: Re: BAM - Brookfield Asset Management
Post by: TBW on December 19, 2017, 05:15:03 AM
No position in BAM, I just follow because I think it is interesting.

I disagree with the view that inflation will increase real estate prices.  It may, but I think it won't.  Particularly in markets that have a lot of leverage.

Take NYC and its ~4% cap rates.  What happens in inflation?  First interest rates go up.  That 4% cap rate looks terrible if inflation is north of 3%.  Second, all real estate needs to be financed and interest rates will be higher.  Both of those point to higher cap rates.  Finally, the cost to repair and manage will go up.  That too should mean higher cap rates and lower prices.

Then there is the secondary effects.  There is so much debt with real estate as collateral.  If we have real estate prices dropping, the security drops.  I think this will make lenders more reluctant to make real estate backed loans.

I think in theory inflation increases real estate prices, but that is only if real estate was bought for cash.  But you add in the leverage, I think the dynamic is the opposite.

If you went back to the 80s, real estate did not do well.  The ramp up in global real estate prices has come in the last 10 to 15 years in a period of low inflation, which leads to lower interest rates, and the opposite of what I describe above.
Title: Re: BAM - Brookfield Asset Management
Post by: Shane on December 19, 2017, 05:30:45 AM
Additionally - the stock today is priced for growth in the asset management business.  Investing in real assets becomes less attractive as interest rates go up.  4-5% inflation would likely mean 6-8% cost of incremental debt.... I think BAM, at the price today, would be likely to take a hit.

Any thoughts on this comment?  Trying to do a little devil's advocate here.
Title: Re: BAM - Brookfield Asset Management
Post by: LongTermView on December 19, 2017, 10:25:29 AM
https://skift.com/2017/12/18/airbnb-is-getting-a-200-million-boost-to-build-its-hotel-like-apartment-business/
Quote
Brookfield Property Partners announced it has entered into a $200 million equity investment program with Niido, a new hotel-like concept that Airbnb announced in October
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on December 19, 2017, 11:14:23 AM
Are we overlooking that brookfield operates all over the world and acquires assets where capital is limited (inflation is probably high) and therefore a run up in US interest rates may not impact them as much as others?  Surely their US assets would be impacted as many have described.  I believe that ~85% of there debt is fixed rate and non-recourse though.

Bruce talks about how their size actually is starting to allow them to grow even more.  For instance, interest rates were ~14% in Brazil when they acquired their recent assets as the only bidder.  BAM had the ability to buy the whole thing with cash.  Now interest rates in Brazil are near 7% and they can mortgage the assets.

As mentioned by another poster, their asset management accounts for ~50% of their projected value in 5 years.
Title: Re: BAM - Brookfield Asset Management
Post by: Og on December 19, 2017, 01:26:21 PM
Are we overlooking that brookfield operates all over the world and acquires assets where capital is limited (inflation is probably high) and therefore a run up in US interest rates may not impact them as much as others?  Surely their US assets would be impacted as many have described.  I believe that ~85% of there debt is fixed rate and non-recourse though.

Bruce talks about how their size actually is starting to allow them to grow even more.  For instance, interest rates were ~14% in Brazil when they acquired their recent assets as the only bidder.  BAM had the ability to buy the whole thing with cash.  Now interest rates in Brazil are near 7% and they can mortgage the assets.

As mentioned by another poster, their asset management accounts for ~50% of their projected value in 5 years.

Exactly. I'm not too concerned with this and I think that the trend towards real assets and privatization of assets that have historically have been controlled by government are only in the beginning phases. I think the BAM is one of the few businesses of their size where growth rates will continue to be pretty high. And like someone said before, they hedge interest rate risk.

I put my money where my mouth is too and have been increasing my position in BAM throughout the year. The vast majority of my position is through the Limited Partnership, Partners Value Investments, LP which is essentially a leveraged bet on Brookfield and a vehicle that management uses to participate in the upside of the common stock.
Title: Re: BAM - Brookfield Asset Management
Post by: Shane on December 19, 2017, 02:10:36 PM
Are we overlooking that brookfield operates all over the world and acquires assets where capital is limited (inflation is probably high) and therefore a run up in US interest rates may not impact them as much as others?  Surely their US assets would be impacted as many have described.  I believe that ~85% of there debt is fixed rate and non-recourse though.

Bruce talks about how their size actually is starting to allow them to grow even more.  For instance, interest rates were ~14% in Brazil when they acquired their recent assets as the only bidder.  BAM had the ability to buy the whole thing with cash.  Now interest rates in Brazil are near 7% and they can mortgage the assets.

As mentioned by another poster, their asset management accounts for ~50% of their projected value in 5 years.

Exactly. I'm not too concerned with this and I think that the trend towards real assets and privatization of assets that have historically have been controlled by government are only in the beginning phases. I think the BAM is one of the few businesses of their size where growth rates will continue to be pretty high. And like someone said before, they hedge interest rate risk.

I put my money where my mouth is too and have been increasing my position in BAM throughout the year. The vast majority of my position is through the Limited Partnership, Partners Value Investments, LP which is essentially a leveraged bet on Brookfield and a vehicle that management uses to participate in the upside of the common stock.

Yes - had lost sight of this.  Very fair point.
Title: Re: BAM - Brookfield Asset Management
Post by: plato1976 on December 19, 2017, 02:58:07 PM
curious how do they hedge the interest risk?
suppose they use some kind of interest future?

Are we overlooking that brookfield operates all over the world and acquires assets where capital is limited (inflation is probably high) and therefore a run up in US interest rates may not impact them as much as others?  Surely their US assets would be impacted as many have described.  I believe that ~85% of there debt is fixed rate and non-recourse though.

Bruce talks about how their size actually is starting to allow them to grow even more.  For instance, interest rates were ~14% in Brazil when they acquired their recent assets as the only bidder.  BAM had the ability to buy the whole thing with cash.  Now interest rates in Brazil are near 7% and they can mortgage the assets.

As mentioned by another poster, their asset management accounts for ~50% of their projected value in 5 years.

Exactly. I'm not too concerned with this and I think that the trend towards real assets and privatization of assets that have historically have been controlled by government are only in the beginning phases. I think the BAM is one of the few businesses of their size where growth rates will continue to be pretty high. And like someone said before, they hedge interest rate risk.

I put my money where my mouth is too and have been increasing my position in BAM throughout the year. The vast majority of my position is through the Limited Partnership, Partners Value Investments, LP which is essentially a leveraged bet on Brookfield and a vehicle that management uses to participate in the upside of the common stock.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on December 19, 2017, 03:49:11 PM
From the Brookfield website: Forbes [May 16, 2017]: World Builder (http://files.parsintl.com/eprints/S041798.pdf).

Quote
ON THE EVE OF THE financial crisis in 2007, hundreds of skeptical investors gathered at the New-York Historical Society for a one-day conference on the fragile state of the global economy, hosted by Grant's Interest Rate Observer. Bearish Merrill Lynch economist David Rosenberg warned that a severe recession was imminent. Hedge fund manager Bill Ackman railed against a new Wall Street creation called CDOs, which he predicted would soon implode.
But when the young chief executive of Canada's Brookfield Asset Management got up to speak, he turned the topic to infrastructure--a $35 trillion opportunity hiding in plain sight.
Forget the gloom. Pipelines, wireless towers, power generation, ports and toll roads--the backbone of the global economy--would soon become the holy grail investment product for trillions of dollars stagnating in pension funds and savings. "David [Rosenberg's] presentation is probably about the next six months," Flatt told the doomsday-obsessed audience. "Mine is more relevant to the next 25 to 60 years."

- - - o 0 o - - -

"To win, you have to finish." [No use  of quotation here, I suppose, it's not needed here on CoBF].


To be able to just not to "finish", but to "win", must in this case [ time horizon 25 - 65 years] be based on analysis on debt, preferred equity and minority interests.


The financing being absolutely crucial to holding on to assets - for the long term - to avoid forced sales - in a downturn - for a very very long time horizon.


- - - o 0 o - - -


So, I think the most important question we have to ask ourselves here, is actually: " What does have to happen to take this thing down?"
Title: Re: BAM - Brookfield Asset Management
Post by: Uccmal on December 19, 2017, 07:04:53 PM
"So, I think the most important question we have to ask ourselves here, is actually: " What does have to happen to take this thing down?"

Fraud at the top? 
Involvement in bribery? 
Unethical, amoral behaviour by the CEO, or one of his closest associates?  No evidence of this.  The guy eats lunch with employees in the food court when he is in town, and apparently doesn't have a private office. 

The usual things Buffett worries about.  Not saying anything like this could happen, but it could happen.  In other words, dont make this a 100% holding. 

Some major hits could be felt if a Venezuela happens in one of the primary operating countries.

The stock may come way down in a market crash but that provides opportunity for the BAMs of the world and they are clearly primed for this.  As Bruce has said, the business cycle has not been repealed.  Each day we get closer to a crash...
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on December 20, 2017, 09:44:45 AM
Thank you for sharing your view, Al, it's as always appreciated.

- - - o 0 o - - -

I read your post as divided into related to two major components: Compliance with company values & economic scenarios going forward.

Risks related to [lack of] compliance with company values:

Findings of lacks of compliance with company values revealed in the public space would most likely result in the loss of a part [perhaps material] of those client relationships to those 200+ clients with deep pockets, hitting fees going forward, and available capital.

Risks related to economic scenarios going forward:

Maybe I would add to Al's list:
A  massive [and successful] cyber attack.
A major geopolitical nuclear event.

I don't know how process those situations mentioned by Al and here. I don't know where to buy a crystal ball, that works for this. [Off topic: Viking is reluctant to share! [: - D]]

BAM is so diversified, almost to the extremes [geografical & among asset classes].

For BAM to fail, the cash flow/liquidity has to break/fall apart.

Some 2017Q3 numbers [trying not to nitpick here]:

BAM core equity: 22.964 B
BAM cash flow from operations: 2.874 B
BAM cash and financial assets [net] - total: 2.592 B
BAM undrawn committed credit lines - total: 5.765 B
BAM core liquidity - total: 8.832 B

Add to that 17.300 B of commited [available] capital from clients.

That's actually - to me - an enormous amount of powder.

- - - o 0 o - - -

I still don't know if BAM can be taken down by something. But I'm pretty sure that I would also have other things to think about, if that particular scenario - an extreme adverse one - would be about to unfold.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on December 23, 2017, 07:11:24 AM
WSJ - Brookfield Property Partners LP is working to restructure its offer for the shares of mall owner GGP Inc. that it doesn’t already own, according to people familiar with the matter.

I'm curious what you did uccmal...
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on December 23, 2017, 09:13:46 AM
I found this SA article (https://seekingalpha.com/news/3319949-wsj-brookfield-property-may-restructure-bid-ggp) elaborating a bit on chrispy's reference to WSJ:

Quote
... BPY is said to be considering two options to change its proposal: In one, it would increase the cash component and continue to offer some of its stock, while the other option would involve the creation of of a new form form of stock to use as consideration.

I speculate the last alternative would be to spin off BPY's own malls [plus some cash and BAM's GGP stock] in a separate company, and then merge that with GGP, while keeping the continuing merged entity listed, paying the other GGP shareholders with cash and shares in the new listed entity.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on December 23, 2017, 09:23:28 AM
John, I was beginning to think the same thing.  BPY share holders would receive stock then of the new entity?
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on December 23, 2017, 09:52:59 AM
Yes, crispy, or a separate listed entity as a sub of BPY, thereby a sub-sub of BAM.

Please take a look at the number of employeés at GGP, it's ~10 [a bit above that] per mall. It simply can't be other than sales/customer relations organisation and administration staff, meaning about everything else is outsourced [, thereby paying gross margin on all curating etc. of the malls].

I speculate that BAM [& BPY] want to insource that by a take over of effective control af the GGP malls. [Also think about geographical overlap between BPY & GGP.]

- - - o 0 o - - -

Partly on topic:

I'm a shareholder for years of a Danish real estate company called Jeudan A/S [JEU.CPH] - it's operating footprint is Copenhagen Inner City - which has done the same - building a technical organisation - here organised in a separate sub called Jeudan Servicepartner A/S, customers being both the parent and external customers.

Tons of money saved over the years on maintenance, capex and reconstruction work.

- - - o 0 o - - -

So I actually think, that the ones that should be shaking in their trousers here, are the non financial vendors of GGP.
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on December 24, 2017, 10:02:28 AM
No position in BAM, I just follow because I think it is interesting.

I disagree with the view that inflation will increase real estate prices.  It may, but I think it won't.  Particularly in markets that have a lot of leverage.

Take NYC and its ~4% cap rates.  What happens in inflation?  First interest rates go up.  That 4% cap rate looks terrible if inflation is north of 3%.  Second, all real estate needs to be financed and interest rates will be higher.  Both of those point to higher cap rates.  Finally, the cost to repair and manage will go up.  That too should mean higher cap rates and lower prices.

Then there is the secondary effects.  There is so much debt with real estate as collateral.  If we have real estate prices dropping, the security drops.  I think this will make lenders more reluctant to make real estate backed loans.

I think in theory inflation increases real estate prices, but that is only if real estate was bought for cash.  But you add in the leverage, I think the dynamic is the opposite.

If you went back to the 80s, real estate did not do well.  The ramp up in global real estate prices has come in the last 10 to 15 years in a period of low inflation, which leads to lower interest rates, and the opposite of what I describe above.

I agree. I think higher inflation will be a disaster for hard asset managers like BAM. Cap rate will go up, which means that the assets that they are managing for their clients will go down in value. Capital will exit and incentive fees will go down. Eventually this will stabilize again and maybe lead to a boom in hard assets, but not before a major adjustment.  I also expect a lot of bankrupticies in the financial sector due to loans going bad and asset/liability mismatches.
Title: Re: BAM - Brookfield Asset Management
Post by: Uccmal on December 24, 2017, 06:45:56 PM
WSJ - Brookfield Property Partners LP is working to restructure its offer for the shares of mall owner GGP Inc. that it doesn’t already own, according to people familiar with the matter.

I'm curious what you did uccmal...

Nothing so far.  I am hesitant to take on more leverage.
Title: Re: BAM - Brookfield Asset Management
Post by: Uccmal on December 24, 2017, 06:58:38 PM
No position in BAM, I just follow because I think it is interesting.

I disagree with the view that inflation will increase real estate prices.  It may, but I think it won't.  Particularly in markets that have a lot of leverage.

Take NYC and its ~4% cap rates.  What happens in inflation?  First interest rates go up.  That 4% cap rate looks terrible if inflation is north of 3%.  Second, all real estate needs to be financed and interest rates will be higher.  Both of those point to higher cap rates.  Finally, the cost to repair and manage will go up.  That too should mean higher cap rates and lower prices.

Then there is the secondary effects.  There is so much debt with real estate as collateral.  If we have real estate prices dropping, the security drops.  I think this will make lenders more reluctant to make real estate backed loans.

I think in theory inflation increases real estate prices, but that is only if real estate was bought for cash.  But you add in the leverage, I think the dynamic is the opposite.

If you went back to the 80s, real estate did not do well.  The ramp up in global real estate prices has come in the last 10 to 15 years in a period of low inflation, which leads to lower interest rates, and the opposite of what I describe above.

I agree. I think higher inflation will be a disaster for hard asset managers like BAM. Cap rate will go up, which means that the assets that they are managing for their clients will go down in value. Capital will exit and incentive fees will go down. Eventually this will stabilize again and maybe lead to a boom in hard assets, but not before a major adjustment.  I also expect a lot of bankrupticies in the financial sector due to loans going bad and asset/liability mismatches.

This need to be kept in context.  The property ownership segment is only a percentage of the whole.  And Brookfield tends to be a buyer in depressed markets.  There is also some churn as assets come to value and they sell.  It mostly depends on if you think that BAM operates ahead of the curve or not.  I suspect they have gamed an inflation scenario and will continue to do so.  They haven't shown themselves to be suckers to this point. 
Title: Re: BAM - Brookfield Asset Management
Post by: Jerry Capital on December 26, 2017, 10:53:57 AM
IWG receives takeover bid from Brookfield and Onex

"For Brookfield, an acquisition would be its highest profile UK deal since it teamed up with the sovereign wealth fund of Qatar to acquire Songbird, the holding company whose sole asset is a majority stake in the Canary Wharf Group, for £2.6bn in 2015." 

https://www.ft.com/content/2e670bea-e82a-11e7-bd17-521324c81e23
Title: Re: BAM - Brookfield Asset Management
Post by: bizaro86 on December 26, 2017, 11:23:06 AM
Seems like some obvious synergy for a company that owns office buildings around the world. I'm usually pretty skeptical of synergy claims, but this seems to have potential.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on December 26, 2017, 11:35:10 AM
 IWG Plc Announcement [December 24, 2017] (http://otp.investis.com/clients/uk/iwg/rns/regulatory-story.aspx?newsid=961153&cid=1012).

- - - o 0 o - - -

Thank you for sharing, Jerry, and a belated welcome to CoBF!
Title: Re: BAM - Brookfield Asset Management
Post by: cmlber on December 28, 2017, 07:50:27 AM
No position in BAM, I just follow because I think it is interesting.

I disagree with the view that inflation will increase real estate prices.  It may, but I think it won't.  Particularly in markets that have a lot of leverage.

Take NYC and its ~4% cap rates.  What happens in inflation?  First interest rates go up.  That 4% cap rate looks terrible if inflation is north of 3%.  Second, all real estate needs to be financed and interest rates will be higher.  Both of those point to higher cap rates.  Finally, the cost to repair and manage will go up.  That too should mean higher cap rates and lower prices.

Then there is the secondary effects.  There is so much debt with real estate as collateral.  If we have real estate prices dropping, the security drops.  I think this will make lenders more reluctant to make real estate backed loans.

I think in theory inflation increases real estate prices, but that is only if real estate was bought for cash.  But you add in the leverage, I think the dynamic is the opposite.

If you went back to the 80s, real estate did not do well.  The ramp up in global real estate prices has come in the last 10 to 15 years in a period of low inflation, which leads to lower interest rates, and the opposite of what I describe above.

I agree. I think higher inflation will be a disaster for hard asset managers like BAM. Cap rate will go up, which means that the assets that they are managing for their clients will go down in value. Capital will exit and incentive fees will go down. Eventually this will stabilize again and maybe lead to a boom in hard assets, but not before a major adjustment.  I also expect a lot of bankrupticies in the financial sector due to loans going bad and asset/liability mismatches.

Aren't you guys forgetting about growth?  A diverse portfolio of real assets should grow by real GDP + inflation, i.e. by nominal GDP.

Theoretically, intrinsic value should be earnings / (cap rate - growth rate).  If inflation goes from 2% to 4%, the cap rate should go up by 2% and the growth rate should go up by 2% and the two should cancel out.  If you're of the view that cap rates will go up because real interest rates will go up (without a corresponding increase in real GDP growth), that's a different story. 
Title: Re: BAM - Brookfield Asset Management
Post by: cubsfan on December 28, 2017, 08:17:11 AM
If you own assets with monopoly/oligopoly-like characteristics - you have pricing power and should be able
to raise prices to keep pace with inflation or in excess of inflation. Pipelines, transmission lines, hydro dams,
cell towers,  that can't be easily duplicated in geographic regions - or even the best located real estate.

This comprises many of BAM's assets.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on December 28, 2017, 08:20:10 AM
Here is an Mail Online article about Mr. Dixon [December 27, 2017] - Founder and major shareholder in IWG: Office rental pioneer Mark Dixon makes £600m as he sells empire to Canadian funds (http://www.dailymail.co.uk/money/markets/article-5215899/Office-rental-pioneer-makes-600m-sells-empire.html?ITO=1490&ns_mchannel=rss&ns_campaign=1490).

Let's see how this plays out.
Title: Re: BAM - Brookfield Asset Management
Post by: sleepydragon on January 04, 2018, 07:01:40 AM
My brokerage account logged an "Exchange" transaction, swiping all my TRISURA GROUP shares into "CONTRA TRINTY VALLEY XPN PARENT"

Does anyone know what this is about?
Thanks!
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on January 04, 2018, 07:23:40 AM
sleepydragon,

A 1 for 10 share consolidation, followed by a 10 for 1 share split is taking place in Trisura, to weed out all shareholders with less than 10 shares, if I have understood things correctly.

It must be covered on the Trisura website, I think.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on January 04, 2018, 08:10:15 AM
I'm sorry for double posting.

It seems that Brookfield just did it again: BBP.UN to aquire Westinghouse Electric Company (https://otp.tools.investis.com/clients/us/brookfield_business_partners/SEC1/sec-show.aspx?Type=html&FilingId=12461240&CIK=0001654795&Index=10000).

Seems like a deal similar to the Terraform deal after SUNE filed for bankruptcy. And a lot of capital send to work for the BAM system and BAM clients/BAM funds, most likely.

Subject to Bankruptcy Court approval, expected to close in third quarter of 2018.

- - - o 0 o - - -

BAM certainly has a lot of appeal to me. Let BAM do the value investing, and I can continue to behave like Beetle Bailey (https://en.wikipedia.org/wiki/Beetle_Bailey).
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on January 04, 2018, 08:27:06 AM
I'm sorry for double posting.

It seems that Brookfield just did it again: BBP.UN to aquire Westinghouse Electric Company (https://otp.tools.investis.com/clients/us/brookfield_business_partners/SEC1/sec-show.aspx?Type=html&FilingId=12461240&CIK=0001654795&Index=10000).

Seems like a deal similar to the Terraform deal after SUNE filed for bankruptcy. And a lot of capital send to work for the BAM system and BAM clients/BAM funds, most likely.

Subject to Bankruptcy Court approval, expected to close in third quarter of 2018.

- - - o 0 o - - -

BAM certainly has a lot of appeal to me. Let BAM do the value investing, and I can continue to behave like Beetle Bailey (https://en.wikipedia.org/wiki/Beetle_Bailey).

As long as they didn't take on those &*#%$^& CBI nuclear projects.  I'm assuming they wouldn't do something like that.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on January 04, 2018, 08:47:37 AM
... As long as they didn't take on those &*#%$^& CBI nuclear projects.  I'm assuming they wouldn't do something like that.

I almost spluttered coffee into the keyboard! Yes, you are right here, Joel. That's actually important - very!, - and not covered - at all - by the news release.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on January 04, 2018, 09:16:35 AM
I've found this Toshiba news announcement, dated December 14, 2017 (http://www.toshiba.co.jp/about/press/2017_12/pr1401.htm), that at least partly supports Joel's assumption. [I haven't been following the CBI topic here on CoBF closely, so I'm not fully and in all details informed.]
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on January 04, 2018, 04:49:34 PM
BIP found a way to scale up in a meaningful way quickly after their spinoff, looks like BBU is doing the same.
Title: Re: BAM - Brookfield Asset Management
Post by: gokou3 on January 04, 2018, 05:46:38 PM
I'm sorry for double posting.

It seems that Brookfield just did it again: BBP.UN to aquire Westinghouse Electric Company (https://otp.tools.investis.com/clients/us/brookfield_business_partners/SEC1/sec-show.aspx?Type=html&FilingId=12461240&CIK=0001654795&Index=10000).

Seems like a deal similar to the Terraform deal after SUNE filed for bankruptcy. And a lot of capital send to work for the BAM system and BAM clients/BAM funds, most likely.

Subject to Bankruptcy Court approval, expected to close in third quarter of 2018.

- - - o 0 o - - -

BAM certainly has a lot of appeal to me. Let BAM do the value investing, and I can continue to behave like Beetle Bailey (https://en.wikipedia.org/wiki/Beetle_Bailey).

As long as they didn't take on those &*#%$^& CBI nuclear projects.  I'm assuming they wouldn't do something like that.

I believe this alleviates your concern?

Brookfield to buy Westinghouse's global nuclear business in $4.6-billion deal
http://business.financialpost.com/commodities/energy/brookfield-business-partners-to-buy-westinghouse-for-4-6-billion

Quote
The deal won’t include what had been the company’s most prized projects — plans to build its AP1000 reactors for U.S. utilities in South Carolina and Georgia. Those projects, plagued by delays and cost overruns, eventually led to its downfall, and Westinghouse has used the Chapter 11 process to distance itself from any obligations to them.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on January 04, 2018, 10:10:12 PM
Here is an article from NewsMaxFinance (https://www.newsmax.com/Finance/Companies/brookfield-buy-westinghouse-nuclear/2018/01/04/id/835120/), that supplements gokou's post well.

BAM cherry picking & fishing in frothy white waters, leaving some proceeds and all the crappy things [in total, likely breadcrumbs] to the Westinghouse creditors.

Forbes [January 4, 2018]: Brookfield Goes Nuclear: Why You Should Watch The Canadian Giant's Restructuring Work (https://www.forbes.com/sites/antoinegara/2018/01/04/brookfield-goes-nuclear-why-you-should-watch-the-canadian-giants-restructuring-work/#37fc15023b30).
Title: Re: BAM - Brookfield Asset Management
Post by: investmd on January 05, 2018, 04:12:17 AM
Thank you for the informative article - that continues the bullish on BAM theme present on this board.

Question: What does BAM actually hold vs. the spinoffs (BEP, BIP, BPO, others...) ? Do these spinoffs pay a fee to parent BAM? When an acquisition is made how do they decide if it is held by BAM or other? In this case it seems that the investment is being made and held under Brookfield Business Partners. If one owns BAM does one reap the benefits from spinoff companies? Seems to me that each spinoff has it's own CEO but works alongside BAM management to make deals.

Thanks for clarification.


Here is an article from NewsMaxFinance (https://www.newsmax.com/Finance/Companies/brookfield-buy-westinghouse-nuclear/2018/01/04/id/835120/), that supplements gokou's post well.

BAM cherry picking & fishing in frothy white waters, leaving some proceeds and all the crappy things [in total, likely breadcrumbs] to the Westinghouse creditors.

Forbes [January 4, 2018]: Brookfield Goes Nuclear: Why You Should Watch The Canadian Giant's Restructuring Work (https://www.forbes.com/sites/antoinegara/2018/01/04/brookfield-goes-nuclear-why-you-should-watch-the-canadian-giants-restructuring-work/#37fc15023b30).
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on January 05, 2018, 05:54:03 AM
This acquisition seems a lot like Teekay where it is service/fee based and not very dependent on commodity pricing.

Bam owns a portion of all LPs and receieves fees from them. They have criteria that helps determine which LP gets which assets. For instance, BBU receieved a water infrastructure business in Brazil because it wasn't a dividend producer. If it was, BIP would have receieved it.
Title: Re: BAM - Brookfield Asset Management
Post by: investmd on January 05, 2018, 09:22:43 AM
This acquisition seems a lot like Teekay where it is service/fee based and not very dependent on commodity pricing.

Bam owns a portion of all LPs and receieves fees from them. They have criteria that helps determine which LP gets which assets. For instance, BBU receieved a water infrastructure business in Brazil because it wasn't a dividend producer. If it was, BIP would have receieved it.

Thanks Chrispy. In that case, for one looking to compound over a 10 yr + time period, and who doesn't need regular dividend payout, likely best to buy the parent BAM rather than buying individual LPs such as BIP, BEP. Does that make sense?
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on January 05, 2018, 09:40:26 AM
Not in any way trying to take chrispy's privilege to respond here, just trying to contribute in a constructive way here for all readers on investmd's question.

The short and simplified answer to the question is yes.

The easiest way to get a perception of the fee structure inside the whole BAM system is to study Investor Day Presentation September 27, 2017 Presentation Material (https://bam.brookfield.com/~/media/Files/B/BrookField-BAM-IR/events/BAM%202017%20Investor%20Day_FINAL.pdf), section "Scorecard", p. 62 & onwards.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on January 05, 2018, 10:42:11 AM
I agree with John. BAM benefits from the performance of all and receives fees.

The investor days presentations and transcripts are very enlightening. Very helpful with understanding what they do and how the business will grow.

Additionally, BAM invests along side the institutional clients. During the talk, Bruce mentioned how they will begin receiving the returns from early funds that will be immediately reinvested. I believe he talked about how that does not fully show up yet in the financials. I need to refresh myself on that and could be mistaken.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on January 05, 2018, 10:46:44 AM
Hidden behind the shadows of the Westinghouse deal:

http://m.nasdaq.com/press-release/brookfield-business-partners-to-acquire-controlling-interest-in-schoeller-allibert-in-partnership-20180105-00038

Bruce mentioned in the recently posted Bloomberg video he was bullish on private equity. This must have been what he was talking about. BBU up 5 percent yesterday and today
Title: Re: BAM - Brookfield Asset Management
Post by: TorontoRaptorsFan on January 05, 2018, 12:43:03 PM
If Buffett is looking for an elephant to purchase why not acquire BAM and make Flatt the next CEO...
Title: Re: BAM - Brookfield Asset Management
Post by: rkbabang on January 05, 2018, 12:46:38 PM
If Buffett is looking for an elephant to purchase why not acquire BAM and make Flatt the next CEO...

+1  I'd be a lot less worried about his inevitable retirement if he did this.
Title: Re: BAM - Brookfield Asset Management
Post by: augustabound on January 05, 2018, 03:40:10 PM
If Buffett is looking for an elephant to purchase why not acquire BAM and make Flatt the next CEO...

+1  I'd be a lot less worried about his inevitable retirement if he did this.

How would current BAM shareholders feel about this?
Title: Re: BAM - Brookfield Asset Management
Post by: Uccmal on January 05, 2018, 03:46:16 PM
If Buffett is looking for an elephant to purchase why not acquire BAM and make Flatt the next CEO...

+1  I'd be a lot less worried about his inevitable retirement if he did this.

Please no.  Dont take Bruce away.....   He will get much better returns for shareholders of BAM over the next 15 years than if he took over the much bigger BRK. 

Besides, wouldn't you think that Bruce wants to keep building what he has been working on.  Thats where the fun is.  I am envious.  If only I could handle the stress and was a wee bit (okay, alot) smarter. 
Title: Re: BAM - Brookfield Asset Management
Post by: Uccmal on January 05, 2018, 03:47:17 PM
If Buffett is looking for an elephant to purchase why not acquire BAM and make Flatt the next CEO...

+1  I'd be a lot less worried about his inevitable retirement if he did this.

How would current BAM shareholders feel about this?

I think I was typing and sending when you posted this. 
Title: Re: BAM - Brookfield Asset Management
Post by: augustabound on January 05, 2018, 04:05:39 PM
If Buffett is looking for an elephant to purchase why not acquire BAM and make Flatt the next CEO...

+1  I'd be a lot less worried about his inevitable retirement if he did this.

Please no.  Dont take Bruce away.....   He will get much better returns for shareholders of BAM over the next 15 years than if he took over the much bigger BRK. 

Besides, wouldn't you think that Bruce wants to keep building what he has been working on.  Thats where the fun is.  I am envious.  If only I could handle the stress and was a wee bit (okay, alot) smarter.
Yes.  I don't see upside to BAM being bought out. This is a compounder (hopefully) for years to come. But I absolutely see why some would want a guy like Bruce Flatt at the helm.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on January 05, 2018, 04:49:44 PM
Please no.  Dont take Bruce away.....   He will get much better returns for shareholders of BAM over the next 15 years than if he took over the much bigger BRK. 

Besides, wouldn't you think that Bruce wants to keep building what he has been working on.  Thats where the fun is.  I am envious.  If only I could handle the stress and was a wee bit (okay, alot) smarter.

Well, there you got the answer to your question, augustabound!

Never say never - But I think between Mr. Buffett and Mr. Flatt, a material part boils down to price. I actually can't imagine those two persons getting to an agreement about the relative values of Berkshire and Brookfield - ever, if they tried - no matter how hard they tried. Lots of other obstacles added to that.
Title: Re: BAM - Brookfield Asset Management
Post by: Wabash02 on January 06, 2018, 07:06:31 PM
If I could work for/with anyone today, Bruce Flatt is certainly the person I'd pick.  Like jumping in with the BRK crew 30 years ago or so....


If Buffett is looking for an elephant to purchase why not acquire BAM and make Flatt the next CEO...

+1  I'd be a lot less worried about his inevitable retirement if he did this.

Please no.  Dont take Bruce away.....   He will get much better returns for shareholders of BAM over the next 15 years than if he took over the much bigger BRK. 

Besides, wouldn't you think that Bruce wants to keep building what he has been working on.  Thats where the fun is.  I am envious.  If only I could handle the stress and was a wee bit (okay, alot) smarter.
Title: Re: BAM - Brookfield Asset Management
Post by: tiddman on January 07, 2018, 07:19:57 AM
I've had large positions in both Berkshire and Brookfield for about 15 years.  One of the things I like about having both investments is that they are in many ways completely different, and yet each company is widely diversified and based on cash flow returns. 

Berkshire is almost entirely in the US, has long term holdings, organic growth, makes little use of debt or financing, and Buffett at the helm.  Brookfield is very international in multiple countries, is more transactional, makes heavy use of debt and financing, and the management team is about 10-15 people who are all considerably younger than Buffett and Munger.

I really don't think that Berkshire would have any interest in acquiring Brookfield or any of its subsidiaries, and it's interesting to me that even though both of them have broad reach, they almost never encounter one another or partner on any investments.  They just have totally different approaches. I think that Buffett and the Berkshire execs would be put off by Brookfield's use of debt and financing, and while Brookfield in some ways models its business after Berkshire, it could not do what it does without debt financing.  The secret to Brookfield's success is access to third party capital, but Berkshire has always generated its own capital via insurance companies.

I think both companies have a bright future but over the next 20 years I think that Brookfield probably has more opportunities for growth and a broader reach.  BAM has a market cap of only $43B, all of the Brookfield subs combined add up to around $70B.  Berkshire is nearly 10x as large with a market cap of $500B and its returns are still driven primarily by one person.  Brookfield is driven by a team of younger execs who each have their own opportunities for growth.  In fact I think Berkshire could learn something from Brookfield's culture and management style.
Title: Re: BAM - Brookfield Asset Management
Post by: cubsfan on January 07, 2018, 08:11:52 AM
I own them both as well - and I think this is a very insightful view contrasting the two.
Title: Re: BAM - Brookfield Asset Management
Post by: investmd on January 07, 2018, 08:54:33 AM
I own them both as well - and I think this is a very insightful view contrasting the two.

+1 Tiddman - thanks.

Seems like between owning BRK, BAM and FFH one could likely have a sustainable long term portfolio that over time generates substantially more than the S&P 500 and is easy to maintain. Thoughts?
Title: Re: BAM - Brookfield Asset Management
Post by: james22 on January 07, 2018, 10:44:58 AM
I really don't think that Berkshire would have any interest in acquiring Brookfield or any of its subsidiaries, and it's interesting to me that even though both of them have broad reach, they almost never encounter one another or partner on any investments.

MINNEAPOLIS, MINNESOTA--(Marketwire - Oct 30, 2012) - HomeServices of America, Inc.™, a Berkshire Hathaway affiliate, and Brookfield Asset Management (BAM.A)(BAM)(EURONEXT:BAMA), announced today that they have partnered to introduce Berkshire Hathaway HomeServices®-a new franchise brand that joins the existing brands and affiliate networks of Prudential Real Estate and Real Living Real Estate.

Berkshire Hathaway HomeServices® combines the financial strength of both organizations, coupled with the operational excellence of HomeServices and superior real estate franchising experience of Brookfield.


https://finance.yahoo.com/news/homeservices-brookfield-announce-residential-real-131516461.html
Title: Re: BAM - Brookfield Asset Management
Post by: james22 on January 07, 2018, 10:46:54 AM
I do agree they are nicely complementary, tiddman.

I'd be OK if they were my only two positions.
Title: Re: BAM - Brookfield Asset Management
Post by: cubsfan on January 07, 2018, 10:56:50 AM
Berkshire has partnered up with Brookfield a couple times. As Berkshire has with Luecadia.
And I think their is plenty of mutual respect. But Tiddman's points are still worth thinking about.
They operate and finance growth differently.

Personally, as raised a few posts back - I'd hate to see BAM acquired by Berkshire, as I'm looking
at BAM as long run compounder. Other than a stock swap, I think a cash offer might undervalue BAM.

My two largest positions.
Title: Re: BAM - Brookfield Asset Management
Post by: tiddman on January 07, 2018, 11:05:09 AM
Seems like between owning BRK, BAM and FFH one could likely have a sustainable long term portfolio that over time generates substantially more than the S&P 500 and is easy to maintain. Thoughts?

I know that FFH is a favorite around here but I've never liked it at anything above book value.  Whereas I think Berkshire is undervalued at 1.4x book I think FFH is significantly overvalued at the same metric.  It is the operating businesses and recurring earnings that make the difference.  I am much more interested in both Berkshire and Brookfield for this reason, the operating businesses, and the ability to reinvest capital.  I don't feel that FFH has the same qualities.
Title: Re: BAM - Brookfield Asset Management
Post by: karthikpm on January 07, 2018, 11:31:49 AM
Seems like between owning BRK, BAM and FFH one could likely have a sustainable long term portfolio that over time generates substantially more than the S&P 500 and is easy to maintain. Thoughts?

I know that FFH is a favorite around here but I've never liked it at anything above book value.  Whereas I think Berkshire is undervalued at 1.4x book I think FFH is significantly overvalued at the same metric.  It is the operating businesses and recurring earnings that make the difference.  I am much more interested in both Berkshire and Brookfield for this reason, the operating businesses, and the ability to reinvest capital.  I don't feel that FFH has the same qualities.

+1
I own all three but have to agree with your comments. However, FFH is becoming a better operating business
Title: Re: BAM - Brookfield Asset Management
Post by: tiddman on January 07, 2018, 01:54:34 PM
What non-insurance operating businesses does Fairfax have?
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on January 07, 2018, 02:16:48 PM
That must go to some Fairfax topic, tiddman [ : - ) ]

However, I very much appreciate your condensed write-up in this topic of Berkshire vs. Brookfield. I suppose only a long term investor - and very well wandered - in both can do such an impressive write-up within max. 15 lines.

Thank you. - I really hope that you'll post more frequently here on CoBF going forward.
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on January 08, 2018, 12:50:15 PM
Folding BAM into BRK kinda makes sense for both.  BAM can put BRK cash to good use, especially since a lot of stuff is capital/organic/M&A intensive, and has loads of operational expertise.  BAM doesn't have to be as dependent on various funding source. 

But my sense is that unless BRK gives a great deal, BAM is more than happy with whatever it's doing.  BAM might get some benefits under BRK, but it can do any deal it wants with what it has.  And like BRK, BAM seems to take enormous pride with working with their investors.

There are also lots of different insider/controlling shareholders (from what I understand) to work out a BAM sale. 
Title: Re: BAM - Brookfield Asset Management
Post by: Shane on January 08, 2018, 02:05:59 PM
Through Berkshire Hathaway Energy - Berkshire already invests quite a bit in infrastructure (Utilities).  Given the success of BAM with less traditional infrastructure (I'm thinking toll roads, Ports, etc...) I am a bit confused as to why Berkshire hasn't moved into the space.  Am I perhaps missing something?

Does anyone who has followed MidAmerican/BHE know why they haven't branched out into other hard assets?
Title: Re: BAM - Brookfield Asset Management
Post by: cubsfan on January 08, 2018, 02:17:06 PM
Might be as simple as BAM provides substantial management and operating expertise, and Berkshire does not.
Title: Re: BAM - Brookfield Asset Management
Post by: Shane on January 08, 2018, 02:40:12 PM
Seems like it wouldn't be hard to bring that expertise in house via hiring... After all, paying a team $10-20m a year is nothing if they can put billions to work.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on January 08, 2018, 03:27:51 PM
Brookfield are real asset operators that recently began putting money to work for clients. Almost everyone else has been managing money and is now trying to figure out the operational aspect
Title: Re: BAM - Brookfield Asset Management
Post by: dutchman on January 08, 2018, 04:18:45 PM
Is BAM.A  the right ticker for toronto ?
Title: Re: BAM - Brookfield Asset Management
Post by: ICUMD on January 08, 2018, 04:41:16 PM
Would appreciate some help understanding valuation of this company and some of its subsidiaries.

Brookfield Asset Management BAM.A:  PE ratio is 30, BV is 34 (P/B is 1.6).  50% debt to capital load.  It appears on the surface to be overvalued by these metrics.  I like the business a lot, but why should I buy it now?

Brookfield Business Partners BBU.UN: PE ratio is 75, BV is $60 (P/B is 0.78). 37% debt to capital load.  Better value???

Brookfield Infrastructure Partners BIP.UN:  PE 36, BV 19.32 (P/B is 2.84). 44% debt to capital load.  Very overvalued?

I'm sure I'm oversimplifying everything here and I love the underlying business, but would it not be a risk going into a market correction given these values?
With the exception of BBU.UN, they all seem overvalued (assuming my values are correct...)

Thanks!
Title: Re: BAM - Brookfield Asset Management
Post by: gokou3 on January 08, 2018, 04:58:28 PM
Folding BAM into BRK kinda makes sense for both.  BAM can put BRK cash to good use, especially since a lot of stuff is capital/organic/M&A intensive, and has loads of operational expertise.  BAM doesn't have to be as dependent on various funding source. 

But my sense is that unless BRK gives a great deal, BAM is more than happy with whatever it's doing.  BAM might get some benefits under BRK, but it can do any deal it wants with what it has.  And like BRK, BAM seems to take enormous pride with working with their investors.

There are also lots of different insider/controlling shareholders (from what I understand) to work out a BAM sale.

BRK should just participate in BAM's fund-raising effort.  BRK will get a good return of its idle cash (above what it can do on its own), BAM has good growth opportunities.
Title: Re: BAM - Brookfield Asset Management
Post by: spark411 on January 08, 2018, 06:49:40 PM
Does anyone have a good breakout of the valuation of BAM?   I'm trying to sort out how much the value is from the asset management business and how much of the value is the underlying holdings of it's subsidiaries like BPY, BIP, BEP, etc.    Thanks in advance.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on January 09, 2018, 04:55:19 AM
This may have been posted before, but here is a good place to start:

Brookfield Asset Management: Value Growth Over Next 5 Years https://seekingalpha.com/article/4112673?source=ansh
Title: Re: BAM - Brookfield Asset Management
Post by: Uccmal on January 09, 2018, 05:28:03 AM
Would appreciate some help understanding valuation of this company and some of its subsidiaries.

Brookfield Asset Management BAM.A:  PE ratio is 30, BV is 34 (P/B is 1.6).  50% debt to capital load.  It appears on the surface to be overvalued by these metrics.  I like the business a lot, but why should I buy it now?

Brookfield Business Partners BBU.UN: PE ratio is 75, BV is $60 (P/B is 0.78). 37% debt to capital load.  Better value???

Brookfield Infrastructure Partners BIP.UN:  PE 36, BV 19.32 (P/B is 2.84). 44% debt to capital load.  Very overvalued?

I'm sure I'm oversimplifying everything here and I love the underlying business, but would it not be a risk going into a market correction given these values?
With the exception of BBU.UN, they all seem overvalued (assuming my values are correct...)

Thanks!

Its hard to say.  Other board members and I were discussing this privately when I was building my position in BAM.a in 2017.  These companies are going to grow alot in the next few years, and I am sure there will be pullbacks.  But I bought Bep.un at 75% of todays price (1.5 years ago), and Bam.a 6% cheaper (through last year).  I suppose it depends on when a pull back occurs.  If its tomorrow I will be underwater.  If it goes up 30% from here and pulls back 20% I wont notice.  I may buy more. 

Right now I am not adding because I have a sizable position, amd can wait to add more.  I may edit this post because my 8  yr. old is bugging me and I cant concentrate.
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on January 09, 2018, 08:55:26 AM
Seems like it wouldn't be hard to bring that expertise in house via hiring... After all, paying a team $10-20m a year is nothing if they can put billions to work.

It's one of the reason BAM and their various subs are worthwhile investment options.  Not only operational expertise, but a lot of experience working in various governmental, regulatory, political, etc situations.  The scale of the real asset purchases is likely something you want to be fairly certain you can pull off profitably.

But with regards to partnering with BAM, BRK partners with 3G.  If BAM ever needed BRK's backing, seems like a way in.  But BAM's approach is likely more conservative/value oriented/long term - and they've seem to be okay with getting the capital they need.
Title: Re: BAM - Brookfield Asset Management
Post by: Og on January 09, 2018, 09:53:54 AM
Would appreciate some help understanding valuation of this company and some of its subsidiaries.

Brookfield Asset Management BAM.A:  PE ratio is 30, BV is 34 (P/B is 1.6).  50% debt to capital load.  It appears on the surface to be overvalued by these metrics.  I like the business a lot, but why should I buy it now?

Brookfield Business Partners BBU.UN: PE ratio is 75, BV is $60 (P/B is 0.78). 37% debt to capital load.  Better value???

Brookfield Infrastructure Partners BIP.UN:  PE 36, BV 19.32 (P/B is 2.84). 44% debt to capital load.  Very overvalued?

I'm sure I'm oversimplifying everything here and I love the underlying business, but would it not be a risk going into a market correction given these values?
With the exception of BBU.UN, they all seem overvalued (assuming my values are correct...)

Thanks!

Partners Value Investments LP can be purchased at double digit discounts (at times) and the majority of their book value is in BAM stock. It's also levered up with preferred stock. Units are thinly traded as about 90% of the float is owned by BAM management. However, if you are able to get an order in (with patience) and double digit discounts to NAV (I've seen it near 20% before), and are willing to wait a few years, you should do even better than if just owning the common in that scenario.

As for valuation of BAM stock -- I'd recommend first checking out their investor presentations. They do a pretty good job on explaining on they value their company and their estimates tend to be on the conservative side.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on January 09, 2018, 10:41:24 AM
Is BAM.A  the right ticker for toronto ?
dutchman,

BAM Annual Report 2016, p. 172 is the place to read.
Title: Re: BAM - Brookfield Asset Management
Post by: no_free_lunch on January 09, 2018, 10:45:36 AM

Partners Value Investments LP can be purchased at double digit discounts (at times) and the majority of their book value is in BAM stock. It's also levered up with preferred stock. Units are thinly traded as about 90% of the float is owned by BAM management. However, if you are able to get an order in (with patience) and double digit discounts to NAV (I've seen it near 20% before), and are willing to wait a few years, you should do even better than if just owning the common in that scenario.

As for valuation of BAM stock -- I'd recommend first checking out their investor presentations. They do a pretty good job on explaining on they value their company and their estimates tend to be on the conservative side.

Right now it looks like they are trading at a 20% premium to book (using Sept 30 book).  Is that really a good deal at these prices?  I know you say to wait for a double discount but.. that's not where it's at.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on January 09, 2018, 11:06:14 AM
Seems like it wouldn't be hard to bring that expertise in house via hiring... After all, paying a team $10-20m a year is nothing if they can put billions to work.

Shane & villainx,

Mr. Flatt and his management team aren't - and haven't become - rich just because they are good at what they are doing.

BAM Annual Report 2016, p. 155:

2016YE outstanding shares: 958,168,417.
2016YE unexcersised options etc.: 43,798,733.

2016YE total diluted shares: 1,001,967,150.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on January 09, 2018, 05:32:49 PM
There was talk about carried interest. This is from the q3 2017 letter:

"
It is important to understand that fund profit, which drives carried interest, in a fund lifecycle is typically generated in three stages. In the early years, the fund generates minimal carried interest while investments are identified and capital is being deployed. At the mid-point of the fund lifecycle, capital has been fully deployed, value is being created and the fund assets should be generating a return above the preferred return. At this point the pace of carried interest generation accelerates. In the later stages the fund will continue to generate carried interest, albeit at a decelerated rate, until all remaining assets are sold and the fund is wound up.

Looking forward, carried interest should become an increasingly larger part of our asset management earnings profile. While we have $41 billion of carry eligible capital at September 30, only 59% has been deployed, and a substantial portion is within funds that are of relatively recent vintages. Accordingly, our overall carry profile is still within that early stage. We expect generated carried interest to increase as we deploy the remaining dry powder, and our operational improvements and asset repositionings take hold. While we generate carried interest throughout the life cycle of the fund, we defer recognition in FFO until the carried interest is no longer subject to clawback. This is when the preferred return has been achieved through sales, cash has been paid and there is no significant uncertainty remaining. We do, however, report to you each quarter the amount of carry generated within our funds based on investment performance to date. We expect to realize about 60% of the potential carried interest within four to seven years and based on current funds in place we expect to earn $8 billion over the next 10 years.

As an example, the recent sale of a European industrial real estate business, from one of our real estate funds, generated $300 million of carried interest. Given that we do not book carry until the end of life of a fund, we will not recognize this carried interest in our results, as it is still subject to clawback. Despite this, it is an “unrealized asset” and this puts us well on our way to realizing substantial
carried interest from this fund.
"
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on January 09, 2018, 05:34:17 PM

Mr. Flatt and his management team aren't - and haven't become - rich just because they are good at what they are doing.


Was this intended to be a criticism of management? 

Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on January 10, 2018, 06:24:43 AM
I was just trying to place some factual counterweight & mild pushback on Shanes post about a management compensation of 10 - 20 M, and giving my own confirmation bias about BAM some massage. I haven't made any calculations or studied it further, but to me it is evident that the total compensation to the BAM management team is in a different range.
Title: Re: BAM - Brookfield Asset Management
Post by: Shane on January 10, 2018, 11:52:22 AM
Hi John,

I pulled $10-20m out of thin air, totally hypothetical.  My line of thinking was that if Berkshire Hathaway Energy has a team capable of analyzing the deals already (they have a strong M&A track record), it may be as easy as bringing in a small team to fill in the gaps they have operationally.  No idea what it would cost to lure them away, maybe $20m a year for a team of 4-5? 

I was just trying to illustrate that a good team would be well worth the investment if they can put billions to work.  Greg Abel's team are already working on tons of deals in the utility space, is a toll road/port that much different?
Title: Re: BAM - Brookfield Asset Management
Post by: cubsfan on January 10, 2018, 11:58:02 AM
I think you have a totally different issue when you are dealing with different countries, tax laws, regulatory frameworks, etc , when it comes to establishing operations in these geographies. BAM has that infrastructure
in addition to the operational expertise. Berkshire doesn't - and I don't thing they want to, unless all the management is in place.
Title: Re: BAM - Brookfield Asset Management
Post by: Shane on January 10, 2018, 12:33:42 PM
Cubsfan - good point.  Maybe BHE already looks at some less traditional infrastructure in North America and just hasn't come across an interesting deal.  BAM has been public that they see few deals in the US.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on January 10, 2018, 12:43:33 PM
Bam and all funds are down 3%ish... Small and probably a blip on the radar but is this what the market thinks of Brookfield if interest rates rise? Gets back to the earlier discussion on inflation
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on January 10, 2018, 01:06:47 PM
Bam and all funds are down 3%ish... Small and probably a blip on the radar but is this what the market thinks of Brookfield if interest rates rise? Gets back to the earlier discussion on inflation

Yes, chrispy,

I've noticed that, too. I've started charting SAN vs BAM daily, to decide when to start doing a roll gradually. Approx. 8 percent relative change to the good side for me alone since the beginning of the year. [BAM down relative to SAN].
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on January 10, 2018, 01:17:38 PM
Hi John,

I pulled $10-20m out of thin air, totally hypothetical.  My line of thinking was that if Berkshire Hathaway Energy has a team capable of analyzing the deals already (they have a strong M&A track record), it may be as easy as bringing in a small team to fill in the gaps they have operationally.  No idea what it would cost to lure them away, maybe $20m a year for a team of 4-5? 

I was just trying to illustrate that a good team would be well worth the investment if they can put billions to work.  Greg Abel's team are already working on tons of deals in the utility space, is a toll road/port that much different?

So, basically, I think we agree, Shane.

BAM management is - relatively - cheap - to us, as investors, because they appear to be good at what they are doing, combined with the scale of BAM in general. ["relativety - cheap" here in the meaning like "not Bigliari like", as an example].

The management options are a condition, that is, a condition for us for investing in BAM. This condition should be considered by us individually.

However we just need to try to stay factual with numbers here on CoBF.

That does not in any way guarantee against screw ups. Just look up my post a couple of days ago in the BAC topic about the BAC DTAs, where I ended up in the ditch in my efforts for calculating a number that was already out in open air from the company.
Title: Re: BAM - Brookfield Asset Management
Post by: cubsfan on January 10, 2018, 01:18:08 PM
Bam and all funds are down 3%ish... Small and probably a blip on the radar but is this what the market thinks of Brookfield if interest rates rise? Gets back to the earlier discussion on inflation

Well it's only one day in the markets. Longterm, future earnings look pretty good for BAM, when
you examine the important factors like carried interest, buildup in committed bookings that turn to revenue, length of contracts, increased fee revenue, and funds raised. Those are going to carry the day in the long run. Short term, interest rates will make some nervous.
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on January 10, 2018, 03:24:30 PM
I was just trying to place some factual counterweight & mild pushback on Shanes post about a management compensation of 10 - 20 M, and giving my own confirmation bias about BAM some massage. I haven't made any calculations or studied it further, but to me it is evident that the total compensation to the BAM management team is in a different range.

No problem.  I follow the mainstream media's account of BAM and Flatt fairly closely, and compensation (high, low, fair or not) has not - to my memory - been an issue.  I like the company and management, but always welcome any criticism or closer look.

The few things to me is that it seems the board is fairly independent, and otherwise have no real motivation to enrich current management, other than for performance reason.

And ... I guess Flatt was not part of the long standing Brascan/BAM insider machine (which I always seem to be think there is one), and had to perform his way to the top.  I imagine Flatt like Michael J Fox in whatever romantic comedy it was where he was some kind of corporate whiz kid and had to convince the board/investors to help him.  BAM before Flatt was very different, and he rose up and led a complete transformation. I give him the benefit of the doubt - in terms of compensation - because he likely had to chart and prove it to management/board/long time stakeholders.

But again, level of compensation is significant with regards to whether to invest or not in a company like BAM.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on January 10, 2018, 04:44:18 PM

I was just trying to place some factual counterweight & mild pushback on Shanes post about a management compensation of 10 - 20 M, and giving my own confirmation bias about BAM some massage. I haven't made any calculations or studied it further, but to me it is evident that the total compensation to the BAM management team is in a different range.


No problem. I follow the mainstream media's account of BAM and Flatt fairly closely, and compensation (high, low, fair or not) has not - to my memory - been an issue.  I like the company and management, but always welcome any criticism or closer look.

The few things to me is that it seems the board is fairly independent, and otherwise have no real motivation to enrich current management, other than for performance reason.

And ... I guess Flatt was not part of the long standing Brascan/BAM insider machine (which I always seem to be think there is one), and had to perform his way to the top.  I imagine Flatt like Michael J Fox in whatever romantic comedy it was where he was some kind of corporate whiz kid and had to convince the board/investors to help him.  BAM before Flatt was very different, and he rose up and led a complete transformation. I give him the benefit of the doubt - in terms of compensation - because he likely had to chart and prove it to management/board/long time stakeholders.

But again, level of compensation is significant with regards to whether to invest or not in a company like BAM.

villainx,

I'm really trying not to be rude here.

The first emphasize of mine in your post, ref. above: It is all about variant perceptions, that make the wheels go around here on CoBF. This is what differs CoBF from everything else out there. So please, let's analyze this *thing* in cooperation with the use of available sharing here on CoBF. [the *thing* that nobody else has paid attention to].

The second emphasize of mine in your post, ref. above : I have read somewhere [I don't have the specific source at hand right now], that Mr. Flatt did use leverage - a lot of it - to gain effective control of BAM, with his team.

I will find my source and post it here.

And again, don't guess, please.
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on January 10, 2018, 05:05:14 PM
https://stayrichblog.wordpress.com/2017/05/02/profile-of-brookfield-and-bruce-flatt/
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on January 10, 2018, 05:31:33 PM
The second emphasize of mine in your post, ref. above : I have read somewhere [I don't have the specific source at hand right now], that Mr. Flatt did use leverage - a lot of it - to gain effective control of BAM, with his team.

I will find my source and post it here.

And again, don't guess, please.

I wouldn't think you are rude.  I'm here to get investment help, so I appreciate any insight.

I don't have any defense for your first emphasis, as my investment style is second hand, probably shoddy analysis - that would never be up to CoFB standards. I go more with feel, but dearly appreciate and learn from more rigid dives.

In regards to your second emphasis, I have never heard that.  Would like to hear more.  I don't mean to offer my guesses as proof, but it's more to test my guesses until I learn more. 
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on January 25, 2018, 02:51:04 PM
They are trying to monetize their graftech gains:

Brookfield-Backed GrafTech Files for IPO https://www.wsj.com/articles/brookfield-backed-graftech-files-for-ipo-1516384344
Title: Re: BAM - Brookfield Asset Management
Post by: Jerry Capital on January 30, 2018, 10:05:05 PM
Apologies if this has been posted before. It is from 2013 but this for lack of a better word, "short case", may help you understand $BAM

http://sirf-online.org/2013/03/11/paper-world-of-brookfield-asset-management/
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on January 31, 2018, 01:37:53 PM
Apologies if this has been posted before. It is from 2013 but this for lack of a better word, "short case", may help you understand $BAM

http://sirf-online.org/2013/03/11/paper-world-of-brookfield-asset-management/

This comes up now and then, and has already upthread.  But aside from some folks finding BAM confusing organizationally to begin with, the more nefarious claims have - yet - to be born out.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on February 16, 2018, 04:05:46 AM
Quote
Net income and funds from operations (“FFO”) both increased significantly in 2017. Net income totaled $4.6 billion, an increase of $1.2 billion compared to last year, reflecting strong operating results and a higher level of unrealized valuation gains. FFO was $3.8 billion, an increase of 18% from the prior year, which also reflects the strong operating results as well as an increased level of realized disposition gains from assets sold during the year. Net income per share reflects the allocation of income between common shareholders and non-controlling interests.

https://globenewswire.com/news-release/2018/02/15/1348677/0/en/Brookfield-Asset-Management-Reports-2017-Results.html

Outstanding year.  A 26% increase in fee related earnings.  7% increase in the dividend.  Carried interest is sky rocketing.  This is all what their investor presentation told us would happen.

Quote
The expansion in fee bearing capital has increased the earning potential of our asset management franchise with annualized fees and target carry now at $2.5 billion, an increase of 22% compared to this time last year.

Our private funds generated unrealized carried interest of $1.3 billion, bringing our total accumulated unrealized carried interest to $2.1 billion, which is more than double the December 2016 amount.

In a recent interview posted on CoBF, Bruce said that credit would be their next big thing.  They would begin now and really put the pedal to the metal during the next downturn:

Quote
We held closes of four credit funds including the final close for our first infrastructure credit fund, Brookfield Infrastructure Debt I ("BID I"), which raised $885 million, exceeding our target of $700 million. We also held a close of our first open ended real estate credit fund.
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on February 22, 2018, 08:54:26 AM
For folks holding any of the Brookfield family of LP, do any of you hold it in US based IRA (or similar tax advantaged) account?  I've been avoiding it because I don't understand the K1 and MLP implications.

But from my understanding, the Brookfield LPs shouldn't have UBIT and where distribution are return on capital, it's a benefit being in IRA as cost basis reduces.  Even if there is an UBIT event, it should be fairly rare?  And the foreign tax would be not a important because of the relatively high yield and return on capital?

Any guidance would greatly be appreciated.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on February 22, 2018, 10:35:09 AM
The Brookfield website discusses this some. Like you mentioned, holding in an IRA is beneficial. They avoid UBIT which is the main concern.

Remember, BAM created the LPs to be desirable for investors to own, causing them to have a higher price, be able to issue shares for acqusitions, and repeat. They want IRA investors to participate.
Title: Re: BAM - Brookfield Asset Management
Post by: Shane on February 22, 2018, 02:25:06 PM
I was looking at Bloomberg today, Partners Value Investments LP sold 79.7m shares in Q4 2017?  Is this accurate?  This would eliminate almost all of their holding in the company...
Title: Re: BAM - Brookfield Asset Management
Post by: bizaro86 on February 22, 2018, 05:18:33 PM
No news release, and that would certainly be material for them.
Title: Re: BAM - Brookfield Asset Management
Post by: Shane on February 23, 2018, 06:28:40 AM
Yes I checked their website later yesterday evening, I don't know why Bloomberg is off.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on February 23, 2018, 07:05:40 AM
Shane,

Do you have a link to that message? Thank you in advance.
Title: Re: BAM - Brookfield Asset Management
Post by: Shane on February 23, 2018, 07:59:34 AM
No - if you have a Bloomberg terminal you can just check the ownership page.  I have attached an imagine of the ownership chart for Partners Value Investments LP.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on February 23, 2018, 08:05:43 AM
Thanks a lot for sharing here, Shane,

It looks from the graphics to me like it's a 1st quarter 2017 issue.
Title: Re: BAM - Brookfield Asset Management
Post by: Shane on February 23, 2018, 12:12:23 PM
Thanks a lot for sharing here, Shane,

It looks from the graphics to me like it's a 1st quarter 2017 issue.

From the graphic, yes.  On the data page it lists it as a change that occurred in the period ending 12/31/17.  I don't know what is going on.  May ask a technician to look into it.

This is an error which IR will soon correct.
Title: Re: BAM - Brookfield Asset Management
Post by: fareastwarriors on March 26, 2018, 05:04:28 PM
Brookfield and GGP Reach Agreement on BPY’s Acquisition of GGP


https://globenewswire.com/news-release/2018/03/26/1453239/0/en/Brookfield-and-GGP-Reach-Agreement-on-BPY-s-Acquisition-of-GGP.html (https://globenewswire.com/news-release/2018/03/26/1453239/0/en/Brookfield-and-GGP-Reach-Agreement-on-BPY-s-Acquisition-of-GGP.html)
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on March 27, 2018, 04:36:15 AM
Wow.  Market reaction will be very interesting.  I take it BPY will remain primarily an office property owner?

"
GGP shareholders will have the option of either exchanging GGP shares for Brookfield shares or shares in the new REIT because a large number of the GGP shareholders are U.S. shareholders who don’t want to own partnership units, Mr. Kingston said.
"
Title: Re: BAM - Brookfield Asset Management
Post by: Astrea on March 27, 2018, 05:48:29 AM
"In conjunction with and in support of the proposed transaction, BAM has stated its intention to convert $500 million currently held in BPY Class C Junior Preferred Shares into BPY units at a price of $23.50 per unit, resulting in BAM’s acquisition of approximately 21.3 million BPY units."

Seems like BAM thinks it is getting a sensible deal at $23.5 or 21% higher than latest closing price...
Title: Re: BAM - Brookfield Asset Management
Post by: vince on March 27, 2018, 06:22:10 AM
anyone know this company well enough to calculate the increase in fees owed from bpy as a result of this transaction? bam waived the increase for 1 year but after that it looks like a nice bump
Title: Re: BAM - Brookfield Asset Management
Post by: vince on March 27, 2018, 06:53:14 AM
base mgmt fees from all public partnerships for 2017 is 529 million and annualized incentive distributions (based on dividend growth of partnerships) is 198 million.  base mgmt fees are based on market cap so bpy accounts for close to 50% of 529 million.  and it looks like market cap is going to increase nicely
Title: Re: BAM - Brookfield Asset Management
Post by: Jerry Capital on March 27, 2018, 07:01:04 AM
Just nitpicking here a little Vince. The base management fees are based on total cap (market cap + preferred equity cap + debt net of cash) not market cap of the LP units.
Title: Re: BAM - Brookfield Asset Management
Post by: vince on March 27, 2018, 07:25:38 AM
thanks Jerry, great point.  I also found, in the supplemental, that bpy's base fees are 166 million.  do u have a rough number of the increase in capitalization on this transaction?
Title: Re: BAM - Brookfield Asset Management
Post by: Mephistopheles on March 27, 2018, 09:53:02 AM
Why is GGP down 4% today and nowhere near the 23.50?
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on March 27, 2018, 09:55:17 AM
Why is GGP down 4% today and nowhere near the 23.50?

Because it will almost certainly be prorated between cash and shares of BPR and BPY is down at $18.9.

I get a spread of ~8% with the prorated amount.
Title: Re: BAM - Brookfield Asset Management
Post by: Mephistopheles on March 27, 2018, 10:01:24 AM
Why is GGP down 4% today and nowhere near the 23.50?

Because it will almost certainly be prorated between cash and shares of BPR and BPY is down at $18.9.

I get a spread of ~8% with the prorated amount.

Wow what a shitty deal
Title: Re: BAM - Brookfield Asset Management
Post by: Jerry Capital on March 27, 2018, 10:40:56 AM
Shitty deal for who?

Certainly good for BAM shareholders.
Title: Re: BAM - Brookfield Asset Management
Post by: Mephistopheles on March 27, 2018, 11:11:25 AM
Shitty deal for who?

Certainly good for BAM shareholders.

I meant for GGP shareholders, forgot this isn't the GGP thread
Title: Re: BAM - Brookfield Asset Management
Post by: gokou3 on March 27, 2018, 12:15:47 PM
Not very often that the stock prices of both the target and the acquirer (and the sponsor BAM) dropped after deal announcement....  and of course I own all 3.  ::)
Title: Re: BAM - Brookfield Asset Management
Post by: karthikpm on March 27, 2018, 03:34:29 PM
Not very often that the stock prices of both the target and the acquirer (and the sponsor BAM) dropped after deal announcement....  and of course I own all 3.  ::)

+1

I was surprised by that too.
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on March 27, 2018, 03:39:04 PM
Not very often that the stock prices of both the target and the acquirer (and the sponsor BAM) dropped after deal announcement....  and of course I own all 3.  ::)

+1

I was surprised by that too.

Well that happens when the market goes down.
Title: Re: BAM - Brookfield Asset Management
Post by: vince on March 27, 2018, 03:46:27 PM
racemize, can u be more specific in what you mean with respect to the 8% please, im a little slow today
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on March 27, 2018, 06:13:01 PM
racemize, can u be more specific in what you mean with respect to the 8% please, im a little slow today

Sure, so the cash portion of the deal is $9.5 billion.  The equity portion is 254 million shares of BPY (to be BPR REIT), which is worth 254*19.19 (closing price) = $4.9 billion.  The ratio of those are 66%/34%.  Adjusting this down to per share by assuming everyone gets a prorated version: 66%*23.5+34%*19.19 = $22.03.  $22.03/20.08 = 1.097 = 9.7% spread now.

The math above changes based on the share price, so when BPY was cheaper earlier today the spread was lower.

Honestly seems pretty good to me.
Title: Re: BAM - Brookfield Asset Management
Post by: vince on March 28, 2018, 08:14:44 AM
Thanks
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on April 02, 2018, 02:31:49 PM
BAM 2017 Annual Report (https://bam.brookfield.com/~/media/Files/B/BrookField-BAM-IR/quarterly-reports/2017/BAM%20Annual%202017/BAM%20Annual%20Report%202017_R.pdf) out on 29th March 2018.

A lot to chew on. I'm not done yet.

-Unrealized Carried Interest Net up from 291M at YE2016 to 928M at YE2017! [p. 5.]
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on April 02, 2018, 03:46:38 PM
Did anyone notice that they use IFRS valuation for BPY and quoted values for BEP,  BIP and BBU? IFRS value is $4.5B higher for BPY than in quoted value, for the other entities the quoted values are higher.

Sneaky accountants....
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on April 02, 2018, 03:52:00 PM
What the heck are you talking about here, Spekulatius? Consolidation is what it is: Consolidation.
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on April 02, 2018, 04:13:23 PM
Did anyone notice that they use IFRS valuation for BPY and quoted values for BEP,  BIP and BBU? IFRS value is $4.5B higher for BPY than in quoted value, for the other entities the quoted values are higher.

Sneaky accountants....

They are marking what they think approximates fair value.  I tend to pick one or the other (IFRS vs quoted) for my own valuations, personally.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on April 02, 2018, 04:51:14 PM
Did anyone notice that they use IFRS valuation for BPY and quoted values for BEP,  BIP and BBU? IFRS value is $4.5B higher for BPY than in quoted value, for the other entities the quoted values are higher.

Sneaky accountants....

Joel cooled me down - at least a bit - , Spekulatius,

What exacly are you referring to - above?

-There is no way according to IFRS to include write-ups of intangibles to the income statements - nor to do the write-ups.

- - - o 0 o - - - -

If your post was about alternative investment measures - no harm done here.
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on April 02, 2018, 05:06:40 PM
Consolidation is required , since it is a related party and BAM is the GP. However, I don’t like they mark IFRS or quoted prices, whatever is higher apparently.
Title: Re: BAM - Brookfield Asset Management
Post by: Jerry Capital on April 02, 2018, 05:14:48 PM
Take all of the values at their lowest most conservative levels and apply even small multiples to the FRE and Unrealized Carry and its clear $BAM is cheap.
Title: Re: BAM - Brookfield Asset Management
Post by: cubsfan on April 02, 2018, 05:17:00 PM
They don't exactly hide it from anyone - it's right on the first page of the annual report:

INVESTED CAPITAL
We value our invested capital based primarily on a combination of quoted market prices for listed investments and IFRS book values for unlisted investments. Listed investments represent approximately 85% of our invested capital. For purposes of measuring value creation and business planning, we substitute BPY’s IFRS value for its market price because its balance sheet assets are almost entirely carried at fair values that are adjusted quarterly, and we adjust the IFRS we value of our unlisted North American residential business to re ect its privatization value. We measure value creation in this part of our business by the change in the value of our invested capital over time.
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on April 02, 2018, 07:04:24 PM
They don't exactly hide it from anyone - it's right on the first page of the annual report:

INVESTED CAPITAL
We value our invested capital based primarily on a combination of quoted market prices for listed investments and IFRS book values for unlisted investments. Listed investments represent approximately 85% of our invested capital. For purposes of measuring value creation and business planning, we substitute BPY’s IFRS value for its market price because its balance sheet assets are almost entirely carried at fair values that are adjusted quarterly, and we adjust the IFRS we value of our unlisted North American residential business to re ect its privatization value. We measure value creation in this part of our business by the change in the value of our invested capital over time.

Yes, it’s not hidden. Nefarious stuff is usually hidden in the footnotes. I still wonder why they do it. It does not look good.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on April 03, 2018, 04:34:44 AM
For quite some time they have stated BPY and GGP are undervalued and they use IFRS for them. This is very clearly stated whenever it is presented. They acted on GGP by acquiring it and they are creating BPR because they believe the REIT strcuture could increase share price of BPY.

While selecting whichever two they like is inconsistent, they have been very consistent in their way of doing it.
Title: Re: BAM - Brookfield Asset Management
Post by: CorpRaider on April 03, 2018, 11:56:30 AM
The deal GGP structure looks kind of interesting to me. $400MM termination fee and seems like the cash component could motivate enough of the non-bam unit holders to get the votes.  Seems maybe designed to incent outsiders to GTFO in a seemingly less than robust pricing environment/with properties in flux. 

Discount to offer is like 15%; competing bid seems unlikely since they own 34%.

I don't really like the structure of the funds, as a long term holder, paying the fees and carry and being externally managed.
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on April 03, 2018, 02:27:36 PM
The deal GGP structure looks kind of interesting to me. $400MM termination fee and seems like the cash component could motivate enough of the non-bam unit holders to get the votes.  Seems maybe designed to incent outsiders to GTFO in a seemingly less than robust pricing environment/with properties in flux. 

Discount to offer is like 15%; competing bid seems unlikely since they own 34%.

I don't really like the structure of the funds, as a long term holder, paying the fees and carry and being externally managed.

There aren’t that many suitors that could take out GGP with an EV of ~$33B. SPG could do it, I don’t think they are interested. I agree on avoiding these yield vehicles. BAM’s incentive as a GP is to make them bigger  (hence the GGP takeover) more so than making them better.
Title: Re: BAM - Brookfield Asset Management
Post by: Jerry Capital on April 03, 2018, 03:27:20 PM
BAM has an incentive to make them bigger for the fee stream, that is undeniable. But your comment implies a sort of negative connotation. They also have (post GGP acquisition)  50% ownership in the combined entity which accounts for a large chunk of the market cap of BAM.

So yes, fees are important, but net net the performance of BPY is equally or even more important than the fee stream.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on April 03, 2018, 04:32:04 PM
The reason I own BAM is the diversity across all the partnerships and that outperformance will hopefully come from the asset management business (during the next few years funds will be closed that have been very successful so far).

Yes, BAM does better when the partnerships become bigger, but who doesnt?  Looking at p6 of the Annual Report (AR), ~50% of BAM's invested capital is in BPY.  BAM does benefit more than the average shareholder due to the fees but their interests are very much aligned with the average shareholder.  Does BPY not also benefit from all of the expertise, capital, reputation, and connections of BAM?

BAM had to make some concessions for the GGP deal, such as this from the "Definitive Agreement to Acquire GGP":

"Brookfield Asset Management (“BAM”), in support of the transaction, has agreed to waive the incremental management fee for a period of 12 months and convert its $500M Class C Preferred Shares into approximately 21.3M BPY units at $23.50 per unit"

From the AR, BAM's first business risk after volatility in the share price is Reputation.

"Actions or conduct that have a negative impact on clients’or stakeholders’perception of us could adversely impact our ability to attract and/or retain client capital."

They are well aware that poor performance in any of their funds could cause harm to their future as an asset manager.

And with regards to the IFRS debate, it should be noted that BAM has sold several assets recently at 10%+ more than IFRS.
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on April 03, 2018, 07:23:27 PM
Points mentioned above are well reasoned. I would say that way to invest in the BAM complex is BAM itself  not the investment entities, because in the end the fees will make the difference.

i don’t think they are playing nice wth GGP. I had some GGP shares a while, but sold in the news of  BAM taking over GGP. If I owned them now, I would be pissed. Exchanging  GGP into BPY is a bad deal for two reasons
1) No chance of anothe suitor or liquidation
2) With BPY owning GGP assets, there is now and additional layer of fees to run and own these assets

There is a lot of reflexivity in BAM‘s business model, which works both in positive and negative feedback loops. some. Some of the peers like Macquarie got hit by this in the 2008 meltdown, BAM got spared, due to being more adept and maybe a bit of luck too, but that is mo guarantee that they will come out Ok next time.
Title: Re: BAM - Brookfield Asset Management
Post by: gokou3 on April 05, 2018, 04:25:37 PM
Wondering if this is good or bad for BAM:

Blackstone is struggling to raise money for the massive, Saudi-backed infrastructure fund it trumpeted last year
http://www.businessinsider.com/blackstone-struggling-to-raise-money-for-saudi-backed-infrastructure-fund-2018-4
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on April 05, 2018, 05:07:43 PM
Points mentioned above are well reasoned. I would say thwtthat way to invest in the BAM complex is BAM itself  not the investment entities, because in the end the fees will make the difference.

i don’t think they are playing nice wth GGP. I had some GGP shares a while, but sold in the news of  BAM taking over GGP. If I owned them now, I would be pissed. Exchanging  GGP into BPY is a bad deal for two reasons
1) No chance of anothe suitor or liquidation
2) With BPY owning GGP assets, there is now and additional layer of fees to run and own these assets

There is a lot of reflexivity in BAM‘s business model, which works both in positive and negative feedback loops. some. Some of the peers like Macquarie got hit by this in the 2008 meltdown, BAM got spared, due to being more adept and maybe a bit of luck too, but that is mo guarantee that they will come out Ok next time.

I have been thinking quite a bit about this post of yours the last couple of days, Spekulatius,

BAM & subs are opportunistic, bordering to being exploitive. It's just the way they operate - it's part of how their capital recycling approach work. We can like it, or not. It will not change. Think the WestingHouse deal and the Terraform deal based on the SUNE bankruptcy. It's almost like sharks that have smelled blood. The moves appear to take place when someone is on their knees in weakness [broke, almost broke, low share price etc.]

To me, GGP has been subject to an occupation by the BAM sphere, and it has only been a matter of time, before the BAM sphere would go in for the kill. I expect there will be an internal bloodbath in GGP related to total reorganization and overhaul of GGP to integrate GGP and make it fit to the "BAM way" to operate. It's to me a daunting task.

And all this because of some reckless RE financing in GGP earlier.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on April 09, 2018, 05:18:36 PM
Toronto-based Brookfield acquired GrafTech in 2015 with an equity investment of about $855 million. If the IPO were to price at the top end of the range, that would ascribe a valuation to the company that is 8.5 times what Brookfield paid for it three years ago.

https://www.bloomberg.com/news/articles/2018-04-04/brookfield-s-graftech-aims-to-raise-up-to-907-million-in-ipo
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on April 09, 2018, 07:44:40 PM
Isn't GrafTech technically with BBU?

Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on April 10, 2018, 03:44:23 AM
Yes and is the reason why BBU spiked ~8-10% last week I believe
Title: Re: BAM - Brookfield Asset Management
Post by: no_free_lunch on April 14, 2018, 02:12:28 PM
Beginner question.  Are the dollar amounts in the brookfield annual report in USD or CAD?
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on April 14, 2018, 02:29:21 PM
Beginner question.  Are the dollar amounts in the brookfield annual report in USD or CAD?

Somehow, the question is ridiculous [because it has merit, based on the reporting, - I can't even straight out find a place in the financials, where it is stated, that reporting is in USD.]. [ : - ) ]

Edit:

BAM Financial Report 2017, p. 39 [about foreign currency translations]: CAD is mentioned in the table, so from that you can deduct that the reporting is done in USD.

BAM Financial Report 2017, p. 123, section e):

Quote
The U.S. dollar is the functional and presentation currency of the company.
Title: Re: BAM - Brookfield Asset Management
Post by: LongTermView on April 15, 2018, 11:05:40 AM
https://www.forbes.com/sites/antoinegara/2018/04/15/bruce-flatt-brookfield-china/#221997273666
Title: Re: BAM - Brookfield Asset Management
Post by: ValueMaven on April 21, 2018, 08:54:40 AM
Does anyone have all of Bruce's annual shareholder letters in one place? 

BAM IR website only goes back to 2012!

Sincerely,
VM
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on April 21, 2018, 09:19:58 AM
Does anyone have all of Bruce's annual shareholder letters in one place? 

BAM IR website only goes back to 2012!

Sincerely,
VM

https://drive.google.com/open?id=0BxTPR9eP5nWeV1JyZktlTncxM00
Title: Re: BAM - Brookfield Asset Management
Post by: Cigarbutt on April 21, 2018, 09:37:56 AM
“Everything we do is directed at maximizing
shareholder value…”


“We cannot guarantee the future, but we do
believe we have laid the foundations for achieving
improved returns for you. »

First and last sentence from Mr. Flatt’s first letter signed as CEO (2001 annual report).

BAM used to be Brascan and the firm has evolved under the new leadership.

Racemize is the reference but their website will take you back to 2009:
https://bam.brookfield.com/en/reports-and-filings

It takes a bit of work, but you can go back in time some more in:
sedar.com

Brascan was related to the Bronfman family and that's another story.
Title: Re: BAM - Brookfield Asset Management
Post by: ValueMaven on April 21, 2018, 11:12:22 AM
THANKS!
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on April 21, 2018, 02:26:18 PM
This share by Joel is just soo awesome!

- - - o 0 o - - -

ValueMaven, what is it with you? - Why don't you get it?  [ ; - ) ] - Last time you asked you got hit by Joel of about 2,241 pages ... - This time about 4,000 pages ... - Next time you ask you'll likely be hit by Joel of 15,000 pages, or something like that!

- - - o 0 o - - -

Thank you for sharing, Joel! I appreciate it a lot!
Title: Re: BAM - Brookfield Asset Management
Post by: ValueMaven on April 21, 2018, 04:40:11 PM
haha John...fair enough. 

Well, the real reason is that I've always followed BAM, but never really dug deep...honestly FFH is really starting to annoy me with all of the corp governance issues etc...that $50mm investment in his sons fund last year is really bugging me.  Anyway, I've been looking for FFH replacements in my portfolio.  Plus, BAM has been 'hit' recently given the whole REIT selloff/rate movements....Just using it as a reason to do some work on the name.

Sincerely,
ValueMaven.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on April 26, 2018, 10:18:35 AM
Two recent purchases in Mumbai and Chicago:

Brookfield to buy Essar’s Equinox office complex for Rs 2,450 Crore ($336m)

economictimes.indiatimes.com/articleshow/62409063.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
https://economictimes.indiatimes.com/wealth/real-estate/brookfield-to-buy-essars-equinox-office-complex-for-rs-2450-crore/articleshow/62409063.cms

Brookfield Property Partners pays $305M for Loop office tower

https://therealdeal.com/chicago/2018/04/25/brookfield-venture-pays-305m-for-loop-office-tower/
Title: Re: BAM - Brookfield Asset Management
Post by: Packer16 on April 30, 2018, 06:06:02 AM
The one observation I have here is BIP has outperformed BAM & and the other subs over time.  It appears there is more profit to be made infrastructure vs. real estate or renewable power assets.  Maybe BIP has a more flexible mandate then the other subs & thus has a larger target set than the other subs.  Also BIP has the largest amount of 3rd party investment in its companies versus the other subs (BAM only owns 30% of BIP vs. a high % of other subs).   

BIP is really interesting in that you can invest in a non-correlated asset class to stocks with an about 4.6% dividend yield & a 7.5% growth rate.  Currently the price to AFFO is about 13x, an AFFO yield of 7.6%.  This is a far cry from the Graham Formula estimate P/E of 23.5.  (Note: earnings here are meaningless as there is non-cash amortization in them)

Packer   
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on April 30, 2018, 07:26:27 AM
BIP benefited from large transformative acquisitions during distress period.  This fits less with BEP profile.  BPY is too cyclical in that RE positives in one area(s) will be offset by distress in others, despite overall good operations.  BBU has potential to be like BIP, a looser/flexible mandate with potential for large transformative acquisitions.   

Title: Re: BAM - Brookfield Asset Management
Post by: StevieV on April 30, 2018, 07:57:40 AM
Packer, or others,

I have a general aversion to investing in the subs.  In general, I prefer to be aligned with management.  In this case, it seems to me as though BAM has all the control, and management is at least largely invested in BAM, rather than the subs.

Any reason I shouldn't be concerned about the alignment of interests with the subs here?

StevieV
Title: Re: BAM - Brookfield Asset Management
Post by: Uccmal on April 30, 2018, 09:25:03 AM
Packer, or others,

I have a general aversion to investing in the subs.  In general, I prefer to be aligned with management.  In this case, it seems to me as though BAM has all the control, and management is at least largely invested in BAM, rather than the subs.

Any reason I shouldn't be concerned about the alignment of interests with the subs here?

StevieV

I have given this alot of thought.  I started with Bep nearly 3 yrs ago, in my margin account.  I decided that losing some of the distributions to taxes was unsatifactory so I slowly shifted the posiiton into our  TFSAs and RRSPs.  At the same time I started to build a posiiton in the parent, maybe a year and a half ago, and reduce the BEP holding in my taxable accounts. 

BAM is likely to grow somewhat faster than the subs simply by virtue of the fact that BAM takes fees from the subs, and all the investment funds, as well as making money on its own operations.  Bam dictates how much fees the subs pay and their dividends.  This doesn't mean that certain subs may not grow faster over certain time periods.  It just means that in aggregate BAM should do better (I think). 

BEP and AQN (Algonquin) are somewhat analogous.  BEP pays their own managers, and BAM.  AQN ownly has to pay their own managers.  This creates a drag for BEP.  Perhaps it is offset by a lower cost of funding when BAM is the guarantor but I am not seeing that.  Algonquin gets pretty cheap money. 

An advantage that BAM provides is their global reach.  Algonquin, Emera, and other BEP comparables just dont have this expertise in non NA deal making. 

The other subs have similar advantages and disadvantages as BEP. 

Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on April 30, 2018, 10:42:09 AM
... Perhaps it is offset by a lower cost of funding when BAM is the guarantor but I am not seeing that. ...

Just to support Al's comments about financing at BAM and BAM subs:

BAM 2017 Annual Report, p.4:

Quote
We finance our operations using debt that is primarily at the operating asset level and is predominantly investment grade with limited recourse and covenants. Our asset level debt is supplemented by medium and long-term debt and perpetual preferred shares at the listed issuers and corporate level.

This financing structure, combined with a constant high level of dry powder in the whole system, makes it quite unlikely, that the rise of a liquidity problem somewhere in BAM or the subs because something has ended in the ditch would cause a domino-effect [house of cards].

- - - o 0 o - - -

Good to see you back, Al. I hope you enjoy the spring.
Title: Re: BAM - Brookfield Asset Management
Post by: ValueMaven on May 01, 2018, 05:20:18 PM
https://www.bloomberg.com/news/videos/2018-05-01/brookfield-ceo-disagrees-with-zell-sees-opportunities-in-real-estate-video
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on May 06, 2018, 06:44:15 PM
A key to Malone's success was applying leverage to a business with predictable, and hopefully growing, cash flows.

After reading the BEP and BIP earnings transcripts, the Brookfield business model is remarkably similar. Buy an infrastructure asset that has high barriers to entry, negotiate long term contracted prices that increase with inflation, and refinance the asset.  Brookfields twist is to sell the asset after many years to a bidder that is interested in the low risk long term pricing.
Title: Re: BAM - Brookfield Asset Management
Post by: peterHK on May 07, 2018, 12:54:56 PM
The reason you'd own the listed partnerships is that you want to own them in different weights than they are owned in BAM. I think BEP and BIP and BBU are better businesses than BPY for instance, so I'd like to own more of them. The real reason to own BAM, in my opinion, at the current juncture is that the implied value of the asset management business at current prices is absurdly low given the growth trajectory and fee growth to come.
Title: Re: BAM - Brookfield Asset Management
Post by: gokou3 on May 07, 2018, 01:19:30 PM
The reason you'd own the listed partnerships is that you want to own them in different weights than they are owned in BAM. I think BEP and BIP and BBU are better businesses than BPY for instance, so I'd like to own more of them. The real reason to own BAM, in my opinion, at the current juncture is that the implied value of the asset management business at current prices is absurdly low given the growth trajectory and fee growth to come.

It's not just a weighting issue.  In addition to the asset return, BAM also collects management fee and IDR from its LPs, so the ROIC BAM gets from its BIP/BEP/BPY/BBU would be higher than the returns by those LP themselves.

Then the next issue is relative valuation.  Similar to BRK, I would use the two-column approach, where one side is the summed values of its LP and other holdings and the other side is the value of its operating (fund management) business.  Even if you use conservative multiples, you should find that BAM is trading at a slight discount to its sum of parts.
Title: Re: BAM - Brookfield Asset Management
Post by: peterHK on May 07, 2018, 02:56:18 PM
The reason you'd own the listed partnerships is that you want to own them in different weights than they are owned in BAM. I think BEP and BIP and BBU are better businesses than BPY for instance, so I'd like to own more of them. The real reason to own BAM, in my opinion, at the current juncture is that the implied value of the asset management business at current prices is absurdly low given the growth trajectory and fee growth to come.

It's not just a weighting issue.  In addition to the asset return, BAM also collects management fee and IDR from its LPs, so the ROIC BAM gets from its BIP/BEP/BPY/BBU would be higher than the returns by those LP themselves.

Then the next issue is relative valuation.  Similar to BRK, I would use the two-column approach, where one side is the summed values of its LP and other holdings and the other side is the value of its operating (fund management) business.  Even if you use conservative multiples, you should find that BAM is trading at a slight discount to its sum of parts.

Yes BAM's return will be higher than the LP's return, but depending on which LP and what weighting they use, investors can earn a higher return than BAM by correctly picking and weighting the LP's. For example, over the past 3 years, BIP has significantly OP'd BAM on a total return basis. Over the past 5 years, BEP has underperformed BAM significantly. BPY has been by far the worst performer. So by going 100% into BIP, you'd have outperformed. This obviously is a more complex method that would likely involve more rebalancing etc. than owning BAM (and I would note that over 10 years BAM has outperformed its LP's).

Agreed on the valuation. I have a live mark to market on all of BAM's LP's in a spreadsheet, so I can mark that part of BAM's balance sheet to market minute by minute and then back out a live valuation for the AM business (more or less) and comp that out to other high quality asset managers. It's actually pretty easy to value due to the public nature of most of it's balance sheet.
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on May 07, 2018, 04:30:54 PM
The management fees that grow with the Lp’s size are key to almost guarantee outperformance of the GP(BAM) over time. Then there is the advantage that thr GP really has the control, while the L.P. are well - limited. When you are buying BAM, you interest is aligned with mangement, when you are buying the L.P., you are the golden Goose that can’t be slaughtered, but that is fair game for anything else...
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on May 08, 2018, 05:33:18 AM
What is happening with BBU is worth keeping an eye on. Graftech just IPOd to wrap up a grand slam investment, the Toronto gambling is about to pick up and expand considerably, Cyrus is very excited about BRK water, Westinghouse operations will start in the next year, and North Palladium may be IPOing this year. One analyst on the call and a market cap of 1.5B
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on May 08, 2018, 08:28:16 AM
BBU will definitely get a ramp up.  I see it as part of the spinoff process where it becomes a legit vehicle for BAM, until 8-12 bil market cap like the other subs.  Like BIP, near term, it likely will find acquisitions that will lead to good performance. 
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on May 10, 2018, 05:13:12 AM
Great results.  The carried interest is starting to take off.  Flatt has frequently mentioned how the carried interest will sky rocket over the next years:

"
Fee related earnings increased by 56% to over $1.0 billion over the LTM, attributable to new capital raised across multiple fund strategies and stronger market valuations of our listed partnerships. Earnings included performance fees of $143 million in the quarter from continued strong unit price performance by Brookfield Business Partners.

We also achieved growth in economic net income from our asset management activities, which more than doubled from the prior LTM period to $2.1 billion. Unrealized carried interest was $1.5 billion before costs, or $1.0 billion net of costs in the last twelve months, more than triple that of the prior period. The step-change is a result of our earlier vintage funds starting to generate significant amounts of carried interest for the first time. As our fund series have been growing and should continue to grow, we expect to see continued increases in carried interest, as carry eligible capital grows.

We continue to generate increasingly significant free cash at the corporate level. We receive significant cash flow from our asset management business as well as distributions from our invested capital, which adds to our robust liquidity profile.

On an annual basis, we receive approximately $1 billion in asset management fee related earnings and $1.5 billion of cash distributions from our invested capital annually based on our current profile. After paying approximately $500 million of interest expense, preferred share dividends and corporate costs, we are generating approximately $2 billion of cash flows before common share dividends that is available for distribution or reinvestment. We have few capital requirements at the corporate level and this positions us well to use our cash flow to support larger fund transactions, providing bridge capital, and seeding new fund products.

We have significant liquidity to deploy for future opportunities. This includes $22 billion of third-party private fund commitments and $10 billion of core liquidity.
"

https://bam.brookfield.com/en/press-releases/2018/05-10-2018-122022041
Title: Re: BAM - Brookfield Asset Management
Post by: Uccmal on May 10, 2018, 06:09:38 AM
To add fuel to the fire about which unit is better to own (I dont have the answer BTW):

" First quarter funds from operations (“FFO”) also increased significantly to $1.2 billion, an increase of 74% from the prior year. Fee related earnings continue to increase as a result of the growth in fee bearing capital and higher performance fee income. This was due to fee bearing capital growth generated by both increases in new private fund capital and listed issuers. We received a performance fee from Brookfield Business Partners in the quarter as the partnership continues to exceed performance hurdles. The increased contribution from our invested capital reflects improved results across our businesses, including higher pricing in our renewable power and private equity operations. FFO included $473 million of disposition gains from assets sold, including the aforementioned utility asset and a partial sale of a core office property.u"
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on May 10, 2018, 06:25:29 AM
In Q1, they have already hit their projected value from the 5-year guidance from 2013 investor day.
Title: Re: BAM - Brookfield Asset Management Inc.
Post by: John Hjorth on May 12, 2018, 12:15:30 PM
cubsfan attended the Bruce Flatt Dinner arranged by Value Investor Conference held on May 4th 2018 in the Berkshire Weekend, and cubsfan's report from the meeting can be read here (http://www.cornerofberkshireandfairfax.ca/forum/berkshire-hathaway/berkshire-weekend-kunal-kapoor-bruce-flatt-dinners-15935/msg332238/#msg332238).

Absolutely worth your time reading, if you're interested in BAM, and thank you for sharing your notes and impressions here on CoBF, cubsfan.
Title: Re: BAM - Brookfield Asset Management
Post by: cubsfan on May 12, 2018, 01:50:18 PM
Thanks - always a pleasure John.
Title: Re: BAM - Brookfield Asset Management
Post by: gokou3 on May 13, 2018, 12:08:20 AM
In Q1, they have already hit their projected value from the 5-year guidance from 2013 investor day.

I don't have their 2013 Investor Day powerpoint, but I have the 2014 one.  Their asset management business is on track to meet the most aggressive forecast made back in 2014.  However, it also forecasted an invested capital of $52B in the *least* optimistic case and yet as of 2018Q1 (supplemental page 15) it only has ~$34B.

On the other hand, I understand BAM puts up capital for its own private funds (supplemental page 25). I wonder if the reason for the performance "lag" of the invested capital is due to the reallocation into private funds. But then, I don't see these assets included in page 15 nor in Brookfield's own valuation model in their Investor's Day presentation.

Title: Re: BAM - Brookfield Asset Management
Post by: racemize on May 13, 2018, 12:13:16 AM
In Q1, they have already hit their projected value from the 5-year guidance from 2013 investor day.

I don't have their 2013 Investor Day powerpoint, but I have the 2014 one.  Their asset management business is on track to meet the most aggressive forecast made back in 2014.  However, it also forecasted an invested capital of $52B in the *least* optimistic case and yet as of 2018Q1 (supplemental page 15) it only has ~$34B.

On the other hand, I understand BAM puts up capital for its own private funds (supplemental page 25). I wonder if the reason for the performance "lag" of the invested capital is due to the reallocation into private funds. But then, I don't see these assets included in page 15 nor in Brookfield's own valuation model in their Investor's Day presentation.

Yes, they are lagging on the invested capital, although I think some of that can be due to spin outs (BBU/Trisura).  Mostly, I track the projected IV, and they have hit that number already, basically by making it up for with the extra fees.

Edit: Also, it is worth noting that in the investor day presentations they typically list the amount of capital available to invest, not the net amount, so that $54 should net down to ~$44 with leverage/overhead capitalization/etc.
Title: Re: BAM - Brookfield Asset Management
Post by: osowi on May 13, 2018, 10:28:00 AM
Given the history of distributions and spinoffs, Is it better to own BAM in an IRA or non IRA regular account?
thank you in advance.
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on May 13, 2018, 12:59:39 PM
Given the history of distributions and spinoffs, Is it better to own BAM in an IRA or non IRA regular account?
thank you in advance.

Personally, I view this as a long term holding and they've largely created the subs they wanted, so I would own something else in an IRA that is shorter term.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on May 18, 2018, 07:32:02 AM
https://www.reuters.com/article/us-usa-kushner-property/brookfield-in-talks-to-acquire-stake-in-kushner-owned-manhattan-tower-source-idUSKCN1II2RH
Title: Re: BAM - Brookfield Asset Management
Post by: Studesy on May 18, 2018, 07:53:50 AM
I am shocked, given that these figures are correct. Who would have signed off on such a sale?!?!  Ontario Liberal decision making at its finest! 

https://www.theglobeandmail.com/opinion/article-ontario-gets-taken-to-the-cleaners-in-casino-deal/
Title: Re: BAM - Brookfield Asset Management
Post by: flesh on May 18, 2018, 08:25:41 AM
I am shocked, given that these figures are correct. Who would have signed off on such a sale?!?!  Ontario Liberal decision making at its finest! 

https://www.theglobeandmail.com/opinion/article-ontario-gets-taken-to-the-cleaners-in-casino-deal/

Whoa.
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on May 18, 2018, 08:28:41 AM
I am shocked, given that these figures are correct. Who would have signed off on such a sale?!?!  Ontario Liberal decision making at its finest! 

https://www.theglobeandmail.com/opinion/article-ontario-gets-taken-to-the-cleaners-in-casino-deal/

This implies a good deal for BBU, right?  The outrage is for the seller?
Title: Re: BAM - Brookfield Asset Management
Post by: Studesy on May 18, 2018, 08:41:27 AM
I am shocked, given that these figures are correct. Who would have signed off on such a sale?!?!  Ontario Liberal decision making at its finest! 

https://www.theglobeandmail.com/opinion/article-ontario-gets-taken-to-the-cleaners-in-casino-deal/

This implies a good deal for BBU, right?  The outrage is for the seller?

Yes.  This is a fire sale price.  Difficult to believe the Ontario gov't  couldn't find other interested parties/more reasonable offers, in selling these assets.
Title: Re: BAM - Brookfield Asset Management
Post by: DTEJD1997 on May 18, 2018, 08:47:12 AM
I am shocked, given that these figures are correct. Who would have signed off on such a sale?!?!  Ontario Liberal decision making at its finest! 

https://www.theglobeandmail.com/opinion/article-ontario-gets-taken-to-the-cleaners-in-casino-deal/

1X EBIDTA?

Heck, why didn't they sell the casinos to me?  I would have given them 1.5x EBIDTA!

When you see government sell stuff at giveaway prices, it raises some questions...

A). The attorneys and investigators should be ALL OVER the politicians who made this "decision".  I would be checking their bank accounts, watching their spouses/children/relatives like hawks.  Good chance they are on the take in some way.

B). This is reason #454,768,111 that government needs to be limited to the basics and essentials.  Why in the world is government in charge of gambling/owning assets in Canada?  Why don't they own auto parts manufacturers?  Restaurants? Strip clubs? 

The less government is involved in, the less chance there is for MONUMENTAL screw ups like this.

C). Why was this not put up for auction?  You can't tell me the best bid was only 1x EBIDTA!

Just like roaches in the kitchen, how many other harebrained schemes/ideas is the government of Ontario involved in?

Shocking transfer of wealth from the public to shareholders of BAM.
Title: Re: BAM - Brookfield Asset Management
Post by: Studesy on May 18, 2018, 08:56:53 AM
I am shocked, given that these figures are correct. Who would have signed off on such a sale?!?!  Ontario Liberal decision making at its finest! 

https://www.theglobeandmail.com/opinion/article-ontario-gets-taken-to-the-cleaners-in-casino-deal/

1X EBIDTA?

Heck, why didn't they sell the casinos to me?  I would have given them 1.5x EBIDTA!

When you see government sell stuff at giveaway prices, it raises some questions...

A). The attorneys and investigators should be ALL OVER the politicians who made this "decision".  I would be checking their bank accounts, watching their spouses/children/relatives like hawks.  Good chance they are on the take in some way.

B). This is reason #454,768,111 that government needs to be limited to the basics and essentials.  Why in the world is government in charge of gambling/owning assets in Canada?  Why don't they own auto parts manufacturers?  Restaurants? Strip clubs? 

The less government is involved in, the less chance there is for MONUMENTAL screw ups like this.

C). Why was this not put up for auction?  You can't tell me the best bid was only 1x EBIDTA!

Just like roaches in the kitchen, how many other harebrained schemes/ideas is the government of Ontario involved in?

Shocking transfer of wealth from the public to shareholders of BAM.

Crazy isn't it.  So BBU has a partnership with GC (Great Canadian Gaming).  I'm not sure about the structure of this parntership but, on May 9th GC shares rose from 37-50.  GC has ebitda of ~$150mm. These new Ontario assets will produce ~$158mm in EBITDA.  Does anyone know how these assets are divided between BBU and GC??
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on May 18, 2018, 09:20:39 AM
From one of the press release:

"Great Canadian and Brookfield will invest through a newly formed partnership, Ontario Gaming GTA LP (the "Partnership"), with Great Canadian and Brookfield each holding a 49% interest in the Partnership. Clairvest Group Inc. will hold a 2% interest. Great Canadian will operate the gaming facilities within the GTA Bundle on behalf of the Partnership."
Title: Re: BAM - Brookfield Asset Management
Post by: rkbabang on May 18, 2018, 09:22:35 AM
Thanks Canada!
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on May 18, 2018, 11:30:53 AM
One way or the other, a crime has been committed with this transaction.? This is sort of how the Oligarch in Russia made their fortune buying then state owned assets for almost nothing.  I think this should be immediately investigated and given enough evidence I think a couple of folks will go to jail and possibly this fraudulent transaction could be reversed.
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on May 18, 2018, 11:39:15 AM
I don't see it as a crime.  Unless the bidding process was flawed in a meaningful way.  It's just an opinion piece, not economic/financial analysis.

edit: I don't mean to say that the government couldn't have erred.  Just that I assume there was a competitive process, and BBU and partners came out ahead.  In this forum/case, I care more about my investment via any outrage against politicians.
Title: Re: BAM - Brookfield Asset Management
Post by: Studesy on May 18, 2018, 11:48:39 AM
One way or the other, a crime has been committed with this transaction.? This is sort of how the Oligarch in Russia made their fortune buying then state owned assets for almost nothing.  I think this should be immediately investigated and given enough evidence I think a couple of folks will go to jail and possibly this fraudulent transaction could be reversed.

I agree.  I'm surprised this story hasn't been more publicized, especially in light of the ongoing Ontario political race.  Would have thought Doug Ford would have used this.
Title: Re: BAM - Brookfield Asset Management
Post by: Studesy on May 18, 2018, 11:53:47 AM
I don't see it as a crime.  Unless the bidding process was flawed in a meaningful way.  It's just an opinion piece, not economic/financial analysis.

edit: I don't mean to say that the government couldn't have erred.  Just that I assume there was a competitive process, and BBU and partners came out ahead.  In this forum/case, I care more about my investment via any outrage against politicians.

I find it hard to believe that a fair and "competitive process" only fetched 1x EBITDA for these assets plus some other valuable rights.  This just doesn't make sense.   
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on May 18, 2018, 11:54:23 AM
BBU Press Release [January 23rd 2018]: Great Canadian Gaming and Brookfield Complete Acquisition of the GTA Bundle in Ontario Gaming Modernization Process (https://bbu.brookfield.com/en/press-releases/2018/01-23-2018-140104649).

The price mentioned here does not match to the contents of the article, and there are nuances in this press release about the identity of the buyers, that does not tie to the contents of the article.

Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on May 19, 2018, 06:20:05 AM
Cyrus (BBU CEO) has mentioned how they are going to remodel and drastically expand the amount of table games. The future earnings could be significantly higher.

This is certainly an eye opening news release. Another view; is BAM starting to receive the first phone call for deals because of their work with institutions?
Title: Re: BAM - Brookfield Asset Management
Post by: DTEJD1997 on May 19, 2018, 08:05:39 AM
BBU Press Release [January 23rd 2018]: Great Canadian Gaming and Brookfield Complete Acquisition of the GTA Bundle in Ontario Gaming Modernization Process (https://bbu.brookfield.com/en/press-releases/2018/01-23-2018-140104649).

The price mentioned here does not match to the contents of the article, and there are nuances in this press release about the identity of the buyers, that does not tie to the contents of the article.

Geez, how crazy is that?  Newspaper reporters didn't get the facts right?  They misreported something?  How could that possibly happen?

In America I have great disdain for most of the press and journalists.  I've met some of them in person, and they are not the sharpest cue balls on the table.
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on May 19, 2018, 08:04:37 PM
BBU Press Release [January 23rd 2018]: Great Canadian Gaming and Brookfield Complete Acquisition of the GTA Bundle in Ontario Gaming Modernization Process (https://bbu.brookfield.com/en/press-releases/2018/01-23-2018-140104649).

The price mentioned here does not match to the contents of the article, and there are nuances in this press release about the identity of the buyers, that does not tie to the contents of the article.

Geez, how crazy is that?  Newspaper reporters didn't get the facts right?  They misreported something?  How could that possibly happen?

In America I have great disdain for most of the press and journalists.  I've met some of them in person, and they are not the sharpest cue balls on the table.

This article was an opinion piece.  Not to argue about press/journalistic rigor, but this had a lower threshold.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on May 21, 2018, 11:02:31 AM
Personally, I'm thinking about if there are other - alternative - ways to triangulate the facts related to this BBU deal?
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on May 27, 2018, 07:59:16 AM
Posted by Vinod, in the Oaktree Capital topic about KKR, today [here, unedited]:


Not related to OAK, but in general to how these private equity managers view investors can be found in this quarter KKR's conf call:

When we listed, we had $55 billion of AUM. We now have almost $200 million. Our book value per share was about $6. It's now $14.50. So, this is a much bigger discussion. Our stock price has really just not grown at the same pace as our company. So, we've really spent the last eight years working to sort out why. And if you think back, we've worked on articulating our story and we thought about reporting changes. We went out and tried to find new investors with many of you. We worked with back offices of mutual funds to help them operationalize K-1s. But honestly, after eight years of effort, it's not clear we've made a lot of lasting progress. So, where this is really coming from is we're stepping back and simplifying our thought process about what's been going on.

So, the high level is as best we can sort out, over 60% of the capital investing in the U.S. equity markets cannot or will not buy PTPs. And if you think about where flows have been going, it's been going to passive smart beta indices, none of which invest in PTPs. So, in other words, virtually 100% of net flows could not or would not buy us and 60% of existing capital can't buy us. So, we kind of stepped way back and it's no wonder it's been hard.

So, it kind of became clear to us that we've been fishing in a small pond with a slow leak and wondering why we weren't catching anything. So then, it was pretty clear there's a big ocean nearby, we had a lot of fish that might like our bait, so we started thinking about moving over to the ocean. And then, we asked our largest shareholders, what do they think, what's their advice. And that was virtually all consistent that moving to the ocean was a good idea.

The analogy of investors as fish to be baited kind of shows their thinking.

Vinod

Somebody are thinking, somebody are acting, and then somebody are thinking AND acting! [ ; - ) ]
Title: Re: BAM - Brookfield Asset Management
Post by: sleepydragon on May 27, 2018, 08:17:00 AM
It took them so many years to figure this out?! An analyst with 2 years of work experience on wall st would know this. They are either too stupid and ignorant or they are pretending.

Posted by Vinod, in the Oaktree Capital topic about KKR, today [here, unedited]:


Not related to OAK, but in general to how these private equity managers view investors can be found in this quarter KKR's conf call:

When we listed, we had $55 billion of AUM. We now have almost $200 million. Our book value per share was about $6. It's now $14.50. So, this is a much bigger discussion. Our stock price has really just not grown at the same pace as our company. So, we've really spent the last eight years working to sort out why. And if you think back, we've worked on articulating our story and we thought about reporting changes. We went out and tried to find new investors with many of you. We worked with back offices of mutual funds to help them operationalize K-1s. But honestly, after eight years of effort, it's not clear we've made a lot of lasting progress. So, where this is really coming from is we're stepping back and simplifying our thought process about what's been going on.

So, the high level is as best we can sort out, over 60% of the capital investing in the U.S. equity markets cannot or will not buy PTPs. And if you think about where flows have been going, it's been going to passive smart beta indices, none of which invest in PTPs. So, in other words, virtually 100% of net flows could not or would not buy us and 60% of existing capital can't buy us. So, we kind of stepped way back and it's no wonder it's been hard.

So, it kind of became clear to us that we've been fishing in a small pond with a slow leak and wondering why we weren't catching anything. So then, it was pretty clear there's a big ocean nearby, we had a lot of fish that might like our bait, so we started thinking about moving over to the ocean. And then, we asked our largest shareholders, what do they think, what's their advice. And that was virtually all consistent that moving to the ocean was a good idea.

The analogy of investors as fish to be baited kind of shows their thinking.

Vinod

Somebody are thinking, somebody are acting, and then somebody are thinking AND acting! [ ; - ) ]

Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on May 27, 2018, 09:09:11 AM
It took them so many years to figure this out?! An analyst with 2 years of work experience on wall st would know this. They are either too stupid and ignorant or they are pretending.

Shhh, sleepydragon, - please don't tell anyone!

Anecdotal:

Scandinavia [understood as Sweden, Norway, Finland and Denmark]: The Mekka of DIY investors: Nordnet Bank AB, as of latest reporting:

Total number of accounts [not to be confused with total numbers of customers]: 923,300 [E2018Q1] [link, p. 7 (https://cdn.nordnetab.com/wp-content/uploads/2018/04/q1eng2018.pdf)].
Total number of accounts connected to Shareville [an investment board run by Nordnet] as of today:  192,332
Shareville accounts holding BAM [NYSE] as of today : 13
Shareville accounts holding BAM.A [TSX] as of today : 10.

- - - o 0 o - - -

My family and I constitutes a majority [with regard to the number of accounts] being invested into BAM [NYSE]. [Because of commisions being lower for our our part [not much though] buying on NYSE in stead of on TSX].
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on May 27, 2018, 06:16:56 PM
Amazing how many analysts are on the KKR call and how few are on the Brookfield calls.
Title: Re: BAM - Brookfield Asset Management
Post by: Uccmal on May 28, 2018, 09:52:32 AM
Amazing how many analysts are on the KKR call and how few are on the Brookfield calls.

Well Bam isn't likely to hire them....   Sycophants. 
Title: Re: BAM - Brookfield Asset Management
Post by: fareastwarriors on May 30, 2018, 09:51:44 AM
How $300B Brookfield Built Second-Largest Alts Shop

http://fundfire.com/c/1973034/231554/brookfield_built_second_largest_alts_shop?referrer_module=emailffalts&module_order=0&code=WTJGcExteHBia0JrYjJSblpXRnVaR052ZUM1amIyMHNJREV4TWpJNE1USXpMQ0F4TWpZMk9EZ3dNak14 (http://fundfire.com/c/1973034/231554/brookfield_built_second_largest_alts_shop?referrer_module=emailffalts&module_order=0&code=WTJGcExteHBia0JrYjJSblpXRnVaR052ZUM1amIyMHNJREV4TWpJNE1USXpMQ0F4TWpZMk9EZ3dNak14)
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on May 31, 2018, 12:23:56 PM
How $300B Brookfield Built Second-Largest Alts Shop

http://fundfire.com/c/1973034/231554/brookfield_built_second_largest_alts_shop?referrer_module=emailffalts&module_order=0&code=WTJGcExteHBia0JrYjJSblpXRnVaR052ZUM1amIyMHNJREV4TWpJNE1USXpMQ0F4TWpZMk9EZ3dNak14 (http://fundfire.com/c/1973034/231554/brookfield_built_second_largest_alts_shop?referrer_module=emailffalts&module_order=0&code=WTJGcExteHBia0JrYjJSblpXRnVaR052ZUM1amIyMHNJREV4TWpJNE1USXpMQ0F4TWpZMk9EZ3dNak14)

Anything especially noteworthy for those unable to access?
Title: Re: BAM - Brookfield Asset Management
Post by: fareastwarriors on May 31, 2018, 12:26:02 PM
How $300B Brookfield Built Second-Largest Alts Shop

http://fundfire.com/c/1973034/231554/brookfield_built_second_largest_alts_shop?referrer_module=emailffalts&module_order=0&code=WTJGcExteHBia0JrYjJSblpXRnVaR052ZUM1amIyMHNJREV4TWpJNE1USXpMQ0F4TWpZMk9EZ3dNak14 (http://fundfire.com/c/1973034/231554/brookfield_built_second_largest_alts_shop?referrer_module=emailffalts&module_order=0&code=WTJGcExteHBia0JrYjJSblpXRnVaR052ZUM1amIyMHNJREV4TWpJNE1USXpMQ0F4TWpZMk9EZ3dNak14)

Anything especially noteworthy for those unable to access?


Didn't know this was behind a wall. Here is a pdf of it.

Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on June 01, 2018, 05:00:55 AM
Thanks for sharing fareast.
Title: Re: BAM - Brookfield Asset Management
Post by: Sharad on June 05, 2018, 02:13:01 PM
I don't see it as a crime.  Unless the bidding process was flawed in a meaningful way.  It's just an opinion piece, not economic/financial analysis.

edit: I don't mean to say that the government couldn't have erred.  Just that I assume there was a competitive process, and BBU and partners came out ahead.  In this forum/case, I care more about my investment via any outrage against politicians.

I find it hard to believe that a fair and "competitive process" only fetched 1x EBITDA for these assets plus some other valuable rights.  This just doesn't make sense.

Well, the deal could sink [Ontario Minister of Finance] Charles Sousa's chances to win his riding, as it has the attention of the NDP:

https://globalnews.ca/news/4250949/calls-mount-for-probe-of-wynne-government-casino-contracts-that-smelled-of-backroom-deals/

If the NDP wins a majority, I'd put a 60% probability that they seek to cancel the casino deal (not sure if it's feasible).

From the article:

In a research note titled “Hitting the lottery,” analysts at Scotiabank said Great Canadian “handily beat estimates based on a materially greater contribution,” from the first two months of operating the Toronto-area casinos. And with the profits produced from these assets, including Woodbine Casino, Great Canadian could pay off its $158-million investment in about six months, according to a financial projection reviewed by Global News.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on June 14, 2018, 06:42:28 AM
Today is Investor Day... Hoping we get the dump of presentations and transcripts before the weekend.
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on June 14, 2018, 07:04:14 AM
Today is Investor Day... Hoping we get the dump of presentations and transcripts before the weekend.

This is the AGM, not the investor day.  I'm not sure if they do any real presentations for the AGM.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on June 14, 2018, 08:29:16 AM
Ah, gotcha.
Title: Re: BAM - Brookfield Asset Management
Post by: cubsfan on June 14, 2018, 09:04:53 AM
I think investor day is in September??   (like last year)
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on June 14, 2018, 09:32:33 AM
I think investor day is in September??   (like last year)

Yes, I'm planning on going this year.
Title: Re: BAM - Brookfield Asset Management
Post by: ValueMaven on June 15, 2018, 07:12:06 AM
What are the pros and cons of owning BAM vs. buying Partners Value Investment LP?  Has anyone looked at this? 

http://pvii.ca/

Sincerely,
VM
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on June 15, 2018, 07:17:12 AM
Pros of Partners:
levered BAM results + other stuff that the higher ups of BAM like

Cons of Partners:
the leverage?
illiquid
PFIC
Title: Re: BAM - Brookfield Asset Management
Post by: ValueMaven on June 15, 2018, 07:23:03 AM
Awesome!! Thanks!!
Title: Re: BAM - Brookfield Asset Management
Post by: Uccmal on June 15, 2018, 09:34:59 AM
PVI seems nearly impossible to buy.  Its hard to tell if its even traded this month, more than once or twice.  So, you really have to study what you think its value is, and then determine if the value of the underlying is valued where you would like it as well. 

BAM and the subs are hard enough to get a handle on.  For example, BAM is up 10% over a few days.  Why?  These guys are continuously moving billions about with various partnerships.  Why would this week be any different? 
Title: Re: BAM - Brookfield Asset Management
Post by: ValueMaven on June 15, 2018, 09:38:47 AM
What do you mean?
Title: Re: BAM - Brookfield Asset Management
Post by: Uccmal on June 15, 2018, 09:46:08 AM
What do you mean?

posted before I was finished.  see above for edit. 
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on June 15, 2018, 09:49:51 AM
We actually have a nice topic about PVF.UN here on CoBF here (http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/pvf-partners-value-investments-inc/), that might be worth your your time, if interested. The topic got molested with holes because a former board member exited CoBF after deleting all own posts though.
Title: Re: BAM - Brookfield Asset Management
Post by: gokou3 on June 15, 2018, 10:09:58 AM
I actually just bought some PVF.un today at $36.xx.  I was able to get several orders executed over the past 2-3 months at prices between $32-37.  At $36, the MTM (for the major holdings) NAV discount is about 30%.
Title: Re: BAM - Brookfield Asset Management
Post by: Uccmal on June 15, 2018, 12:06:40 PM
I actually just bought some PVF.un today at $36.xx.  I was able to get several orders executed over the past 2-3 months at prices between $32-37.  At $36, the MTM (for the major holdings) NAV discount is about 30%.

Thanks for that Gokou.  What kind of volumes, if you mind me asking?
Title: Re: BAM - Brookfield Asset Management
Post by: gokou3 on June 15, 2018, 12:17:17 PM
Hundreds of shares each order. Small portfolio.  ;)
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on June 24, 2018, 04:06:23 PM
Thinking that the terms are favorable due to ATT needing the cash. A good quality way of starting a foundation in data centers

https://www.fool.com/investing/2018/06/21/brookfield-infrastructure-partners-lp-expands-furt.aspx
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on June 28, 2018, 11:00:49 AM
does anyone have a recent analyst report for BPY?  Would appreciate a PM if so.

Cheers!
Title: Re: BAM - Brookfield Asset Management
Post by: ValueMaven on June 29, 2018, 05:58:48 PM
Does anyone have this FT article: "How does it do that? Brookfield and its dividends"
Title: Re: BAM - Brookfield Asset Management
Post by: alpha23 on June 29, 2018, 06:19:15 PM
Does anyone have this FT article: "How does it do that? Brookfield and its dividends"

Here you go: https://www.google.com/amp/s/amp.ft.com/content/f6b4c598-7ad7-11e8-bc55-50daf11b720d
Title: Re: BAM - Brookfield Asset Management
Post by: gokou3 on June 29, 2018, 08:28:40 PM
Does anyone have this FT article: "How does it do that? Brookfield and its dividends"

Here you go: https://www.google.com/amp/s/amp.ft.com/content/f6b4c598-7ad7-11e8-bc55-50daf11b720d

Or try this: https://www.outline.com/ZKZKMn

Personally, I think it's not worth your 5 minutes' time.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on June 30, 2018, 03:14:24 AM
IPE Real Assets [June 28th 2018]: Top 50 infrastructure managers 2018 (https://realassets.ipe.com/infrastructure/top-50-infrastructure-investment-managers-2018/realassets.ipe.com/infrastructure/top-50-infrastructure-investment-managers-2018/10025380.fullarticle).
Title: Re: BAM - Brookfield Asset Management
Post by: ValueMaven on July 01, 2018, 11:45:04 AM
The more I study and analyze BAM, the more I like it over FFH for long-term capital appreciation.  I own both in size, but will likely not add to my FFH position, and contiutally add to BAM throughout time.   

Instead of using insurance as float, I wonder if Flatt thinks fee generation is similar from an AUM perspective, and carries a heck of a lot less risk!!
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on July 01, 2018, 07:27:44 PM
The more I study and analyze BAM, the more I like it over FFH for long-term capital appreciation.  I own both in size, but will likely not add to my FFH position, and contiutally add to BAM throughout time.   

Instead of using insurance as float, I wonder if Flatt thinks fee generation is similar from an AUM perspective, and carries a heck of a lot less risk!!

The risk is implicit- they may have to support their dependent vehicles.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on July 02, 2018, 02:23:26 AM
For BAM to end up in trouble, the cash flow on overall level [in both BAM and BAM subs] has to break to such an extent, that FFO gets negative to a degree and over an extended period of time, so that the dry powder already in place isen't sufficient. So the way to think about such a scenario is to study the dry powder and what would have to happen [i.e. to RE vacancy rates, lease rates etc.] for this to incur.

I also think that it is worthwhile to study how did BAM operate and perform going through the GFC [i.e. '07 - '10]. [If I remember correctly, you can't go any longer back than '09 on the BAM website for financials, when BAM switched to IFRS - but one is able to grab Joel's BAM monster compilation via Twitter to do the reading.]

- - - o 0 o - - -

Being bullish on BAM is to me being optimistic about the whole world going forward will become a better place to live.
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on July 02, 2018, 04:12:33 AM
For BAM to end up in trouble, the cash flow on overall level [in both BAM and BAM subs] has to break to such an extent, that FFO gets negative to a degree and over an extended periode of time, so that the dry powder already in place isen't sufficient. So the way to think about such a scenario is to study the dry powder and what would have to happen [i.e. to RE vacancy rates, lease rates etc.] for this to incur.

I also think that it is worthwhile to study how did BAM operate and perform going through the GFC [i.e. '07 - '10]. [If I remember correctly, you can't go any longer back than '09 on the BAM website for financials, when BAM switched to IFRS - but one is able to grab Joel's BAM monster compilation via Twitter to do the reading.]

- - - o 0 o - - -

Being bullish on BAM is to me being optimistic about the whole world going forward will become a better place to live.

There were two asset managers in Australia that went belly up in 2008 - Allco and Babock & Brown. I think what did them in was that their sponsored vehicles got into trouble and they had significant leverage on the holding level (which held stakes in the units as well). This basically caused a margin call when the units value depreciated to the point where the value wasn’t  coveraging the debt any more. Allco‘s and B&B business model was almost identical to BAM, but BAM survived, while those entities did not. Studying what did B&B and Allco in nevertheless should be useful to find out what happens when credit market seize and the equity markets go down (which are typically related events).
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on July 02, 2018, 06:31:52 AM
Is the purpose of Partners Value Investments to avoid that leverage in the holding company?
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on July 02, 2018, 06:41:56 AM
It actually more the other way around, chrispy.

PVF.UN is basically [for the most part] a levered play on BAM, the leverage used being preferred equity. [One more layer of leverage.]
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on July 02, 2018, 07:56:54 AM
Yes, I think my wording was unclear. Here is another attempt:

Is the leverage at Value Partners and not BAM to avoid blowing the company up in a downturn a la Allco and B&B?
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on July 02, 2018, 08:13:56 AM
chrispy,

The extra layer of leverage at PVF.UN is in that particular legal entity. So if BAM defaults on its financial obligations, PVF.UN will be in the toilet, too. Holders of ordinary units will loose control of the partnership, and the preferred unit holders will likely gain control, one way or another.

There is a separate topic for PVF.UN here on CoBF here (http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/pvf-partners-value-investments-inc/).
Title: Re: BAM - Brookfield Asset Management
Post by: wisowis on July 04, 2018, 02:55:23 PM
Enbridge sells assets worth $4.3 billion to Brookfield consortium
https://business.financialpost.com/commodities/energy/enbridge-sells-4-3b-in-assets-to-brookfield-consortium-in-bid-to-reduce-61b-debt-pile
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on July 07, 2018, 08:11:52 AM
Just as follow-up on the post by wisowis: Bloomberg - Deals [July 4th 2018]: Enbridge Shakes Debt Woes With $3.3 Billion Sale to Brookfield (https://www.bloomberg.com/news/articles/2018-07-04/enbridge-sells-canadian-natural-gas-businesses-for-3-3-billion).

The deal is discussed in detail in the Enbridge topic (http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/enbridge-enb/) here on CoBF, too.
Title: Re: BAM - Brookfield Asset Management
Post by: ValueMaven on July 07, 2018, 01:56:08 PM
Amazing that they are able to move on deals like this honestly...

This is why I own BAM an have been buying more recently...

This is a deal Berkshire should have explored too - between Oncur and this, that is $10bn+ of very high quality, utility like earnings they have missed out on. 
Title: Re: BAM - Brookfield Asset Management
Post by: ValueMaven on July 07, 2018, 05:38:05 PM
To be more specific here, berkshire made some awesome purchases at amazing prices when Williams Co was looking to delever their balance sheet in 2001 or 2002.  KernRiver pipeline and compression facilties were a total steal b/c Williams needed cash and needed it quickly....I am very happy BAM picked these assets up vs. PE....but as noted above between Oncur and  the noted above, BRK has missed out on $10+ of Utility like assets, which were right in their circle of competence
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on July 08, 2018, 05:11:59 AM
To be more specific here, berkshire made some awesome purchases at amazing prices when Williams Co was looking to delever their balance sheet in 2001 or 2002.  KernRiver pipeline and compression facilties were a total steal b/c Williams needed cash and needed it quickly....I am very happy BAM picked these assets up vs. PE....but as noted above between Oncur and  the noted above, BRK has missed out on $10+ of Utility like assets, which were right in their circle of competence

The price may not have been right for BRK. BAM can pay more, because BIP foots the bill, while BAM cashes in  fees, so growth in size benefits BAM. I am also not sure that the assets are utility like, there are some gathering assets in the packet, which generally have a lower lifespan and are hence of lower quality.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on July 08, 2018, 05:19:46 AM
The price may not have been right for BRK. BAM can pay more, because BIP foots the bill, while BAM cashes in  fees, so growth in size benefits BAM. I am also not sure that the assets are utility like, there are some gathering assets in the packet, which generally have a lower lifespan and are hence of lower quality.

That's actually a very good point, Spekulatius. Also think about return expectations/hurdle rates for institutional clients participating in the infrastucture fund involved in this transaction.
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on July 08, 2018, 05:58:27 AM
The price may not have been right for BRK. BAM can pay more, because BIP foots the bill, while BAM cashes in  fees, so growth in size benefits BAM. I am also not sure that the assets are utility like, there are some gathering assets in the packet, which generally have a lower lifespan and are hence of lower quality.

That's actually a very good point, Spekulatius. Also think about return expectations/hurdle rates for institutional clients participating in the infrastucture fund involved in this transaction.

IRR targets of BIP investments are 15%+, which they have pretty consistently hit.  Owner AFFO growth for BIP has been ~13% CAGR for 5 years, which you get a 4-5% div yield on top.  Anyway, I wouldn't put BIP as an 'asset gatherer', unless they are doing something very different than what they state and what their results have been historically.
Title: Re: BAM - Brookfield Asset Management
Post by: rkbabang on July 09, 2018, 10:38:21 AM
A Primer On Brookfield Asset Management, By Brian Langis
https://seekingalpha.com/article/4186043-primer-brookfield-asset-management#alt1
Title: Re: BAM - Brookfield Asset Management
Post by: Og on July 09, 2018, 12:09:45 PM
A Primer On Brookfield Asset Management, By Brian Langis
https://seekingalpha.com/article/4186043-primer-brookfield-asset-management#alt1

Brian speaks about BAM on here: https://intelligentinvesting.podbean.com/e/brian-langis-stocks-poutine/
Title: Re: BAM - Brookfield Asset Management
Post by: Liberty on July 12, 2018, 04:22:34 AM
Brookfield Asset Management is investing in the Kushner Companies' flagship building just as its multibillion-dollar purchase of the nuclear company Westinghouse is under government review. More on what's at stake: https://nyti.ms/2uedy0J
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on July 27, 2018, 02:12:11 AM
GGP Press Release [July 26th 2018]: GGP Stockholders Approve Proposed Acquisition of GGP by Brookfield Property Partners (http://investor.ggp.com/press-release/earnings/ggp-stockholders-approve-proposed-acquisition-ggp-brookfield-property-partner).
Title: Re: BAM - Brookfield Asset Management
Post by: saltybit on July 27, 2018, 10:28:45 AM
GGP Press Release [July 26th 2018]: GGP Stockholders Approve Proposed Acquisition of GGP by Brookfield Property Partners (http://investor.ggp.com/press-release/earnings/ggp-stockholders-approve-proposed-acquisition-ggp-brookfield-property-partner).

Does anyone know why GGP is still trading below even the cash offer of 23.50? (currently at 21.28)
Title: Re: BAM - Brookfield Asset Management
Post by: RAFA1989 on July 27, 2018, 10:46:29 AM
GGP Press Release [July 26th 2018]: GGP Stockholders Approve Proposed Acquisition of GGP by Brookfield Property Partners (http://investor.ggp.com/press-release/earnings/ggp-stockholders-approve-proposed-acquisition-ggp-brookfield-property-partner).

Does anyone know why GGP is still trading below even the cash offer of 23.50? (currently at 21.28)

It's not all cash and I think there are some people afraid to own BPY or BPR shares.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on July 31, 2018, 07:42:52 AM
https://www-bloomberg-com.cdn.ampproject.org/v/s/www.bloomberg.com/amp/news/articles/2018-07-31/brookfield-is-said-to-near-6-8-billion-deal-for-forest-city?amp_js_v=a2&amp_gsa=1&usqp=mq331AQCCAE%3D#referrer=https%3A%2F%2Fwww.google.com&amp_tf=From%20%251%24s&ampshare=https%3A%2F%2Fwww.bloomberg.com%2Fnews%2Farticles%2F2018-07-31%2Fbrookfield-is-said-to-near-6-8-billion-deal-for-forest-city

Do the Forest City assets go to the private funds?

$11B on Forest City and $15B on GGP... Over $26B of US real estate being acquired in 2018
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on July 31, 2018, 07:50:47 AM
https://www-bloomberg-com.cdn.ampproject.org/v/s/www.bloomberg.com/amp/news/articles/2018-07-31/brookfield-is-said-to-near-6-8-billion-deal-for-forest-city?amp_js_v=a2&amp_gsa=1&usqp=mq331AQCCAE%3D#referrer=https%3A%2F%2Fwww.google.com&amp_tf=From%20%251%24s&ampshare=https%3A%2F%2Fwww.bloomberg.com%2Fnews%2Farticles%2F2018-07-31%2Fbrookfield-is-said-to-near-6-8-billion-deal-for-forest-city

Do the Forest City assets go to the private funds?

$11B on Forest City and $15B on GGP... Over $26B of US real estate being acquired in 2018

Sounds like it went through the private opportunistic fund, and ~20% of BPY is in those funds.
Title: Re: BAM - Brookfield Asset Management
Post by: rkbabang on July 31, 2018, 09:16:39 AM
ReneSola Signs Non-Binding Offer to Sell 206.8 MW of Distributed Generation Operating Assets in China
https://seekingalpha.com/pr/17230197-renesola-signs-non-binding-offer-sell-206_8-mw-distributed-generation-operating-assets-china
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on July 31, 2018, 09:45:11 AM
https://www-bloomberg-com.cdn.ampproject.org/v/s/www.bloomberg.com/amp/news/articles/2018-07-31/brookfield-is-said-to-near-6-8-billion-deal-for-forest-city?amp_js_v=a2&amp_gsa=1&usqp=mq331AQCCAE%3D#referrer=https%3A%2F%2Fwww.google.com&amp_tf=From%20%251%24s&ampshare=https%3A%2F%2Fwww.bloomberg.com%2Fnews%2Farticles%2F2018-07-31%2Fbrookfield-is-said-to-near-6-8-billion-deal-for-forest-city (https://www-bloomberg-com.cdn.ampproject.org/v/s/www.bloomberg.com/amp/news/articles/2018-07-31/brookfield-is-said-to-near-6-8-billion-deal-for-forest-city?amp_js_v=a2&amp_gsa=1&usqp=mq331AQCCAE%3D#referrer=https%3A%2F%2Fwww.google.com&amp_tf=From%20%251%24s&ampshare=https%3A%2F%2Fwww.bloomberg.com%2Fnews%2Farticles%2F2018-07-31%2Fbrookfield-is-said-to-near-6-8-billion-deal-for-forest-city)

Do the Forest City assets go to the private funds?

$11B on Forest City and $15B on GGP... Over $26B of US real estate being acquired in 2018

Sounds like it went through the private opportunistic fund, and ~20% of BPY is in those funds.

I read it the same way as Joel does, so this likely to some extent will affect BAM dry powder on group level at closing, but likely not BAM total assets at group level, while BAM AUM and BAM fee bearing capital likely will get a bump upwards at closing of the deal.
Title: Re: BAM - Brookfield Asset Management
Post by: gokou3 on July 31, 2018, 09:58:35 AM
https://www-bloomberg-com.cdn.ampproject.org/v/s/www.bloomberg.com/amp/news/articles/2018-07-31/brookfield-is-said-to-near-6-8-billion-deal-for-forest-city?amp_js_v=a2&amp_gsa=1&usqp=mq331AQCCAE%3D#referrer=https%3A%2F%2Fwww.google.com&amp_tf=From%20%251%24s&ampshare=https%3A%2F%2Fwww.bloomberg.com%2Fnews%2Farticles%2F2018-07-31%2Fbrookfield-is-said-to-near-6-8-billion-deal-for-forest-city (https://www-bloomberg-com.cdn.ampproject.org/v/s/www.bloomberg.com/amp/news/articles/2018-07-31/brookfield-is-said-to-near-6-8-billion-deal-for-forest-city?amp_js_v=a2&amp_gsa=1&usqp=mq331AQCCAE%3D#referrer=https%3A%2F%2Fwww.google.com&amp_tf=From%20%251%24s&ampshare=https%3A%2F%2Fwww.bloomberg.com%2Fnews%2Farticles%2F2018-07-31%2Fbrookfield-is-said-to-near-6-8-billion-deal-for-forest-city)

Do the Forest City assets go to the private funds?

$11B on Forest City and $15B on GGP... Over $26B of US real estate being acquired in 2018

Sounds like it went through the private opportunistic fund, and ~20% of BPY is in those funds.

I read it the same way as Joel does, so this likely to some extent will affect BAM dry powder on group level at closing, but likely not BAM total assets at group level, while BAM AUM and BAM fee bearing capital likely will get a bump upwards at closing of the deal.


Their flagship $9B BSREP II fund was 80% invested per 2018Q1 report, meaning only $1.8B of dry powder remaining on that fund that would for sure be exhausted by these two deals.  BAM also also raised $9B for their estimated $20B BSREP III fund, so a good chunk of this commitment would be put into good use with these deals.
Title: Re: BAM - Brookfield Asset Management
Post by: walkie518 on July 31, 2018, 10:31:08 AM
https://www-bloomberg-com.cdn.ampproject.org/v/s/www.bloomberg.com/amp/news/articles/2018-07-31/brookfield-is-said-to-near-6-8-billion-deal-for-forest-city?amp_js_v=a2&amp_gsa=1&usqp=mq331AQCCAE%3D#referrer=https%3A%2F%2Fwww.google.com&amp_tf=From%20%251%24s&ampshare=https%3A%2F%2Fwww.bloomberg.com%2Fnews%2Farticles%2F2018-07-31%2Fbrookfield-is-said-to-near-6-8-billion-deal-for-forest-city (https://www-bloomberg-com.cdn.ampproject.org/v/s/www.bloomberg.com/amp/news/articles/2018-07-31/brookfield-is-said-to-near-6-8-billion-deal-for-forest-city?amp_js_v=a2&amp_gsa=1&usqp=mq331AQCCAE%3D#referrer=https%3A%2F%2Fwww.google.com&amp_tf=From%20%251%24s&ampshare=https%3A%2F%2Fwww.bloomberg.com%2Fnews%2Farticles%2F2018-07-31%2Fbrookfield-is-said-to-near-6-8-billion-deal-for-forest-city)

Do the Forest City assets go to the private funds?

$11B on Forest City and $15B on GGP... Over $26B of US real estate being acquired in 2018

Sounds like it went through the private opportunistic fund, and ~20% of BPY is in those funds.

I read it the same way as Joel does, so this likely to some extent will affect BAM dry powder on group level at closing, but likely not BAM total assets at group level, while BAM AUM and BAM fee bearing capital likely will get a bump upwards at closing of the deal.


Their flagship $9B BSREP II fund was 80% invested per 2018Q1 report, meaning only $1.8B of dry powder remaining on that fund that would for sure be exhausted by these two deals.  BAM also also raised $9B for their estimated $20B BSREP III fund, so a good chunk of this commitment would be put into good use with these deals.

off the top, I don't remember average fee per $1 AUM... at 1%, those two deals would boost 2019 net income by nearly 12% before carried interest?
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on July 31, 2018, 10:59:00 AM
https://www-bloomberg-com.cdn.ampproject.org/v/s/www.bloomberg.com/amp/news/articles/2018-07-31/brookfield-is-said-to-near-6-8-billion-deal-for-forest-city?amp_js_v=a2&amp_gsa=1&usqp=mq331AQCCAE%3D#referrer=https%3A%2F%2Fwww.google.com&amp_tf=From%20%251%24s&ampshare=https%3A%2F%2Fwww.bloomberg.com%2Fnews%2Farticles%2F2018-07-31%2Fbrookfield-is-said-to-near-6-8-billion-deal-for-forest-city (https://www-bloomberg-com.cdn.ampproject.org/v/s/www.bloomberg.com/amp/news/articles/2018-07-31/brookfield-is-said-to-near-6-8-billion-deal-for-forest-city?amp_js_v=a2&amp_gsa=1&usqp=mq331AQCCAE%3D#referrer=https%3A%2F%2Fwww.google.com&amp_tf=From%20%251%24s&ampshare=https%3A%2F%2Fwww.bloomberg.com%2Fnews%2Farticles%2F2018-07-31%2Fbrookfield-is-said-to-near-6-8-billion-deal-for-forest-city)

Do the Forest City assets go to the private funds?

$11B on Forest City and $15B on GGP... Over $26B of US real estate being acquired in 2018

Sounds like it went through the private opportunistic fund, and ~20% of BPY is in those funds.

I read it the same way as Joel does, so this likely to some extent will affect BAM dry powder on group level at closing, but likely not BAM total assets at group level, while BAM AUM and BAM fee bearing capital likely will get a bump upwards at closing of the deal.


Their flagship $9B BSREP II fund was 80% invested per 2018Q1 report, meaning only $1.8B of dry powder remaining on that fund that would for sure be exhausted by these two deals.  BAM also also raised $9B for their estimated $20B BSREP III fund, so a good chunk of this commitment would be put into good use with these deals.

off the top, I don't remember average fee per $1 AUM... at 1%, those two deals would boost 2019 net income by nearly 12% before carried interest?

If I recall correctly, I think those funds are at 1.5% flat fee and then a decent percentage of results over the target.  For opportunistic, the target should be 15%+.  Also, I believe the GGP buyout is pretty much only BPY, and involves waiving management fees for some period (or adding some amount of credits).  Incentive distributions have not started for BPY yet.
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on August 06, 2018, 05:38:07 AM
To be more specific here, berkshire made some awesome purchases at amazing prices when Williams Co was looking to delever their balance sheet in 2001 or 2002.  KernRiver pipeline and compression facilties were a total steal b/c Williams needed cash and needed it quickly....I am very happy BAM picked these assets up vs. PE....but as noted above between Oncur and  the noted above, BRK has missed out on $10+ of Utility like assets, which were right in their circle of competence

The price may not have been right for BRK. BAM can pay more, because BIP foots the bill, while BAM cashes in  fees, so growth in size benefits BAM. I am also not sure that the assets are utility like, there are some gathering assets in the packet, which generally have a lower lifespan and are hence of lower quality.

Just as an update, the valuation of the NG transmission assets sold to BOY was mentioned in ENB earnings CC. They were sold at 13x EBITDA. As an ENB shareholder, I am very satisfied with this price.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on August 07, 2018, 04:27:27 PM
Can anyone help me understand their business annuity company and how it complements BAM? I found these but don't understand the overlap...

Today:
http://m.newson6.com/story.aspx?story=38833437&catId=112042

Older:
https://www.benefitscanada.com/pensions/db/brookfield-launches-group-annuity-solutions-company-91734

EDIT: Is this similar to float?  Brookfield buys the pension obligations and over time has to pay out the benefits?  Could it also be beneficial in building relationships with institutions for investing in their funds and/or another way of driving fees to BAM?
Title: Re: BAM - Brookfield Asset Management
Post by: bizaro86 on August 08, 2018, 09:00:00 AM
Seems like a potentially creative way to raise large amounts of capital. Pension liabilities are a good fit for many of their long life type assets (infrastructure, RE)
Title: Re: BAM - Brookfield Asset Management
Post by: petec on August 08, 2018, 09:13:06 AM
EDIT: Is this similar to float? 

Precisely. You take a lump sum up front and have to pay out a stream of cash flows later. If your investment profits are greater than the cash flows you have to pay, you keep the difference.
Title: Re: BAM - Brookfield Asset Management
Post by: cubsfan on August 09, 2018, 04:45:38 AM
Heck of a great letter here from Bruce Flatt on Q2 results and outlook for BAM:

https://bam.brookfield.com/~/media/Files/B/BrookField-BAM-IR/letters-to-unitholders/2018/q2/F%20-%20BAM%20Q2_2018_Ltr_to_Shareholders.pdf

Great section on valuation. Flatt is so impressive.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on August 09, 2018, 04:51:11 AM
Looking forward to reading it after work!

The last few sentences of the press release:

"We are currently generating over $2 billion of free cash at the corporate level on an annual basis, with few capital requirements, and the amount is growing rapidly.

We have flexibility to use this capital in several ways. One area is to invest in new strategies directly on our balance sheet while we build up a track record prior to investing our client's capital. Credit has been a particular area of focus and this will continue. As our cash resources grow we continue to look further to shrinking the shares outstanding at Brookfield over time through repurchases."
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on August 09, 2018, 10:14:12 AM
Anyone have any thoughts on Enercare acquisition?  Still trying to wrap my head around why, especially within BIP.  Seems better fit within BBU, if anything.
Title: Re: BAM - Brookfield Asset Management
Post by: spark411 on August 09, 2018, 11:00:34 AM
This was in the quarterly letter.   Shows management's perspective on how undervalued BAM is and their willingness to buy back shares...

The total equity across Brookfield is approximately $80 billion and the equity market capitalization for BAM
common shares is currently approximately $40 billion. The $40 billion can be broken into two components: our
net tangible invested capital, and our asset management business.
Taking IFRS values for our non-listed assets and real estate business and using stock market prices for our other
listed investments, the total tangible invested capital was $40 billion at the end of the second quarter. After
deducting $10 billion of long-term debt and perpetual shares, net invested capital was $30 billion.
Q2 2018 Letter to Shareholders Brookfield Asset Management Inc. 3
This scenario implies that $10 billion is being attributed to our asset management business. In our view, this
represents an extremely low value, based on the underlying financial metrics and the way most investors value
similar businesses. For example, this value represents 10 times our current estimate of annualized fee related
net earnings (approximately $1 billion), with no value attributed to the gross carried interest of $8 billion that we
stand to earn over the next 10 years if we achieve target returns. This is also based only on funds raised to date,
with nothing attributed to our ability to grow our franchise.
Stated differently, if our shares reflected a 20 times multiple for fee related earnings and a 10 times multiple for
net annualized carry on existing funds, this would add $18 billion of value, or $18 per share. This is close to a
50% increase over current stock market price. And this, still has no value attributed to the growth in our future
franchise, including larger and new funds.
Title: Re: BAM - Brookfield Asset Management
Post by: rkbabang on August 09, 2018, 11:08:06 AM
This was in the quarterly letter.   Shows management's perspective on how undervalued BAM is and their willingness to buy back shares...

The total equity across Brookfield is approximately $80 billion and the equity market capitalization for BAM
common shares is currently approximately $40 billion. The $40 billion can be broken into two components: our
net tangible invested capital, and our asset management business.
Taking IFRS values for our non-listed assets and real estate business and using stock market prices for our other
listed investments, the total tangible invested capital was $40 billion at the end of the second quarter. After
deducting $10 billion of long-term debt and perpetual shares, net invested capital was $30 billion.
Q2 2018 Letter to Shareholders Brookfield Asset Management Inc. 3
This scenario implies that $10 billion is being attributed to our asset management business. In our view, this
represents an extremely low value, based on the underlying financial metrics and the way most investors value
similar businesses. For example, this value represents 10 times our current estimate of annualized fee related
net earnings (approximately $1 billion), with no value attributed to the gross carried interest of $8 billion that we
stand to earn over the next 10 years if we achieve target returns. This is also based only on funds raised to date,
with nothing attributed to our ability to grow our franchise.
Stated differently, if our shares reflected a 20 times multiple for fee related earnings and a 10 times multiple for
net annualized carry on existing funds, this would add $18 billion of value, or $18 per share. This is close to a
50% increase over current stock market price. And this, still has no value attributed to the growth in our future
franchise, including larger and new funds.

And he said that it was a "medium term" goal to reduce share count to less than it was in 1999.  Which means buying back more than 10% of existing shares.
Title: Re: BAM - Brookfield Asset Management
Post by: StevieV on August 09, 2018, 12:19:16 PM
This was in the quarterly letter.   Shows management's perspective on how undervalued BAM is and their willingness to buy back shares...

The total equity across Brookfield is approximately $80 billion and the equity market capitalization for BAM
common shares is currently approximately $40 billion. The $40 billion can be broken into two components: our
net tangible invested capital, and our asset management business.
Taking IFRS values for our non-listed assets and real estate business and using stock market prices for our other
listed investments, the total tangible invested capital was $40 billion at the end of the second quarter. After
deducting $10 billion of long-term debt and perpetual shares, net invested capital was $30 billion.
Q2 2018 Letter to Shareholders Brookfield Asset Management Inc. 3
This scenario implies that $10 billion is being attributed to our asset management business. In our view, this
represents an extremely low value, based on the underlying financial metrics and the way most investors value
similar businesses. For example, this value represents 10 times our current estimate of annualized fee related
net earnings (approximately $1 billion), with no value attributed to the gross carried interest of $8 billion that we
stand to earn over the next 10 years if we achieve target returns. This is also based only on funds raised to date,
with nothing attributed to our ability to grow our franchise.
Stated differently, if our shares reflected a 20 times multiple for fee related earnings and a 10 times multiple for
net annualized carry on existing funds, this would add $18 billion of value, or $18 per share. This is close to a
50% increase over current stock market price. And this, still has no value attributed to the growth in our future
franchise, including larger and new funds.

I understand the illustration for simplicity's sake.  However, I don't care for this particular valuation framework.

First, it glosses over a big part of the business - the net tangible invested capital.  Is the IFRS valuation correct?  Is the stock market valuation correct?  Are the companies growing?  What is the outlook?

I agree that the asset management side is undervalued.  However, I'm not sure about the multiples used: "if our shares reflected a 20 times multiple for fee related earnings and a 10 times multiple for net annualized carry on existing funds, this would add $18 billion of value, or $18 per share."  Maybe that would be appropriate, but I am not aware of any alt getting those multiples today.

Plus, there is a disconnect to me when you accept the market multiple for publicly listed subsidiaries, then later suggest the market severely undervalues the asset management side of the business.  If the market is so wrong on the asset management valuation, why should I trust it with the listed subs.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on August 09, 2018, 12:38:41 PM
With regards to the market price of the partnerships, BPY believes the market undervalues them and BAM owns more then half.
Title: Re: BAM - Brookfield Asset Management
Post by: cubsfan on August 09, 2018, 12:42:24 PM
I'm actually wondering if we are reading the same documents..

Are the companies growing? What's the outlook?  It's all in there.
Title: Re: BAM - Brookfield Asset Management
Post by: StevieV on August 09, 2018, 01:12:48 PM
I'm actually wondering if we are reading the same documents..

Are the companies growing? What's the outlook?  It's all in there.

Maybe I posted before I read the letter thoroughly enough.  However, I'm not suggesting that the conclusion is wrong, or that they didn't discuss other things.  I simply don't like the valuation framework in the quoted section.  Specifically, somewhat setting aside the invested capital side in this specific valuation discussion section.

FWIW, I think that 20X FRE and 10X incentive may be appropriate valuations.  They are growing FRE at 34% and expect to be able to continue to grow at 20% going forward.  20X for FRE growing at 20% isn't rich.  I am also fine with 10X carry.  Maybe lumpy, but certainly valuable.  However, unlike the letter says, I don't believe that similar businesses are currently trading at those multiples.  I think I am right on that, but admit I haven't run those numbers on the competitors lately.
Title: Re: BAM - Brookfield Asset Management
Post by: gokou3 on August 09, 2018, 04:10:36 PM
This was in the quarterly letter.   Shows management's perspective on how undervalued BAM is and their willingness to buy back shares...

The total equity across Brookfield is approximately $80 billion and the equity market capitalization for BAM
common shares is currently approximately $40 billion. The $40 billion can be broken into two components: our
net tangible invested capital, and our asset management business.
Taking IFRS values for our non-listed assets and real estate business and using stock market prices for our other
listed investments, the total tangible invested capital was $40 billion at the end of the second quarter. After
deducting $10 billion of long-term debt and perpetual shares, net invested capital was $30 billion.
Q2 2018 Letter to Shareholders Brookfield Asset Management Inc. 3
This scenario implies that $10 billion is being attributed to our asset management business. In our view, this
represents an extremely low value, based on the underlying financial metrics and the way most investors value
similar businesses. For example, this value represents 10 times our current estimate of annualized fee related
net earnings (approximately $1 billion), with no value attributed to the gross carried interest of $8 billion that we
stand to earn over the next 10 years if we achieve target returns. This is also based only on funds raised to date,
with nothing attributed to our ability to grow our franchise.
Stated differently, if our shares reflected a 20 times multiple for fee related earnings and a 10 times multiple for
net annualized carry on existing funds, this would add $18 billion of value, or $18 per share. This is close to a
50% increase over current stock market price. And this, still has no value attributed to the growth in our future
franchise, including larger and new funds.

Sorry for being dim, but how does Flatt get from $40B to $80B equity?  He seems to be arguing the IV of BAM should be $30B net asset value of owned assets and $10B+$18B for the asset management business, totaling $58B...
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on August 09, 2018, 04:48:50 PM
I believe the $80B accounts for BAM plus partnerships, etc
Title: Re: BAM - Brookfield Asset Management
Post by: ValueMaven on August 09, 2018, 05:20:53 PM
This is an epic quarterly letter.  What an undervalued stock. 

Decreasing share count, increasing IV, and BV...plus higher rev from fees...

Let's not forget BAM management own about 20% of the co too...

This was a really genius letter... I read it three times today!!

-VM
Title: Re: BAM - Brookfield Asset Management
Post by: peterHK on August 10, 2018, 06:39:25 AM
I'm actually wondering if we are reading the same documents..

Are the companies growing? What's the outlook?  It's all in there.

Maybe I posted before I read the letter thoroughly enough.  However, I'm not suggesting that the conclusion is wrong, or that they didn't discuss other things.  I simply don't like the valuation framework in the quoted section.  Specifically, somewhat setting aside the invested capital side in this specific valuation discussion section.

FWIW, I think that 20X FRE and 10X incentive may be appropriate valuations.  They are growing FRE at 34% and expect to be able to continue to grow at 20% going forward.  20X for FRE growing at 20% isn't rich.  I am also fine with 10X carry.  Maybe lumpy, but certainly valuable.  However, unlike the letter says, I don't believe that similar businesses are currently trading at those multiples.  I think I am right on that, but admit I haven't run those numbers on the competitors lately.

You can look at it similar to ONEX, backing out the implied AM business (high quality PE/CLO with incentive fees) from the share price. I haven't done the math recently, but I think it's traded at something like 10-15x net earnings depending on where the shares are at, plus valuing the unrealized carry at 1x, which is highly conservative.

I think Bruce might say that there aren't any similar businesses in the AM industry growing at 20% a year, plus carry, with secular tailwinds. Blackstone/KKR/Apollo trade at 11-15x earnings, Canadian AM peers trade at 11-14x (e.g CI Financial at ~11x or so), but none of those businesses is growing FRE at 34%, so a premium to that I think is warranted, though I don't know that 20x is the right number (I use 17-18x myself).
Title: Re: BAM - Brookfield Asset Management
Post by: Shane on August 10, 2018, 07:13:42 AM
What was the share count in 1999?
Title: Re: BAM - Brookfield Asset Management
Post by: Jerry Capital on August 10, 2018, 07:27:48 AM
10% lower
Title: Re: BAM - Brookfield Asset Management
Post by: Shane on August 10, 2018, 09:42:14 AM
10% lower

Weird - why not just say reduce to where shares were in 2009?
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on August 10, 2018, 10:11:08 AM
10% lower

Weird - why not just say reduce to where shares were in 2009?

Shane,

The 1999 figures are actually in the table in the shareholder letter, p. 3, lower part. 1999: shares : 905 M - 2018 [mid year] : 1,004 M. Ref. note 2 to the table, the 1999 figure is adjusted for four 3 for 2 stock splits since 1999 [, but not share buybacks, excersises of options etc., I suppose]. The actual fully diluted share count at YE1999 was 178,733,919, ref. Joel's BAM monster compilation (http://www.austinvaluecapital.com/resources.html) [p. 44 [out of 13,840 [!]]].
Title: Re: BAM - Brookfield Asset Management
Post by: Shane on August 10, 2018, 12:28:30 PM
Thanks - I had missed that!
Title: Re: BAM - Brookfield Asset Management
Post by: CorpRaider on August 13, 2018, 05:09:44 AM
Seems like some of you guys are deep in the weeds on BAM.  Is BPR (the GGP successor REIT) going to have the same fee arrangement with BAM as BPY (expenses + management fee + incentive fee)?  I suspect that it will (although I'm not sure, but I don't remember that from going through the deal docs).  Didn't make it all the way through yet...not sure that I will.  Thanks!
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on August 13, 2018, 10:12:47 AM
Seems like some of your guys are deep in the weeds on BAM.  Is BPR (the GGP successor REIT) going to have the same fee arrangement with BAM as BPY (expenses + management fee + incentive fee)?  I suspect that it will (although I'm not sure I've seen , but I didn't hit that going through the deal docs.  Didn't make it all the way through yet...not sure that I will.  Thanks!

I think it should be similar, but they are waiving fees for the first year (I think).
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on August 13, 2018, 10:47:27 AM
Seems like some of your guys are deep in the weeds on BAM.  Is BPR (the GGP successor REIT) going to have the same fee arrangement with BAM as BPY (expenses + management fee + incentive fee)?  I suspect that it will (although I'm not sure I've seen , but I didn't hit that going through the deal docs.  Didn't make it all the way through yet...not sure that I will.  Thanks!

I think it should be similar, but they are waiving fees for the first year (I think).

I have read what Joel just posted, too. However I can't immediately find the source.
Title: Re: BAM - Brookfield Asset Management
Post by: CorpRaider on August 13, 2018, 11:35:18 AM
Makes sense.  Thanks gents.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on August 13, 2018, 01:53:30 PM
Just a note here, now that we are actually right now talking about GGP and its successor REIT BRP:

I think that it was a while back while reading the AGM presentations not so long ago for BAM ... -  It was about priorities going forward, presented as bullet points in that particular presentation ... I ended up very puzzled, thinking: "What? - GGP integration isen't mentioned in the priorities there?" ... Then I finally ended up pushing that particular thing away from me mentally, thinking: "Well, talking about that [at that time] would actually be like selling the fur of the bear before shooting it." [related to not-yet GGP shareholder approval of BAM take-over bid].

-And now, we have a description of what BAM actually plans to do with the GGP properties, in the 2018Q2 shareholder letter. To me, it reads pretty daunting. -For BAM, it's "just" "in the course of ordinary business".
Title: Re: BAM - Brookfield Asset Management
Post by: OnTheShouldersOfGiants on August 13, 2018, 02:20:40 PM
Bruce Flatt will be coming through our office this week for a meeting. Anyone have a question they would like have answered?
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on August 13, 2018, 02:50:57 PM
Bruce Flatt will be coming through our office this week for a meeting. Anyone have a question they would like have answered?

These are my current questions:

1) BPY focuses on FFO growth + dividends as a measure of returns to investors; however, BPY is marked on BAM's balance sheet as its IFRS values.  These IFRS values appear to be in line with NAV estimations, and as BAM has emphasized in the past, properties have generally sold close to those values.  Accordingly, shouldn't we be able to use IFRS growth + reinvested dividends as a proxy for IV growth of BPY?  If so, since 2011, BPY's IFRS has grown at around 9% a year since 12/31/2013, which is below the targeted 12% returns.  How should we think about this?  Is this because of the irregularity of timing of when unrealized gains are reflected?  Does it have to do with the development pipeline, which presumably has depressed IFRS values until the projects are completed?

2) Where does the fee related overhead go (e.g., the 30% of fee earnings that are subtracted for costs)?  Is it mostly compensation to underlying managers?

3) Given that the public entities are largely directed towards core type investments (e.g., BPY) and have permanent equity, why is there a need to create new private permanent core funds, which would seem to have very similar characteristics?  Is it because there is value to private partners to have non-listed investments (e.g., which do not mark-to-market in the same way)?

4) Each of the sub-entities report FFO/AFFO in different ways.  For example, BIP's AFFO does not adjust for preferred unit distributions or incentive distributions, whereas BEP's AFFO is post-preferred unit distributions, but before incentive distributions.  Additionally, investors have to adjust these numbers by hand to determine the "owner earnings" attributable to them as the earnings those investors receive will be post these distributions.  Has Brookfield considered presenting an "owner AFFO" value for each of the sub-entities?

5) In a related manner, BPY now shows opportunistic realized gains with an adjustment to get to an approximation of AFFO, but there are significant gains outside of BPY which are not included.  Additionally, it appears that these additional realized gains are no longer reported in the supplemental, which puts investors a little in the dark if they were attempting to create an AFFO that had a "smoothed out" value for disposition gains (i.e., including both core and opportunistic disposition gains).  Is there a reason these disposition gains are no longer reported and/or is there a way to get to an AFFO value that includes all of the gains (e.g., using a 3 or more year average disposition gain figure)?
Title: Re: BAM - Brookfield Asset Management
Post by: Jerry Capital on August 14, 2018, 06:19:22 AM
Those are great questions including the last two.

Thank you for posting
Title: Re: BAM - Brookfield Asset Management
Post by: TorontoRaptorsFan on August 14, 2018, 12:18:02 PM
Bruce Flatt will be coming through our office this week for a meeting. Anyone have a question they would like have answered?

Does he any have any book recommendations? What's a typical day like for him.
Title: Re: BAM - Brookfield Asset Management
Post by: Rod on September 01, 2018, 02:31:14 PM
I'm actually wondering if we are reading the same documents..

Are the companies growing? What's the outlook?  It's all in there.

Maybe I posted before I read the letter thoroughly enough.  However, I'm not suggesting that the conclusion is wrong, or that they didn't discuss other things.  I simply don't like the valuation framework in the quoted section.  Specifically, somewhat setting aside the invested capital side in this specific valuation discussion section.

FWIW, I think that 20X FRE and 10X incentive may be appropriate valuations.  They are growing FRE at 34% and expect to be able to continue to grow at 20% going forward.  20X for FRE growing at 20% isn't rich.  I am also fine with 10X carry.  Maybe lumpy, but certainly valuable.  However, unlike the letter says, I don't believe that similar businesses are currently trading at those multiples.  I think I am right on that, but admit I haven't run those numbers on the competitors lately.

I'm having a bit of trouble interpreting the 20X multiple of fee related earnings that Flatt uses in the Q2 report. The implication seems to be that these are net earnings, that is after tax. But, I can't see where the tax is actually being deducted. All I see is revenues less direct costs. The direct costs, however, don't seem to include income tax. Does anyone have any insight into this?
Title: Re: BAM - Brookfield Asset Management
Post by: pau_ on September 05, 2018, 06:42:34 PM
Google just published this talk by the CEO: Bruce J. Flatt "Durable Principles for Real Asset Investing" | Talks at Google (https://www.youtube.com/watch?v=vmt1Li1Rnes)
Title: Re: BAM - Brookfield Asset Management
Post by: ValueMaven on September 05, 2018, 06:47:30 PM
WOW!  Thank you for sharing this! 
Title: Re: BAM - Brookfield Asset Management
Post by: fareastwarriors on September 05, 2018, 09:57:08 PM
Google just published this talk by the CEO: Bruce J. Flatt "Durable Principles for Real Asset Investing" | Talks at Google (https://www.youtube.com/watch?v=vmt1Li1Rnes)

Google gets the most amazing speakers.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on September 05, 2018, 10:02:28 PM
Very good talk and Q&A session with Mr. Flatt. Brookfield explained "on the rim". Certainly worth anybodys time, if interested in BAM.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on September 06, 2018, 06:16:48 AM
A very nice surprise
Title: Re: BAM - Brookfield Asset Management
Post by: Rod on September 07, 2018, 06:44:18 PM
I only started researching BAM recently and I was surprised to keep reading that the company is "little known", "ignored", and Bruce Flatt is the "billionaire nobody has heard of". Even this video from Google shows an audience of about 10 people! I had assumed that BAM was a well known stock, a household name amongst investors. So I thought it was a crowded trade and avoided looking at it. Have I been wrong all this time? Is BAM really generally ignored by investors?

As an aside, I actually bought Brookfield about 20 years ago when it was called Brascan just before Flatt took over. I bought it because the stock seemed cheap. Of course, I promptly sold it around the time Bruce became CEO (face palm!).
Title: Re: BAM - Brookfield Asset Management
Post by: bizaro86 on September 07, 2018, 08:36:23 PM
Thanks for posting that. Every time I see him speak I add to my BAM exposure, and I consider whether I should just go 100% there and find a different hobby.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on September 08, 2018, 01:24:03 AM
Thanks for posting that. Every time I see him speak I add to my BAM exposure, and I consider whether I should just go 100% there and find a different hobby.

bizaro,

Back in December 2017 in this topic Al replied to a question from me this way [just sayin'! [ : - ) ]]:

"So, I think the most important question we have to ask ourselves here, is actually: " What does have to happen to take this thing down?"

Fraud at the top? 
Involvement in bribery? 
Unethical, amoral behaviour by the CEO, or one of his closest associates?  No evidence of this.  The guy eats lunch with employees in the food court when he is in town, and apparently doesn't have a private office. 

The usual things Buffett worries about.  Not saying anything like this could happen, but it could happen.  In other words, dont make this a 100% holding.

Some major hits could be felt if a Venezuela happens in one of the primary operating countries.

The stock may come way down in a market crash but that provides opportunity for the BAMs of the world and they are clearly primed for this.  As Bruce has said, the business cycle has not been repealed.  Each day we get closer to a crash...
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on September 08, 2018, 04:02:55 AM
A credit market meltdown in combination with a downturn in the economy will hit BAM disproportionally harder than let say BRK or GOOG etc. BAM is an asset manager and if assets values  don’t do well, neither will BAM. BAM assets and vehicles also have a lot of leverage (BPY) to both credit markets and the economy. They have shown to manage astutely in the last, but that’s no guarantee for the future, esepicalky since they grow so much in size.
Title: Re: BAM - Brookfield Asset Management
Post by: bizaro86 on September 08, 2018, 07:14:38 AM
Oh for sure. That was hyperbole, sorry, doesn't come across on the internet. My current BAM/PVF allocation is high single digits, and I doubt I'd ever go more than 20-25%, which I'd only do if they had a big drop not coincident with a big drop in the rest of the market.

As operators go, I think I'd put Flatt second to only Buffett, and he likely has a lot more time left in him.

Title: Re: BAM - Brookfield Asset Management
Post by: ValueMaven on September 08, 2018, 01:16:34 PM
As operators go, I think I'd put Flatt second to only Buffett'

Flatt is likely a BETTER operator then Buffett.  Either way - one of the best public CEOs out there.  Would be interesting to see how many CEO's have $1bn of common stock exposure like Flatt does...I am sure a lot of Tech...but outside of that???
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on September 08, 2018, 03:06:58 PM
Google just published this talk by the CEO: Bruce J. Flatt "Durable Principles for Real Asset Investing" | Talks at Google (https://www.youtube.com/watch?v=vmt1Li1Rnes)

Pretty amazing talk. To extend on what Flatt has talked about, I think ENB fits many of the same narratives (durable/ irreplaceable assets with a cash yield, NG revolution). Its one of my major positions in my “yield” bucket.

It’s also worthwhile to note that their investment thesis hinges upon bond yields staying comparatively low. I think this is important to keep in mind.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on September 09, 2018, 12:51:11 PM
As operators go, I think I'd put Flatt second to only Buffett'

Flatt is likely a BETTER operator then Buffett.  Either way - one of the best public CEOs out there.  Would be interesting to see how many CEO's have $1bn of common stock exposure like Flatt does...I am sure a lot of Tech...but outside of that???

Just as a discussion point; if we think he is one of the best allocators/operators, has all of his networth in the company then shouldn't others feel ok doing it too?

 I agree that during the next downturn the price will drop more significantly then most other businesses. Buf, they will continue to earn and acquire numerous distressed assets.
Title: Re: BAM - Brookfield Asset Management
Post by: Ahab on September 09, 2018, 02:10:29 PM
In the spirit of trying to avoid unforced errors, I try to remind myself to keep at least 7 or 8 holdings. Too much concentration risk when putting your entire net worth into one security IMO. An outsized bet of 20% or 30% in a business you know really well is another story. There are good arguments that BAM fits the bill as a high-quality compounder.
Title: Re: BAM - Brookfield Asset Management
Post by: Cigarbutt on September 09, 2018, 02:32:26 PM
In the spirit of trying to avoid unforced errors, I try to remind myself to keep at least 7 or 8 holdings. Too much concentration risk when putting your entire net worth into one security IMO. An outsized bet of 20% or 30% in a business you know really well is another story. There are good arguments that BAM fits the bill as a high-quality compounder.
I like BAM too and have also seen it as a potential long-term compounder.
Could you elaborate on the "good arguments"?
and
Could you share (that's the part I'm working on now) the factors that will allow them to survive and even thrive through the next inevitable (although impossible to predict when) downside of the cycle?
Title: Re: BAM - Brookfield Asset Management
Post by: Uccmal on September 09, 2018, 04:00:03 PM
In the spirit of trying to avoid unforced errors, I try to remind myself to keep at least 7 or 8 holdings. Too much concentration risk when putting your entire net worth into one security IMO. An outsized bet of 20% or 30% in a business you know really well is another story. There are good arguments that BAM fits the bill as a high-quality compounder.

Smart.  I have seen people blow up completely from analyzing (guessing?) wrong.  One took all his "winnings" from FFH and put them into Research in Motion just as Apple came out with the IPAD. 

It was a good video.  Bruce Flatt is impressive to say the least.  But we never totally know what is going on.  Everytime I think of putting 100% into something I think of Jared the subway guy, or Bill Crosby, or Elliot Spitzer, or Hank Greenberg (not even anything wrong on his part). In this day and age even unproven allegations can take someone down enough to wipe out an investment for the passive investor. 

Tesla is showing the problems when a company is too reliant on one person.  I dont think this is the case with BAM but if the CEO were to have a meltdown the stock would get killed, at least for awhile.  That being said BAM is internally diversified with a few extremely capable management teams. 

Title: Re: BAM - Brookfield Asset Management
Post by: mcliu on September 09, 2018, 04:33:01 PM
BAM has obviously been a very astute investor, but I wonder how much of their returns has been a result of the decline in interest rates (credit super cycle?) and corresponding increase in the prices of these long-duration real assets..?
I also wonder how these assets will perform in a long period of rising interest rates..?
Would love to hear your thoughts.
Title: Re: BAM - Brookfield Asset Management
Post by: Ahab on September 09, 2018, 05:09:40 PM
@Cigarbutt
I like to look for companies that I feel are 'elite' in their areas of focus. Monitoring business news, I'm always struck by how Brookfield is involved in so many restructuring deals involving real assets. The company seems to have a knack for buying coal and turning it into diamonds, rinse and repeat. Its performance record over the last 20 years has been incredibly impressive (high teens over 1997-2017). That being said, I agree that there are some very real risks in a downturn (that would be hopefully offset by skilled management). The upside of tougher times for BAM is the ability to buy assets for a song in an environment of business failure and forced selling. Here, I'm reminded by what Bruce Flatt said at a conference during the financial crisis about the previous speaker's gloomy predictions being valid for the next few months while his outlook was relevant to emerging trends over the next few decades.

@Uccmal
I think you highlight some really good cases of individuals the public believed to be above board, even admirable until scandalous/immoral things were revealed about them. Not too worried about key man risk with Flatt, but having him behind the reins is clearly a fantastic tailwind for BAM.

@mcliu
That's an important question. I'm optimistic that the values of the real assets that BAM manages (including a solid portion of the Manhattan skyline) will benefit greatly from the continued growth of the global economy even in a much higher rate environment. I'd love to hear your and others thoughts about the sensitivity of BAM's operating performance to rising interest rates.
Title: Re: BAM - Brookfield Asset Management
Post by: Cigarbutt on September 09, 2018, 05:43:19 PM
@Cigarbutt
I like to look for companies that I feel are 'elite' in their areas of focus. Monitoring business news, I'm always struck by how Brookfield is involved in so many restructuring deals involving real assets. The company seems to have a knack for buying coal and turning it into diamonds, rinse and repeat. Its performance record over the last 20 years has been incredibly impressive (high teens over 1997-2017). That being said, I agree that there are some very real risks in a downturn (that would be hopefully offset by skilled management). The upside of tougher times for BAM is the ability to buy assets for a song in an environment of business failure and forced selling. Here, I'm reminded by what Bruce Flatt said at a conference during the financial crisis about the previous speaker's gloomy predictions being valid for the next few months while his outlook was relevant to emerging trends over the next few decades.

@mcliu
"BAM has obviously been a very astute investor, but I wonder how much of their returns has been a result of the decline in interest rates (credit super cycle?) and corresponding increase in the prices of these long-duration real assets..?
I also wonder how these assets will perform in a long period of rising interest rates..?"

---)

That's an important question. I'm optimistic that the values of the real assets that BAM manages (including a solid portion of the Manhattan skyline) will benefit greatly from the continued growth of the global economy even in a much higher rate environment. I'd love to hear your and others thoughts about the sensitivity of BAM's operating performance to rising interest rates.

@Ahab
Good points. Future events are likely to be different from past events but interesting to remember that BAM was able to raise significant capital during 2008 and 2009. Probably useful to run some "stress" tests. This is just opinion on my part and it may take a while but I think that the value of "real" assets will tend to do relatively well over the long term.

@mcliu
If you're in this for the long term and are worried about inflation, the volatility or downward pressure on asset valuation should not disturb you because the business is characterized by long term cash flows with embedded indexing provisions and inflation should not preclude management from buying undervalued real assets.

If your worry is inflation and if you agree with the principles laid out by Mr. Buffett in his "How inflation swindles the investor" article, you may need to take into account that the value taken away by inflation would be inversely proportional to the inflation protection that the security provides. In addition, Mr. Flatt and the BAM people are savvy capital allocators and, in an inflationary environment, they could possibly lock in long-term debt with fixed interest rates which would mitigate the inflation cheat.

However, in the same vein, higher inflation may diminish the relative attractiveness of BAM's returns because institutional investors looking for alternative investments may find that the return differential to be not large enough for the "risk" considered. So, they may handle less fee-bearing capital.

Don't want to turn this into a macro discussion and, at this point, this is pretty contrarian but, if you are running various scenarios, the effect of unexpected deflation should be considered.
Title: Re: BAM - Brookfield Asset Management
Post by: bizaro86 on September 09, 2018, 06:44:20 PM
My thought is that higher interest rates are likely to be a consequence of d continued strong economic growth and/or increased inflation. I think Brookfield assets are of better than average quality, and so are likely to disproportionately benefit from economic growth.

As to the argument about Bruce Flatt having a big percentage of his net worth in BAM, that's a good sign but not conclusive, imo. If I lost 80% of my net worth, it would affect my life dramatically. If that happened to Bruce Flatt, he'd still be excessively rich.
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on September 09, 2018, 07:46:55 PM
My thought is that higher interest rates are likely to be a consequence of d continued strong economic growth and/or increased inflation. I think Brookfield assets are of better than average quality, and so are likely to disproportionately benefit from economic growth.

As to the argument about Bruce Flatt having a big percentage of his net worth in BAM, that's a good sign but not conclusive, imo. If I lost 80% of my net worth, it would affect my life dramatically. If that happened to Bruce Flatt, he'd still be excessively rich.

Flatt stated it himself that they are working opunder the assumption that interest rates stay reasonably low, so I would take it from the horses mouth that it is necessary condition for them to do well. Certainly rising interest rates or even worse rising spreads can’t be good for an asset  management business that needs access to debt and equity markets for new deals.
Title: Re: BAM - Brookfield Asset Management
Post by: Uccmal on September 09, 2018, 07:47:17 PM
BAM has obviously been a very astute investor, but I wonder how much of their returns has been a result of the decline in interest rates (credit super cycle?) and corresponding increase in the prices of these long-duration real assets..?
I also wonder how these assets will perform in a long period of rising interest rates..?
Would love to hear your thoughts.

I suppose we could worry about this.  But there is no evidence it is happening.  The Gov't of Canada left the overnight at 1.75, which is higher than the US, and higher than Japan and most of the EU.  The yield curve is close to flat which indicates that nothing is going to happen very fast. 

BAM gets alot of institutional money both as 'partners' and as prefs. and long bonds.  Any effect from changing interest rates would likely be slow. 

Bruce Flatt talks about the urbanization of the planet.  Most of their business is focussed in this direction.  I dont think this is going to reverse, if it even can.  I dont think people en masse can move from cities to the country side and maintain their standard of living.

You have a few businesses here.  They are all inter-related to some extent. 

BIP invests in widely diverse infrastructure support businesses.  Higher interest rates or recession aren't going to kill the need for these services.  In many they can raise prices lock step with interest rate or inflation pressures. 

BEP invests in renewable power generation, storage, and transmission.  In our hot, energy hungry world, I dont see too much danger here. 

BPY invests in higher end real estate. If you believe that London, NewYork, Toronto, etc. are going to hell due to higher interest rates then this could be a sore spot.  I am not a real estate expert and really know only enough to know that the BPY people are good at what they do.

Then there is all the other stuff directly under BAM. 

What is telling is what has little presence in their portfolio:
1) Manufacturing: Excepting the high end, it is crowded and not very profitable.
2) Banking: at least directly, and again very crowded. 
2b) Financial management.  The do private equity as a way to fund projects, and earn fees.  They dont try to compete in the retail finance business the way Blackrock does.
3) Insurance: Crowded, and not particularly profitable. 
4) Retail Tech.

BAM could easily buy into any of the above.  They clearly spend alot of time and thought on choosing where to best go.  As the CEO says they try to stay away from crowded areas. 

Finally, businesses always face problems.  Its the job of management to solve these problems, or higher the right people to fix them.  Not too many companies have been able to do as well at this as BAM. 

Title: Re: BAM - Brookfield Asset Management
Post by: Uccmal on September 09, 2018, 08:11:24 PM
I keep trying to paste up interest rate chart for the last 500 years. 

Here is a link to one: https://amp.businessinsider.com/images/554b7b546bb3f7f062881fc8-960-720.jpg

If you look at it we are near the lowest interest rates have ever been.  On the other hand the highest they ever were was in the 1980s.  Most of history they spent in the 3 to 6% range, spiking for short periods.  Obviously this kind of data is fraught with caveats but in a general sense I dont get that we will see rates like we saw in the 1980s as long as we live. 

Bruce Flatt would likely be aware of interest rate history and know that the 1980s were an anomaly, as much as today is an anomaly.
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on September 09, 2018, 08:23:18 PM
My main thing with BAM is catching the company when it's at a size where continued growth would be harder to achieve.  Especially with more alternative and real assets being more popular these days.

Similar with jumping into Berkshire, Constellation, Amazon, etc. these days. I could be wrong.  And it probably has a lot to do with following the company closely for a while and seeing it grow and grow, which leads to some creeping doubts whether it can be sustained. 

Title: Re: BAM - Brookfield Asset Management
Post by: Ahab on September 09, 2018, 10:14:40 PM
I think worrying about company size crimping returns is a legitimate fear, one that I share in regards to pretty much every large cap stock in my portfolio. I try to remind myself that we are reaching trillion dollar companies and someday we will be reaching 10 trillion dollar ones, so size is relative to where the economy is now. I think a big part of the BAM investment case is that urbanization, modernization, and the move towards environmental sustainability require massive amounts of investment in the real assets that are in BAM's wheelhouse. In my minds eye, things like skyscrapers, bridges, pipelines, and malls go hand in hand with modernity and aren't going out of style.
Title: Re: BAM - Brookfield Asset Management
Post by: bizaro86 on September 09, 2018, 10:16:22 PM
He also said they seek financing that won't cause them to be forced sellers. I agree that higher interest rates will be a negative for them, but I think that the quality of their portfolio will mitigate that somewhat.

I think it depends on how interest rates move as well. If rates move up to 4-5% (say for the 2 year) I don't think that would be a big deal. If we went back to 80s style double digit rates you wouldn't want to own BAM going into that I don't think.

Personally, I think the economy has been getting more capital light every year, so I think real interest rates will probably be lower on average in the future than they have been in the past, but macro forecasting isn't exactly my specialty.
Title: Re: BAM - Brookfield Asset Management
Post by: StevieV on September 10, 2018, 07:55:40 AM
He also said they seek financing that won't cause them to be forced sellers. I agree that higher interest rates will be a negative for them, but I think that the quality of their portfolio will mitigate that somewhat.

I think it depends on how interest rates move as well. If rates move up to 4-5% (say for the 2 year) I don't think that would be a big deal. If we went back to 80s style double digit rates you wouldn't want to own BAM going into that I don't think.

Personally, I think the economy has been getting more capital light every year, so I think real interest rates will probably be lower on average in the future than they have been in the past, but macro forecasting isn't exactly my specialty.

On rates:

The gradual and moderate rising rate environment is the negative situation I am most focused on.  More aggressively rising rates are a big problem for huge swaths of the economy and the US government.  What do housing, autos and the US budget look like at high single-digit rates?  That scenario is a bloodbath for wide swath of the US and world economies.  I don't think there are many safe havens in that situation.


On size:

Always wise to consider size as a potential headwind.  In BAM's case, a few things: (1) I like the geographic diversity.  That can provide a growing opportunity set to mitigate some size issues.  (2) In some instances, size can be helpful for getting deals done.  For example, not many players were in a position to do the GGP deal or, I believe, some of their deals in Brazil.  (3) I don't think size is a big issue yet, but it could happen.  If they grow 15% for the next 5 years, does that doubling make size an issue?  In any event, I expect it to be an issue as a gradual slow-down of growth.
Title: Re: BAM - Brookfield Asset Management
Post by: Cigarbutt on September 10, 2018, 09:45:48 AM
A credit market meltdown in combination with a downturn in the economy will hit BAM disproportionally harder than let say BRK or GOOG etc. BAM is an asset manager and if assets values  don’t do well, neither will BAM. BAM assets and vehicles also have a lot of leverage (BPY) to both credit markets and the economy. They have shown to manage astutely in the last, but that’s no guarantee for the future, esepicalky since they grow so much in size.

They do have significant credit exposure, have grown a lot and it can be hard to evaluate the EV/EBITDA multiples they're paying for acquisitions but these risk factors can be estimated through the capital discipline prism.

Mr. Buffett has likely looked at "real" assets deals that intersect with BAM and has described unrealistic expectations of competitive bidders (acquisition multiples, high debt to equity financing ratios and extremely low cost of debt {based on low risk-free rates and spreads}).

Looking at long term trends, at BAM, corporate and non-recourse borrowing has grown but seems to have remained in line with underlying cashflows. Compared to BRK, BAM does have a more concentrated risk profile but this appears to be mitigated by maintained financial discipline, a true long-term contrarian mindset (segments of the above linked video are convincing) and have developed a consistent in-house ability to improve (or even "to re-make the business" at times) the acquired businesses by operating the assets better.

Despite their discipline, it must be hard to resist the large supply of institutional capital and that may downplay, to some extent, their focus on areas where capital is scarce.
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on September 10, 2018, 01:18:27 PM
I think it is important to note that BAM makes their money working with other peoples money. From memory, they paid a pretty rich 13x EBITDA multiple for ENB Canadian gas distribution assets sold this year. I am guessing that as long as they meet their investors return targets, finance them solidly and run them well, they don’t really need to buy them cheap.
 I don’t think that their GGP buy will work out at a 6.5-7% cap rate, if the 30 year treasury goes to 5% for example, maybe for them, but probably not for the folks supplying the capital.
Title: Re: BAM - Brookfield Asset Management
Post by: walkie518 on September 11, 2018, 11:10:06 AM
I think it is important to note that BAM makes their money working with other peoples money. From memory, they paid a pretty rich 13x EBITDA multiple for ENB Canadian gas distribution assets sold this year. I am guessing that as long as they meet their investors return targets, finance them solidly and run them well, they don’t really need to buy them cheap.
 I don’t think that their GGP buy will work out at a 6.5-7% cap rate, if the 30 year treasury goes to 5% for example, maybe for them, but probably not for the folks supplying the capital.
Brookfield has a history of buying mismanaged and underperforming assets, stabilizing and/or realizing greater revenue streams.  Also, it's worth noting that large groups like BAM likely have credit agreements in place with banks collateralized on their institutional LP commitments.  Say Brookfield has no way to increase the value of the GGP assets by further development...if cost of funds is 4% for BAM and GGP is 7 Cap there's a 3% spread.  It may be that if the underlying rental revenues are strong enough, Brookfield might find a way to borrow all the way and take the 3% spread to LPs, who may not shell out any money for this particular deal (unlikely here but hypothetical).

The company's track record is very good and they seem to see no shortage of capital.  This likely means that institutional investors trust BAM and that BAM is making, ie showing, real returns on capital. 
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on September 11, 2018, 11:55:44 AM
In the latest supplemental they show that all of the funds are tracking or exceeding their performance targets.

Edit: Bruce has said on a few different occasions that it is their operating skills that drives much of the performance. Brascan and Brookfield we're operators before they were asset managers. I don't see Buffett wanting to turn around a pipeline (but you guys have more experience in this then me).

How common is it for an institutional investor or sovereign wealth fund to want to lock up caital for 10 plus years? Might that limit the available funds to BAM?
Title: Re: BAM - Brookfield Asset Management
Post by: vince on September 12, 2018, 09:39:17 PM
Chrispy, I have read every presentation and supplemental for years and you basically nailed it perfectly that Bam's advantage stems from their operating capabilities.  Even if they buy at a 5-6 cap rate they can bump that up a couple points by "fixing" the asset.  Then they lever it with cheap capital at long fixed rates (Bruce has stated that they could increase their earnings substantially by borrowing short) and are able to achieve 12-15 percent equity returns with low risk.  So yes they are contrarian and buy smart.  They are also very diversified geographically and have the capital to do big deals that others don't.  And all these things add up to superior returns.....but the secret sauce is their operating abilities that you will probably not find elsewhere, especially not in Buffetts toolbox.  Lastly, because they have shown superior returns over long periods, over many types of assets and through all the economic ups and downs they consistently attract long term capital from diversified sources including institutional and sovereign wealth funds.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on September 16, 2018, 02:19:53 AM
Brookfield Property REIT Inc. [BPR] has now got its own subsection on the Brookfield website here (https://bpy.brookfield.com/en/bpr) with option for subscription for alerts by e-mail, like for the other Brookfield entities.
Title: Re: BAM - Brookfield Asset Management
Post by: ValueMaven on September 16, 2018, 05:31:26 AM
So for us that HATE K1's here in the States...this is the one to own then..

'Brookfield Property REIT (NASDAQ: BPR) (“BPR”) is a subsidiary of BPY, intended to offer investors economic equivalence to BPY units but in the form of a U.S. REIT security. Dividends on BPR shares are identical in amount and timing to distributions paid out for BPY units, and BPR shares are exchangeable on a 1:1 basis for BPY units or their cash equivalence.'
Title: Re: BAM - Brookfield Asset Management
Post by: rkbabang on September 18, 2018, 07:42:23 AM
Toshiba in talks with Brookfield for UK nuke unit sale (https://www.nasdaq.com/article/toshiba-in-talks-with-brookfield-for-uk-nuke-unit-sale-20180918-00264)

"The NuGen project in Moorside, northwest England, was expected to provide around 7 percent of Britain's electricity, but faced setbacks after Toshiba's nuclear arm Westinghouse went bankrupt last year."
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on September 22, 2018, 05:53:06 AM
Financial Times [September 22nd 2018]: Bruce Flatt of Brookfield on owning the backbone of the global economy [Article outlined here] (https://outline.com/NpJ5nB).

[H/T QuesnelCap.]

- - - o 0 o - - -

Edit: Username for QuesnelCap fixed [from Twitter Username Quesnel Capital].
Title: Re: BAM - Brookfield Asset Management
Post by: ValueMaven on September 22, 2018, 03:41:32 PM
Does anyone have any fairly decent NAV estimates for BAM? 

I know this is much more of a FCF story ... but would be interested to see what some members think
Title: Re: BAM - Brookfield Asset Management
Post by: Ahab on September 22, 2018, 04:33:45 PM
I'm always impressed by Bruce Flatt's erudition. Enjoyed today's FT article...along with his recent talk at Google.
Title: Re: BAM - Brookfield Asset Management
Post by: no_free_lunch on September 23, 2018, 06:36:21 AM
You cant value it on nav alone or if u do its clearly overvalued.  Much of current value is a multiple on the asset management business. If you read the annual report they provide their viewpoint on valuation.
Title: Re: BAM - Brookfield Asset Management
Post by: cubsfan on September 23, 2018, 06:41:48 AM
You cant value it on nav alone or if u do its clearly overvalued.  Much of current value is a multiple on the asset management business. If you read the annual report they provide their viewpoint on valuation.

That is EXACTLY right.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on September 23, 2018, 08:22:47 AM
Does anyone have any fairly decent NAV estimates for BAM? 

I know this is much more of a FCF story ... but would be interested to see what some members think.

ValueMaven,

Well, QuesnelCap actually just released a blog post about BAM on his website: Security (in) Securities here (https://securityinsecurities.com/2018/09/23/brookfield-asset-management/). The blog post contains a link to a presentation called "Efficient markets?" (https://securityinsecurities.files.wordpress.com/2018/09/brookfield1.pdf) about BAM. On page 5 you find QuesnelCap's stab at a SOTP analysis of BAM. It's a one-pager, and one can agree with it, or not. To me it's structure for thinking about it, which makes it great.

- If you disagree with it, just start spending the rest of your life making adjustments to it - especially if you start diving down into the subs! [ : - D]

- - - o 0 o - - -

Edit:: CoBF username for QuesnelCap fixed [from Quesnel Capital [Twitter username]].
Title: Re: BAM - Brookfield Asset Management
Post by: Packer16 on September 23, 2018, 09:07:18 AM
It is a good way to look at except it does not include a discount for lack of control/marketability of the underlying stakes in the partnerships.  These discounts are typically in the range of 10 to 15%.  The reason for this discount is you have no right or option to sell these so why would you pay face value for an entity that holds them which takes away this option.  There are also typically hold co expenses but in this case given BAMs size the are immaterial.  Also the AM multiples IMO are high.  Other Alt managers sell at multiples of 10x recurring fees plus carry fees.  If you make these two adjustment, then BAM is fairly or slightly overvalued.  IMO BIP looks like a better investment & it is in the area of most growth (infrastructure).  BBU is also interesting but is more of a growth play then BIP.  Just my 2 cents.

Packer
Title: Re: BAM - Brookfield Asset Management
Post by: Og on September 23, 2018, 09:40:59 AM
It is a good way to look at except it does not include a discount for lack of control/marketability of the underlying stakes in the partnerships.  These discounts are typically in the range of 10 to 15%.  The reason for this discount is you have no right or option to sell these so why would you pay face value for an entity that holds them which takes away this option.  There are also typically hold co expenses but in this case given BAMs size the are immaterial.  Also the AM multiples IMO are high.  Other Alt managers sell at multiples of 10x recurring fees plus carry fees.  If you make these two adjustment, then BAM is fairly or slightly overvalued.  IMO BIP looks like a better investment & it is in the area of most growth (infrastructure).  BBU is also interesting but is more of a growth play then BIP.  Just my 2 cents.

Packer

Well this is what makes a market. I think BAM is very undervalued due to both quality of their asset management business and future runway. I think people will look back in 20 years from now in the value investing world who knew of Bruce Flatt but couldn't pull the trigger on BAM because it never got cheap enough for their liking. BAM's asset management business is not the typical asset management business and there's some incredible competitive advantages here.

I've been a shareholder since 2015 and I've added at times and own some of Partners Value Investments LP as well in some tax-exempt accounts I manage.
Title: Re: BAM - Brookfield Asset Management
Post by: Packer16 on September 23, 2018, 09:57:02 AM
I agree Brookfield is a great business & I just think BIP & BBU are better ways to play on the unique aspects of the business given the current valuation.  The discounts applied to internal investments are real & vary rarely do the discounts approach 0 as is implied in the linked valuation.  The AM business is unique but it is also large & IMO the blended AM fee & carry multiple of 15x is high given other AM firms with similar scale sell for 10x.  IMO what is unique is the assets Brookfield invests in & you can get that directly by investing in the funds you like.  I am not excited about BEP or as excited about BRY.  I believe Brookfield's special sauce shines in BIP and BBU.  With BAM I am forced to hold assets I am not as interested in. 

I agree the whole family of securities should do well here over the next 20 years, I just have a preference for certain parts of the business at the current valuation.

Packer   
Title: Re: BAM - Brookfield Asset Management
Post by: QuesnelCap on September 23, 2018, 10:57:46 AM
It is a good way to look at except it does not include a discount for lack of control/marketability of the underlying stakes in the partnerships.  These discounts are typically in the range of 10 to 15%.  The reason for this discount is you have no right or option to sell these so why would you pay face value for an entity that holds them which takes away this option.  There are also typically hold co expenses but in this case given BAMs size the are immaterial.  Also the AM multiples IMO are high.  Other Alt managers sell at multiples of 10x recurring fees plus carry fees.  If you make these two adjustment, then BAM is fairly or slightly overvalued.  IMO BIP looks like a better investment & it is in the area of most growth (infrastructure).  BBU is also interesting but is more of a growth play then BIP.  Just my 2 cents.

Packer

Hey Packer,

Thanks for the feedback and maybe the best way to is through the partnership you believe in most like you mentioned. I am of the view that these discounts (be it conglomerate, liquidity, etc) are to be taken advantage of in special circumstances when you come across an exceptional businesses, in addition to an owner/operator like Flatt who indicates a strong intention to close the discount (see Q2 18 letter). I'd contrast that to maybe Buffett, whose view is basically "I'll lay out the information I use to value my company, set a floor (buyback at x of book) and leave the rest to the market". Anyway time will tell. Good points nonetheless

Regards.
Title: Re: BAM - Brookfield Asset Management
Post by: leftcoast on September 23, 2018, 06:23:27 PM
Hi Packer - Do you mind elaborating on what you like about BIP and BBU?  Or conversely, why you're unexcited by BEP and BPY?  Is it mostly about the current valuations, or is it the nature of the assets in each?
Title: Re: BAM - Brookfield Asset Management
Post by: ValueMaven on September 23, 2018, 06:32:03 PM
Thank You John for posting this!
Title: Re: BAM - Brookfield Asset Management
Post by: ValueMaven on September 23, 2018, 06:34:42 PM
I wonder if Flatt views AUM fees similar to how Buffett viewed insurance Float??  It's an interesting topic to think about. 
Title: Re: BAM - Brookfield Asset Management
Post by: leftcoast on September 23, 2018, 07:44:45 PM
Hi Packer - Do you mind elaborating on what you like about BIP and BBU?  Or conversely, why you're unexcited by BEP and BPY?  Is it mostly about the current valuations, or is it the nature of the assets in each?

To partly answer my own question, I found this post from April where Packer outlines what he likes about BIP over the other LPs (and the GP):

The one observation I have here is BIP has outperformed BAM & and the other subs over time.  It appears there is more profit to be made infrastructure vs. real estate or renewable power assets.  Maybe BIP has a more flexible mandate then the other subs & thus has a larger target set than the other subs.  Also BIP has the largest amount of 3rd party investment in its companies versus the other subs (BAM only owns 30% of BIP vs. a high % of other subs).   

BIP is really interesting in that you can invest in a non-correlated asset class to stocks with an about 4.6% dividend yield & a 7.5% growth rate.  Currently the price to AFFO is about 13x, an AFFO yield of 7.6%.  This is a far cry from the Graham Formula estimate P/E of 23.5.  (Note: earnings here are meaningless as there is non-cash amortization in them)

Packer
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on September 24, 2018, 01:31:49 AM
ValueMaven,

There is also a good article on SA about valuation of BAM by SA author Eric Sprague from February 28th 2018. Here (https://outline.com/wJJe8P) is a link to the outlined article. If I remember correctly, Joel has mentioned it on here before, around the time of the release, however I can't right now find Joel's post about it back then.
Title: Re: BAM - Brookfield Asset Management
Post by: Packer16 on September 24, 2018, 04:52:10 AM
I guess our views on the hold co discounts are different. I view them as facts of life versus something to take advantage of because they are so prevalent & zero or premium valuations are so rare.  BAM is like an asset manager with a fund of closed end funds attached.  Now this is not taking anything away from Bruce Flatt & his ability.  He will do the best he can reduce the discount.  I just think the steps to do this are beyond what Bruce can reasonably do & are structural versus operational in nature.  As an example, one way to reduce the discount on the closed end fund side is to reduce the fees but this will reduce the value of the asset manager & Brookfield's institutional investors would not look favorably on this unless they could get a discount also. 

Another way is to reduce the discount is to spin-off the fund interests to shareholders.  I have never heard about this being discussed but it would be interesting to see if Brookfield is interested in this way to unlock value as is it doable & will IMO add value.  One question if this takes place is will the publicly traded fund value decline if it is done too quickly.  If so & it has to be done over time then a discount for timing is still applicable.   

Another way to look at this is where has the fund customer gotten the most value in the past & why.  If you look at the historical returns for Brookfield's funds you will see the highest returns are in Infrastructure and Private Equity.  IMO the returns are higher here because of Brookfield's unique expertise & assets in infrastructure & specialized PE areas.  There is also less competition in these areas versus real estate and energy.  I also think the underlying economics of energy are much more commodity based versus infrastructure.  These are my views & if relative valuations change then my views would change. 

One test of this is to examine the historical returns of BIP versus BAM.  BIP has done better than BAM.  Why?  That in part has led me down this path of reasoning.  I am open to others ideas or thoughts on this matter.

Packer
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on September 24, 2018, 04:20:55 PM
Interesting points Packer. Thank you for sharing.

BIP and BBU are the compounding machines, BPY may be undervalued but like Packer said is in a much more competitive field, and BEP is great but not a compounder. The target returns for each partnership reflect this.

The asset management business started out so small relative to the size of BAM that it was going to take years to have a major impact. It seems like we may be getting to the exciting times if the 1bn in fees continues to compound >20%...

Investor day is Wednesday and will provide boat loads of commentary and presentations to dig into.
Title: Re: BAM - Brookfield Asset Management
Post by: gokou3 on September 24, 2018, 05:21:12 PM
FWIW, BAM has been very busy buying BPY shares over the past few weeks.  I don't see the same level of buying activities for the other LPs.

https://www.canadianinsider.com/node/7?menu_tickersearch=bpy

Title: Re: BAM - Brookfield Asset Management
Post by: walkie518 on September 25, 2018, 07:52:53 AM
anyone going to the investor day tomorrow?
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on September 25, 2018, 08:13:13 AM
anyone going to the investor day tomorrow?

I'll be there.
Title: Re: BAM - Brookfield Asset Management
Post by: ValueMaven on September 25, 2018, 04:22:14 PM
The stock has been racing upwards recently...I think there is a lot of buzz around tomorrow's meeting.  Will be very interesting to watch
Title: Re: BAM - Brookfield Asset Management
Post by: bluejoseph on September 25, 2018, 05:42:34 PM
  I believe Brookfield's special sauce shines in BIP and BBU.  With BAM I am forced to hold assets I am not as interested in. 

Packer   

For those interested, Credit Suisse recently did a 40 page valuation on BBU using a "Net Asset Value approach that revolves around a sum-of-parts that uses a variety of public references for BBU's private businesses" - https://research-doc.credit-suisse.com/docView?language=ENG&format=PDF&sourceid=emgpm&document_id=1080688141&serialid=P3GSX7t%2FaAVVfkJLfKteJLJSkJ5ruLCc2vkkB4UGh5A%3D (https://research-doc.credit-suisse.com/docView?language=ENG&format=PDF&sourceid=emgpm&document_id=1080688141&serialid=P3GSX7t%2FaAVVfkJLfKteJLJSkJ5ruLCc2vkkB4UGh5A%3D)

Side note: Never really posted here before but pretty cool to see that the interface gives me the option to insert an FTP link.  :D
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on September 25, 2018, 06:19:05 PM
For those interested, Credit Suisse recently did a 40 page valuation on BBU using a "Net Asset Value approach that revolves around a sum-of-parts that uses a variety of public references for BBU's private businesses" - https://research-doc.credit-suisse.com/docView?language=ENG&format=PDF&sourceid=emgpm&document_id=1080688141&serialid=P3GSX7t%2FaAVVfkJLfKteJLJSkJ5ruLCc2vkkB4UGh5A%3D (https://research-doc.credit-suisse.com/docView?language=ENG&format=PDF&sourceid=emgpm&document_id=1080688141&serialid=P3GSX7t%2FaAVVfkJLfKteJLJSkJ5ruLCc2vkkB4UGh5A%3D)

Side note: Never really posted here before but pretty cool to see that the interface gives me the option to insert an FTP link.  :D

Thank you for sharing, Joseph!

Still a plain pdf-file, though. - Please don't be a stranger going forward! [ : - ) ]

I'll be there.

I really hope you'll enjoy your day in New York, Joel! [ : - ) ]
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on September 25, 2018, 07:15:02 PM
anyone going to the investor day tomorrow?

I'll be there.

I plan to be there for some of the presentations.  In the middle of move and renovation, so ... I'll be the one who will look most out of place.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on September 25, 2018, 08:15:11 PM
Behind every great company there is a great story. [I.e. for Investor AB, I have access to 100 years of financials on the company website.]

[If one has studied Berkshire, perhaps combined with the Buffett Partnership Letters, also perhaps combined with the information in "Snowball", one get a clear line of the whole evolution in Mr. Buffett's wealth].

I have been struggling now for months with "a missing link" about Mr. Flatt & Co's takeover of control of Brascan [now BAM] back then. Found out a bit about it last weekend - the whole thing still appears opaque to me.

I have posted about my findings in the PVF.UN topic here: http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/pvf-partners-value-investments-inc/msg346184/#msg346184 .
Title: Re: BAM - Brookfield Asset Management
Post by: Cigarbutt on September 25, 2018, 09:56:37 PM
Behind every great company there is a great story. [I.e. for Investor AB, I have access to 100 years of financials on the company website.]

[If one has studied Berkshire, perhaps combined with the Buffett Partnership Letters, also perhaps combined with the information in "Snowball", one get a clear line of the whole evolution in Mr. Buffett's wealth].

I have been struggling now for months with "a missing link" about Mr. Flatt & Co's takeover of control of Brascan [now BAM] back then. Found out a bit about it last weekend - the whole thing still appears opaque to me.

I have posted about my findings in the PVF.UN topic here: http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/pvf-partners-value-investments-inc/msg346184/#msg346184 .

FWIW, I have looked into this a while back. Could not untie the Gordian knot.
It seems that Mr. Cockwell was the mastermind behind the gradual grip of what eventually became BAM.
It also seems that Mr. Cockwell's edge was based, at least partly, on the mastery of complexity and labyrinthine accounting.
We all have to come to our own conclusions and it may end up a matter of trust but, for my humble part, I would say that there is likely nothing to find in terms of improper tansactions or dealings.

The historical part of Mr. Cockwell's rise is interesting as he was able to gradually gain control from two famous (in Canada anyways) Bronfman family descendants, using similar complex strategies and using his Pagurian vehicle which ate its parent Edper Group and which eventually became Brascan.

Mr. Cockwell firm structure map (which has always looked more or less like a pot of spaghetti dropped on the floor) has always included parallel intertwined funds and partnerships and some have used the nickname "the manipulator". I understand that he was a tough and clever tactician who is now quite involved in charity work which may have more than one meaning.

When 1139966 Ontario Limited became Edperpartners and then Partners Limited, Mr. Flatt is listed as one of the 38 investors which includes names of the Brascan family, including Mr. Timothy Price who is a director at Fairfax.

I assume that Mr. Flatt gradually increased his ownership over time and cannot figure out precisely the trajectory and the underlying financing. I would say that Mr. Flatt is more a strategist than a tactician, which IMO makes him a better CEO, and the BAM structure has been simplified to some degree over time.

https://web.archive.org/web/20060613022727/http://adamcorelli.com/html/edper.html
https://en.wikipedia.org/wiki/Edper_Investments
http://sirf-online.org/wp-content/uploads/2013/02/Partners_list-c-11.pdf
Title: Re: BAM - Brookfield Asset Management
Post by: Saluki on September 26, 2018, 05:01:59 AM
Behind every great company there is a great story. [I.e. for Investor AB, I have access to 100 years of financials on the company website.]

[If one has studied Berkshire, perhaps combined with the Buffett Partnership Letters, also perhaps combined with the information in "Snowball", one get a clear line of the whole evolution in Mr. Buffett's wealth].

I have been struggling now for months with "a missing link" about Mr. Flatt & Co's takeover of control of Brascan [now BAM] back then. Found out a bit about it last weekend - the whole thing still appears opaque to me.

I have posted about my findings in the PVF.UN topic here: http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/pvf-partners-value-investments-inc/msg346184/#msg346184 .

FWIW, I have looked into this a while back. Could not untie the Gordian knot.
It seems that Mr. Cockwell was the mastermind behind the gradual grip of what eventually became BAM.
It also seems that Mr. Cockwell's edge was based, at least partly, on the mastery of complexity and labyrinthine accounting.
We all have to come to our own conclusions and it may end up a matter of trust but, for my humble part, I would say that there is likely nothing to find in terms of improper tansactions or dealings.

The historical part of Mr. Cockwell's rise is interesting as he was able to gradually gain control from two famous (in Canada anyways) Bronfman family descendants, using similar complex strategies and using his Pagurian vehicle which ate its parent Edper Group and which eventually became Brascan.

Mr. Cockwell firm structure map (which has always looked more or less like a pot of spaghetti dropped on the floor) has always included parallel intertwined funds and partnerships and some have used the nickname "the manipulator". I understand that he was a tough and clever tactician who is now quite involved in charity work which may have more than one meaning.

When 1139966 Ontario Limited became Edperpartners and then Partners Limited, Mr. Flatt is listed as one of the 38 investors which includes names of the Brascan family, including Mr. Timothy Price who is a director at Fairfax.

I assume that Mr. Flatt gradually increased his ownership over time and cannot figure out precisely the trajectory and the underlying financing. I would say that Mr. Flatt is more a strategist than a tactician, which IMO makes him a better CEO, and the BAM structure has been simplified to some degree over time.

https://web.archive.org/web/20060613022727/http://adamcorelli.com/html/edper.html
https://en.wikipedia.org/wiki/Edper_Investments
http://sirf-online.org/wp-content/uploads/2013/02/Partners_list-c-11.pdf



As part of my deep dive into Brookfield, I came across two books that you might find interesting. Corporate Catalyst by Tony Griffiths (also on Fairfax's board) worked on deals with Brascan and a related Bronfmann entity, Edper, and discusses them in his book. 

But the book that has a ton of information (I'm only halfway through it now) is called The Brass Ring.  It deals with the history of Brascan and the the other entities (Edper, Hees etc). There is a corporate entity chart in the back of the book which looks like a more complicated version the old setup of Berkshire in the Blue Chip Stamp days.  Cockwell is a key figure in building and transforming the group of entities (so is Trevor Eyton).  The Bronfmann's are portrayed as smart businessmen, but very hands off.  Their role is hiring the best managers they can and giving them room to run.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on September 26, 2018, 10:38:31 AM
Thanks a lot Cigarbutt & Saluki,

This is great! - I will look into those things. Saluki, I hope that you will consider to start two new topics about those two particular books separately, I do not recall to have seen topics there about them, but I may be wrong about that.
Title: Re: BAM - Brookfield Asset Management
Post by: cubsfan on September 26, 2018, 10:41:13 AM
The first 2 presentations at the Capital Markets day were terrific.

Flatt and company have done a lot to simplify the presentation.  It has historically been tough
to get your arms around BAM, there is so much too it.  Today has been great.
Title: Re: BAM - Brookfield Asset Management
Post by: ValueMaven on September 26, 2018, 06:55:35 PM
I have a lot of thoughts about today...

Does anyone recall the last time management gave these specific guidance metrics and valuation targets?? 

Look at BAM slide 108 ... targeting $118 BAM parent price in 2022.

the 20x multiple on the Asset Mgmt arm is rich IMHO... but even if its more like 15x, you are still talking about basically a double from here. 

You have recession risk overall with BAM - but with $35bn+ of dry powered, they can add to their Real Asset portfolio. 

I came away very impressed with todays presentation and will be adding to my position at these levels
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on September 26, 2018, 07:21:10 PM
I have a lot of thoughts about today...

Does anyone recall the last time management gave these specific guidance metrics and valuation targets?? 

Look at BAM slide 108 ... targeting $118 BAM parent price in 2022.

Don't recall if it was every single investor day, but I've seen targets fairly regularly.

I remember a past q&a where someone asking Flatt how BAM performed based on their target (forget which particular one) from 5 years ago.  Flatt didn't have that particular information readily available.

The thing to keep in mind is that with the spinoffs, the deeper one goes back to the presentation archives, the harder it is to really see how, say, their price or IV target, has or hasn't been met.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on September 27, 2018, 03:13:47 AM
Last year's or the year before had the same price target info.

On BAMs website there is a returns calculator. May this help?
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on September 27, 2018, 04:44:44 AM
They've had these targets since at least 2012.  They usually hit them overall, but not necessarily exactly how they say they will.
Title: Re: BAM - Brookfield Asset Management
Post by: vince on September 27, 2018, 07:08:50 AM
I have a lot of thoughts about today...

Does anyone recall the last time management gave these specific guidance metrics and valuation targets?? 

Look at BAM slide 108 ... targeting $118 BAM parent price in 2022.

the 20x multiple on the Asset Mgmt arm is rich IMHO... but even if its more like 15x, you are still talking about basically a double from here. 

You have recession risk overall with BAM - but with $35bn+ of dry powered, they can add to their Real Asset portfolio. 

I came away very impressed with todays presentation and will be adding to my position at these levels

every year
Title: Re: BAM - Brookfield Asset Management
Post by: StevieV on September 27, 2018, 07:17:38 AM
I believe that BAM is using the same valuation metrics when they say: (1) the stock is worth $56.21 today; and (2) should be worth $118 in 5 years.

As I type, BAM is trading at close to $45.  So, given a similar valuation in 5 years, the projection would be about $94.  Basically, a little more than double, without a change in market multiple.  Of course, that's a projection.
Title: Re: BAM - Brookfield Asset Management
Post by: walkie518 on September 27, 2018, 07:28:01 AM
My general impression of the meeting was that (1) BAM is firing on all cylinders and (2) they have training in being great sales people.

Sitting through the 8 hours did give me a much better feel for some of the subs and while they didn't advertise any limitations, there are certainly some cracks. 

It looks like BAM is putting a lot of money into BBU, which, if I understand correctly, intends to buy commodity-driven businesses and find ways to create stable cash flows from them and use a little leverage to juice returns.  My interpretation is that they are not shy to buy garbage at the right price, and in the case of Graftech, they turned a turd into gold.  How repeatable is the model?

On the one hand, Westinghouse appears like an interesting acquisition and plays to Brookfield's strengths.  Teekay looks like a business that might be more hands-off than Graftech was. 

The AT&T deal, on the other hand, doesn't look particularly appealing on a number of metrics.  Maybe there's something I'm missing on that one, but I don't think AT&T had a feel for what "scale" meant in the data center business when those properties were developed.

The financial engineering underpinning BAM is as deliberate as palpable. 

How BAM handled the GGP transaction with a new class of BPY as a US REIT in BPR shows they're willing to pull all the stops.  I'm curious to see how the reporting between the two will be different.

The clear benefit to owning BAM is that we can let some of the managers falter while the others do well and across the cycles BAM should continue to outperform. 

As for the targets Flatt outlined, they are substantial, but the market doesn't tend to appreciate guidance past a few months. 

If Brookfield generates as much cash as they claim they will over the next 5 years, the stock could certainly double.  If Brookfield starts to buy back shares using this cash as well as find new deals with good ROIC, I see no reason not to increase. 
Title: Re: BAM - Brookfield Asset Management
Post by: nickenumbers on September 28, 2018, 05:23:44 AM
From Bruce Flatt's Google talk

(http://)
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on September 30, 2018, 06:17:19 AM
After watching the BAM presentation only:

1) BAM has exceeded their 2018 projections from 2013.
2) While Brookfield estimates real asset allocation to continue to grow enormously, Bruce believes that institutions are most underweight in infrastructure assets. In the q&a he stated that if 20 institutional investors we're polled, all 20 would want to allocate more to infrastructure. The investors are still unfamiliar with infrastructure and trying to find out how to participate. BIPs and their privately listed infrastructure funds show a great track record.
3) BPY has been transformed over the past 5 years with shares continuously being diluted. This is done. BPY is built and ready to earn and reduce, not increase, sharecount.
4) BAM's projection of 5 year future share price assumes all earnings not dividend out sit on the balance sheet. If they are used for share repurchases then price per share will be even larger. Glad to hear Bruce chime in that they are only beneficial if done at the right price or else they destroy value. This flexibility is why they will favor repurchases over a substantial dividend increase.
Title: Re: BAM - Brookfield Asset Management
Post by: wisowis on September 30, 2018, 07:41:42 AM
https://twitter.com/AndrewRangeley/status/1044960395302227969

Quote
$BAM thinks their shares are ~25% undervalued, will compound at ~24% IRR over next five years (includes discount closing), will generate enough excess cash to buy back entire market cap over next 10 years.
Title: Re: BAM - Brookfield Asset Management
Post by: Packer16 on September 30, 2018, 09:31:17 AM
The one thing BAM should do is distribute its ownership in the funds.  This would reduce the discount now & not leave the funds locked in with a lack of control discount.  I was not at the meeting.  Did anyone suggest this or did BAM give a rationale for not doing this?

Packer
Title: Re: BAM - Brookfield Asset Management
Post by: vince on September 30, 2018, 10:16:43 AM
https://twitter.com/AndrewRangeley/status/1044960395302227969

Quote
$BAM thinks their shares are ~25% undervalued, will compound at ~24% IRR over next five years (includes discount closing), will generate enough excess cash to buy back entire market cap over next 10 years.

Within the twitter posts responding in that link, one poster said that he cant stand it when bam claims how undervalued the shares are yet they don't buy back shares.  This is the one thing that makes me not buy a shitload more and add to an already large position.  They brag about the large amount of cash and liquidity on hand, they claim strongly qtr after qtr how undervalued bpy and bam are and they also inform us how important shrinkage of equity (or no dilution) is in terms of ultimate value creation for shareholders.  And since 2013, when I bought a large position, they have done very little.  Flatt is way smarter than me, and obviously knows so much more about those assets than I ever will so I want to be careful not critisize too much.  I love the asset and the mgmt here and plan on holding some bam stock for a long time.  But anyone that is not confused by this has to be looking at it thru a different lense.  What am I missing?
Title: Re: BAM - Brookfield Asset Management
Post by: bigbluffzinc on September 30, 2018, 11:21:23 AM
I don't think my opinion is worth much but if you recall from Flatt's prior transcripts he's talked about share repurchases as a capital allocation decision relative to building out new platforms/transformative acquisitions.  You can argue those haven't happened/opportunities haven't been/there is no opportunity cost but I think for the asset management franchise it's far more accretive to acquire something they can manage and earn fees on if the IRR is even remotely close to what they get on a share repurchase.  Getting something they can really build/subsequently kick out and charge fees on is vastly superior to the repurchase (That is my interpretation of Flatt's comment).

They are building out their credit business (which I think will ultimately be huge even though fees will be lower) and might have an eye for opportunities there...  The venture capital business won't tie up capital/see acquisitions/ultimately won't be that meaningful but it will still be a big business...  Nothing relative to what they though have I dont think.

I also think in the past they've been rewarded for having a liquid balance sheet with cycles and like like many other investors they haven't reaped rewards because this cycle has only really gone one way...  (It didn't work for Buffett either) So no reward.  I give Flatt credit for being able to judge when liquidity is just inefficient and deploying the surplus into repurchases. 

At the same time I'd get warm if all of a sudden I saw massive blocks getting picked up/cancelled.  :)
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on September 30, 2018, 02:39:52 PM
Could we please go back to discussing BAM et. al. based on facts - not projections, speculations etc.?
Title: Re: BAM - Brookfield Asset Management
Post by: vince on September 30, 2018, 04:24:32 PM
I don't think my opinion is worth much but if you recall from Flatt's prior transcripts he's talked about share repurchases as a capital allocation decision relative to building out new platforms/transformative acquisitions.  You can argue those haven't happened/opportunities haven't been/there is no opportunity cost but I think for the asset management franchise it's far more accretive to acquire something they can manage and earn fees on if the IRR is even remotely close to what they get on a share repurchase.  Getting something they can really build/subsequently kick out and charge fees on is vastly superior to the repurchase (That is my interpretation of Flatt's comment).

They are building out their credit business (which I think will ultimately be huge even though fees will be lower) and might have an eye for opportunities there...  The venture capital business won't tie up capital/see acquisitions/ultimately won't be that meaningful but it will still be a big business...  Nothing relative to what they though have I dont think.

I also think in the past they've been rewarded for having a liquid balance sheet with cycles and like like many other investors they haven't reaped rewards because this cycle has only really gone one way...  (It didn't work for Buffett either) So no reward.  I give Flatt credit for being able to judge when liquidity is just inefficient and deploying the surplus into repurchases. 

At the same time I'd get warm if all of a sudden I saw massive blocks getting picked up/cancelled.  :)

I agree with everything you say except for the irr comparison with new investments.  If they are projecting a 24 percent return to Bam shareholders, there isnt much they could do to reach those types of returns.  Remember, an investor in the stock doesnt have to borrow to buy shares so thats a cash on cash return (at least thats how i see it).  If Bam even gets close to those numbers on their capital, there will be lots of borrowed money involved to juice their returns.  I realize they get a nice royalty that you may want to include in their asset returns.  I'm not saying they have to bleed their balance sheet and get very aggressive.... but to pound the table about how cheap their stock is, to consistently and clearly demonstrate their case, slide after slide while in the same presentation remark how strongly they feel about "buybacks for value" and then barely keep the share count constant just doesnt make sense to my ears and then brain.  There is an obvious contradiction there that to my knowledge has never been addressed properly or truthfully.  And if a 25 percent discount (with future growth that increases present value over and above) isnt enough then i dont believe they will ever do it properly because the only chances that they will get are likely to be at times where everything else is cheap. 
Title: Re: BAM - Brookfield Asset Management
Post by: bigbluffzinc on September 30, 2018, 04:34:38 PM
I agree that at 20%+ returns they get tough to explain away.  To date the liquidity would have absolutely been better utilized repurchasing shares
Title: Re: BAM - Brookfield Asset Management
Post by: bigbluffzinc on September 30, 2018, 04:42:34 PM
On speculation & projection...

Don't we attribute the growth in FRE to the franchise?  The growth in FRE to date has been a derivative (at least in part) of their ability to spinoff vehicles like BBU in 2016 or BEP in 2011 from their own balance sheet into unique vehicles and subsequently charge public investors for access to it.

Do you ignore these types of events taking place subsequently when you model the company?  I think it's reasonable to consider growth in adjacent businesses and is the way I ascribe value to the brand.  I think an investment hinges on believing the brand has value. Flatt has spoken directly and emphatically about the credit business and how large it would be.   I think it makes sense considering the sectors BAM is in..

The viability of their entry into credit is important both to handicapping management (if it's hopeless why are they wasting resources) and to a valuation.  I view credit as a 1-foot hurdle to be honest.

Private credit will be a 1T$ market by 2020 and I think BAM can have an edge in the segments they operate in.  Blackstone has 123B in AUM in private credit & I don't see anything preventing BAM from reaching a comparable height.  It's the same thesis for private credit that you apply to the other businesses BAM operate in.  They have operating expertise so they know the assets better, they know the cycles/currencies better, and government credit around the world wont present acceptable investments for most institutions looking forward. 

I think it's part and parcel to investing in a brand to consider where the brand can go...
Title: Re: BAM - Brookfield Asset Management
Post by: Packer16 on September 30, 2018, 04:57:27 PM
I am not sure buy-backs would help as much as spinning off funds.  With buy-backs you are buying back an entity composed of 50 to 75% of a closed-end fund with a discount that is not unjustified & 25 to 50% of an asset management company.  If you spin off the funds you remove the discount first then buyback shares if the residual is undervalued.

Packer
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on September 30, 2018, 05:46:46 PM
Bruce has said they are building the credit business to take advantage of the next cycle.

Packer, are the consistent dividends from the LPs along with the semi-predictable fees from the AUM what makes management believe they have a very predictable outcome 5-10 years from now?

With regards to always presenting that the company is undervalued; I like that they present how they value the company, do it the same way each year,  and reflected on what they projected in 2013 and how they have performed in comparison. BAM has a very unique structure that was quite difficult to understand up until recently. Their consistent valuation method has made it understandable. Growing the business with asset purchases, their way of organic growth, is much better then simply buying back shares. If cash piles up though, buy em up.
Title: Re: BAM - Brookfield Asset Management
Post by: Packer16 on September 30, 2018, 06:20:22 PM
IMO it does not matter what management thinks in regards to the hold co discount.  The spin-off will remove the discount from holding the funds & we can see if the market will truly misprice the asset manager.  I am taken the discount as a given versus trying find ways to reduce it because I have never seen one reduced for an extended period of time.  Why try to fight the market when with a spin-off you do not have to.

Packer
Title: Re: BAM - Brookfield Asset Management
Post by: bizaro86 on October 01, 2018, 06:33:38 AM
The big stakes in the subs give them the ability to take huge leverage at the hold co based on the value of those stakes. Provides them extra optionality if the markets freeze up again.

And they always have the option to do a spin, so any time they decide to capture that value they could. There is a time value argument against waiting, because capturing the money later isn't as good as capturing it now.

I think it would probably be value maximizing to spin off the subs, at least partially. But I understand why they don't...
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on October 01, 2018, 06:49:34 AM
Doesn’t having a stake in the subs or event them from losing control over them? I think at least theoretically, it is a possibility to lose control, if an activist came in.
Title: Re: BAM - Brookfield Asset Management
Post by: Packer16 on October 01, 2018, 07:45:34 AM
Why would you want BAM to lever up at the hold co when you can do it much cheaper vis someone like IB?  IMO the increased leverage at the hold co just adds more risk for everyone while the leverage by individuals holding fund stakes allows investors to leverage to taste.

As to loosing control, the funds that are traded are LPs so I do not think BAM can loose control unless the spin-off the GP which would not make sense due to potential loss of control.

Packer
Title: Re: BAM - Brookfield Asset Management
Post by: merkhet on October 01, 2018, 08:21:36 AM
Maybe I'm missing something, but if the idea is that a spin of the subs will close/eliminate the discount, wouldn't you want them to repurchase a bunch of shares before they spin out the subs?
Title: Re: BAM - Brookfield Asset Management
Post by: Shane on October 01, 2018, 09:00:02 AM
Maybe I'm missing something, but if the idea is that a spin of the subs will close/eliminate the discount, wouldn't you want them to repurchase a bunch of shares before they spin out the subs?

I'm confused as well...
Title: Re: BAM - Brookfield Asset Management
Post by: Spos on October 01, 2018, 09:26:15 AM
Maybe I'm missing something, but if the idea is that a spin of the subs will close/eliminate the discount, wouldn't you want them to repurchase a bunch of shares before they spin out the subs?

I think this also depends on management's (and important shareholders') horizon.  And I don't really know these guys, but they seem to have the vast majority of their personal wealth in BAM and they are definitely long-term investors.  This again reminds of Loews.  Loews shares have traded at a discount for years and for for years, Loews just continually buys back shares.  The way I see that strategy is that if you know that you will be holding the shares for a very long time (and you already have control), does it not make sense that the shares perpetually trade at a discount so that you can keep buying them at that discount?
Title: Re: BAM - Brookfield Asset Management
Post by: Packer16 on October 01, 2018, 11:34:23 AM
My assumption is management's choices are buyback or spin-off.  Spin-off IMO adds more value.  If you buyback before the spin-off that would be the best but I have not heard it to be management's intention to do any full spins.  IMO that is the first step.

Packer
Title: Re: BAM - Brookfield Asset Management
Post by: Shane on October 01, 2018, 11:52:13 AM
My assumption is management's choices are buyback or spin-off.  Spin-off IMO adds more value.  If you buyback before the spin-off that would be the best but I have not heard it to be management's intention to do any full spins.  IMO that is the first step.

Packer

To me the smartest move for a long-term holder would be to take advantage of the discount with buybacks until you are ready to liquidate your position (a spin-off is an option to have in your back pocket).  This way you have created a more or less guaranteed intelligent option to use excess cash when good 'organic' investments are not available.  It makes no sense for long-term holders to spin-off subs today IMO.
Title: Re: BAM - Brookfield Asset Management
Post by: Packer16 on October 01, 2018, 12:03:13 PM
The only problem is you as a shareholder have no option to spin-off the stakes & are stuck with the discount until management does the spin-off.  If the management never spins off the stakes you are stuck with a permanent discount, which is where we are today.

Packer
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on October 01, 2018, 12:03:47 PM
As mentioned by gokou in post #643 (http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/bam-brookfield-asset-management/msg346067/#msg346067), BAM is actually active buying BPY at the moment. BPY can't do it itself for now, because BPY's acquisition capacity is somehow a bit exhausted right now, because of the GGP deal earlier this year.



Title: Re: BAM - Brookfield Asset Management
Post by: Packer16 on October 01, 2018, 12:25:27 PM
The issue here is the hold co discount & the buying of shares at the market price (BPY) actually destroys value because the market will only value these share at 70 cents for every dollar invested due to the hold co discount. 

Now if BAM spun off the LP holdings & was selectively buying BPY that would be a different story as the proportion of the BPY holding to the AM would be smaller.

Packer
Title: Re: BAM - Brookfield Asset Management
Post by: vince on October 01, 2018, 12:59:22 PM
Maybe I'm missing something, but if the idea is that a spin of the subs will close/eliminate the discount, wouldn't you want them to repurchase a bunch of shares before they spin out the subs?

Bingo
Title: Re: BAM - Brookfield Asset Management
Post by: vince on October 01, 2018, 01:02:13 PM
Maybe I'm missing something, but if the idea is that a spin of the subs will close/eliminate the discount, wouldn't you want them to repurchase a bunch of shares before they spin out the subs?

I think this also depends on management's (and important shareholders') horizon.  And I don't really know these guys, but they seem to have the vast majority of their personal wealth in BAM and they are definitely long-term investors.  This again reminds of Loews.  Loews shares have traded at a discount for years and for for years, Loews just continually buys back shares.  The way I see that strategy is that if you know that you will be holding the shares for a very long time (and you already have control), does it not make sense that the shares perpetually trade at a discount so that you can keep buying them at that discount?

If they have been at a discount for many many years then almost by definition they are not trading at a true discount
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on October 01, 2018, 01:41:22 PM
Packer,

I've had a hard time to understand your stance on this, because I'm thinking really long term about BAM and BAM subs. I think the way to look at this in reality boils down to the investors time horizon for this investment, doesen't it?

Somehow to me, it boils down to get the discount released - fairly short term - or - as an alternative - to have the advantage to reinvest dividends and do buybacks at a [still] existing discount going forward long term. [We can't get both at the same time.]

Mr. Kingston is actually mute about this whole situation in the BPY 2018Q2 Unit Holder Letter (https://bpy.brookfield.com/~/media/Files/B/Brookfield-BPY-IR/letters-to-unitholders/2018/bpy-q218-ltu.pdf), which to me appear a bit odd. [to me, this letter a bit too short, actually.]

Mr. Flatt, on the other hand, goes at it at great length in the BAM 2018Q2 Shareholder Letter (https://bam.brookfield.com/~/media/Files/B/BrookField-BAM-IR/letters-to-unitholders/2018/bam-q2-2018-ltr-to-shareholders.pdf).

From p.5 - the GGP paragraph:

Quote
Last month, we received shareholder approval to combine the balance of GGP Inc. into Brookfield Property Partners (“BPY”). At closing, later in August, we will complete the last major initiative post the launch of BPY. These initiatives included the privatization of five listed companies, and with all of these now complete, we believe that we are in a strong position to focus our efforts on value enhancements in the business, and on the trading price of BPY. Given the scale of our business, our vast access to institutional capital, and BPY’s now large equity base, BPY has no need to issue additional equity for the foreseeable future. Furthermore, if we continue to trade at discounts to tangible value, we will use our resources to repurchase shares, adding further to its intrinsic value....

... We think that this transaction, 10 years from now, will prove to have been transformational to our real estate business. We are acquiring 125 incredible parcels of land in major cities in the U.S. Along with this land, which will be developed into many tens of thousands of multifamily apartments and condominiums, hotels, industrial warehouses, office properties, self-storage and other uses, we are acquiring a 123 million square foot, 94% leased retail business which generates EBITDA of $2.2 billion. Our plan is to redevelop this land into these other real estate uses, concentrate the retail business on the highest quality centers, and integrate our retail offering with an online presence. All the while, the core retail business should generate substantial free cash flow for investment into these other real estate businesses.

So to me, it appears quite clear, that BAM has no intentions of any short term actions to eliminate the discount, but want to take advantage of it for the long term via buybacks.

The cash flow from the BPY retail real estate business will be recycled into development of the BPY retail real estate. Perhaps BPY will master to do some buybacks on itself going forward. BAM will do the rest, based on what's possible, ref. the word "we" above, as long as this buyback opportunity exists.
Title: Re: BAM - Brookfield Asset Management
Post by: vince on October 01, 2018, 01:50:19 PM
After many years of reading Buffett and thinking about the way he does things I have come to a few conclusions, one of which I want to mention now because it is related to the discussion on stubborn discounts.  Wells Fargo very often trades at a discount to the market multiple (and Im excluding the recent fiasco) even though it has shown to be superior to the average business over many decades ( I realize they have more assets for every dollar of equity than most businesses but bare with me ).  Many analysts and investors talk about a 15 multiple being at the very high end of what a bank should trade at therefore some very well managed banks have traded at 10-12 times earnings, even when business is good and asset prices high.  Indeed, this characteristic is what has allowed Buffett to accumulate a huge position over time.....investors are hesitant to buy stocks that have limited multiple upside.  So lets do some simple math.  The following numbers are very rough as I havent looked at them in a couple years.  Wells earns roughly 20 billion( assume we can buy them for 240 billion) and dividends out 7.5 billion, buys back 5.5 billion of stock and then puts 7 billion back into the business where it earns 15-20 percent on that new equity.  So assuming a constant multiple (a low 12 times multiple forever) investors will receive a respectable 11-12 percent return here (div+buyback+6 percent growth in earnings).  I know I oversimplified here and I'm sure some things will be pointed out to me but point is you can still do extremely well with a flat multiple.  And Buffett has said soooooo many times, "we buy pieces of businesses, we dont know what the stock will do and we dont care.  We are looking at what the asset can potentially produce and the resulting yield".  And we all know that there is a very good chance to get some changes in multiples over time and consider that icing on the cake
Title: Re: BAM - Brookfield Asset Management
Post by: Packer16 on October 01, 2018, 02:06:50 PM
It has little to do with long-term or short-term but how the market values these types of holding companies of other companies.  The market puts a discount on them.  When you buy you buy at a discount but when you sell you also sell at discount & you as a minority shareholder have no influence on this.  If BAM buys BPY at full price & the market puts a discount on the shares of BPY held by BAM is that value enhancing?  It is only enhancing if somehow the hold co discount is reduced.  Initially it is value destroying & will only be enhanced if the discount is reduced to zero of it BPY's price appreciates to make up for the discount. 

How can this discount be reduced?  Two ways.  Spin-off the subs or the subs become a smaller percentage of BAMs value over time.  This situation is akin to Loews mentioned above a continuous discount until liquidation.  The key difference here is if Loews sells a majority stake they can lose control but if BAM spins off its LP units it does not loose control.  So what is advantage of BAM to hold these LP units?  Not very much IMO.  If the AM required cash flows for some reason I could see the benefit but the AM does not need cash flow so IMO the benefit is deminimus.   

Packer 
Title: Re: BAM - Brookfield Asset Management
Post by: Spos on October 01, 2018, 03:54:38 PM
Maybe I'm missing something, but if the idea is that a spin of the subs will close/eliminate the discount, wouldn't you want them to repurchase a bunch of shares before they spin out the subs?

I think this also depends on management's (and important shareholders') horizon.  And I don't really know these guys, but they seem to have the vast majority of their personal wealth in BAM and they are definitely long-term investors.  This again reminds of Loews.  Loews shares have traded at a discount for years and for for years, Loews just continually buys back shares.  The way I see that strategy is that if you know that you will be holding the shares for a very long time (and you already have control), does it not make sense that the shares perpetually trade at a discount so that you can keep buying them at that discount?

If they have been at a discount for many many years then almost by definition they are not trading at a true discount

In a sense yes.  But if you that discount is strictly do to a holdco structure that you could get rid of at any time, as a controlling shareholder you do not necessarily mind.  As a minority shareholder, what is annoying about this is that the company looks like they are not trying to maximize shareholder value by trying to close the discount (at least in the short term).
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on October 01, 2018, 08:05:57 PM
I thought I followed the recent conversation, but got lost somehow.

Spin off subs mean ... spinning off BIP, BPY, etc.?
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on October 02, 2018, 06:25:58 AM
There is also a good article on SA about valuation of BAM by SA author Eric Sprague from February 28th 2018. Here (https://outline.com/wJJe8P) is a link to the outlined article. If I remember correctly, Joel has mentioned it on here before, around the time of the release, however I can't right now find Joel's post about it back then.

New SA article by Eric Sprague on SA about BAM & subs: Seeking Alpha - Eric Sprague [October 2nd 2018]:"The Outstanding Track Record At Brookfield Should Continue" (https://seekingalpha.com/article/4209339-outstanding-track-record-brookfield-continue).
Title: Re: BAM - Brookfield Asset Management
Post by: StevieV on October 02, 2018, 07:18:03 AM
I thought I followed the recent conversation, but got lost somehow.

Spin off subs mean ... spinning off BIP, BPY, etc.?

villainx,

BIP, BPY, etc. are already separately listed.  BAM is the GP and also owns units of the various subs (BIP, BPY, etc.).  Packer notes that BAM doesn't get as much credit for the units as the units get standing alone.  That is, if BIP has a share price of $10/share, when BAM owns it, BAM only gets 70% of the valuation, or the equivalent of a $7/share.

As I understand Packer, he would like to see BAM distribute units of the subs to the BAM shareholders.  So, BAM would give each BAM shareholder some BIP and BPY shares.  Theoretically, the value of your BAM shares would only go down the 70%/$7 number, but you would get the full 100%/$10 share for the units standing alone.

I'm not 100% sure I understood your question correctly, so I am sorry if that doesn't answer it.

StevieV
Title: Re: BAM - Brookfield Asset Management
Post by: villainx on October 02, 2018, 10:34:17 AM
Thanks.  I thought s/he was referring to CEF, or other funds within BAM originally, but as the thread continued, I was less certain.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on October 02, 2018, 10:58:05 AM
Packer [Keith] is a "he" (https://bonhoeffercapital.com/partner-info/). [ : - ) ]
Title: Re: BAM - Brookfield Asset Management
Post by: Spos on October 02, 2018, 12:18:47 PM
It has little to do with long-term or short-term but how the market values these types of holding companies of other companies.  The market puts a discount on them.  When you buy you buy at a discount but when you sell you also sell at discount & you as a minority shareholder have no influence on this.  If BAM buys BPY at full price & the market puts a discount on the shares of BPY held by BAM is that value enhancing?  It is only enhancing if somehow the hold co discount is reduced.  Initially it is value destroying & will only be enhanced if the discount is reduced to zero of it BPY's price appreciates to make up for the discount. 

How can this discount be reduced?  Two ways.  Spin-off the subs or the subs become a smaller percentage of BAMs value over time.  This situation is akin to Loews mentioned above a continuous discount until liquidation.  The key difference here is if Loews sells a majority stake they can lose control but if BAM spins off its LP units it does not loose control.  So what is advantage of BAM to hold these LP units?  Not very much IMO.  If the AM required cash flows for some reason I could see the benefit but the AM does not need cash flow so IMO the benefit is deminimus.   

Packer 

I think you evaluate the BPY on its return potential, as a capital allocation decision like any other.  If they are buying an undervalued security, then great.  I don't think the effect of these purchases on the BAM share price is important.  If the market reaction is negative and you have money leftover for buybacks, that could be a good thing.

I do agree that these situations are frustrating to minority shareholders and that they deserve a discount, but I think you have to look at it from management's point of view, the people who really count.  This represents all their net worth, running this is what they will be doing for a long time and even if they want to maximize their returns, they don't really have an incentive to close any holdco discounts.  They will always have the spinoff as an option to close the discount.  In the meantime they can repurchase shares at a discount.  IMO, this can almost become like an American call option of non-dividend paying stocks from their point of view, where you have no incentive to exercise early and as such the investment horizon automatically becomes very long, longer than even committed value investors. 

I think in the end, this Holdco model becomes more prevalent than the John Malone model as the controlling shareholders/management just don't need that one-time bump in valuation.


Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on October 02, 2018, 12:23:51 PM
Doesn't management own most of their stuck with Partners Value, sothey really hold it with another hold co?
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on October 02, 2018, 12:49:06 PM
chrispy,

What is your own answer [, based on doing some work.]?
Title: Re: BAM - Brookfield Asset Management
Post by: gokou3 on October 02, 2018, 01:01:11 PM
Doesn't management own most of their stuck with Partners Value, sothey really hold it with another hold co?

Going from memory, management owns 90% of PVF.UN (Partners Value LP), which in turns own 20% of BAM directly or through other funds.  Last time I checked, PVF.UN itself has a holdco discount of ~30% based on the market value of its holdings.  So if you consider BAM has a holdco discount, then PVF is doubly discounted.
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on October 02, 2018, 02:23:18 PM
Goku described exactly what I was hinting, if Partners is any indicator, management is not concerned about a holdco discount today.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on October 02, 2018, 03:20:23 PM
Again, chrispy,

Where are the facts as basis for your last post?
Title: Re: BAM - Brookfield Asset Management
Post by: bizaro86 on October 02, 2018, 08:12:07 PM
John - While I know you prefer to impose your own order on this board, I'm not really seeing the issue with his post?

Are you questioning whether BAM management owns the majority of their stake through a holdco, which appeared to me to be his only claim? I would say that has been well discussed here. If you believe that it needs a citation, I can provide it for you on his behalf.

The management information circular has the details of each director's holdings: https://www.investorx.ca/Doc/VV86DUDU6FB/2018/05/15/brookfield-asset-management-inc/management-information-circular-english

They separate their direct stakes from stakes held through Partners Value (the holdco he mentioned)

Bruce Flatt, for example, owns 8.4 MM shares directly/indirectly, while he effectively owns 31.6 MM shares held through Partners. So his stake is much larger through the holdco.

Back to the topic that caused the comment - they could collapse the holdco discount at partners instantly if they wanted by distributing the shares to the owners on a pro-rata basis (that would be convenient/profitable for me!) but they don't. Given they don't at Partners where it would benefit them all directly and significantly, I doubt they'll do so at BAM any time soon. 
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on October 03, 2018, 03:18:06 AM
Well, for a spin-off/break-up scenario to actually happen, it requires Mr. Flatt & his team to change their mind, ref. what I have already quoted Mr. Flatt for. I personally consider that as unlikely as a break-up of Berkshire. It's about the most important asset inside the Brookfield sphere, that you don't find in the consolidated BAM balance sheet, while it actually saturates everything in the sphere: Client relations. I personally think it's important for the clients to know that they are in the same boat as their asset manager. One starts tinkering with that if you break up the whole structure, I think.
Title: Re: BAM - Brookfield Asset Management
Post by: cubsfan on October 03, 2018, 04:49:40 AM
Well, for a spin-off/break-up scenario to actually happen, it requires Mr. Flatt & his team to change their mind, ref. what I have already quoted Mr. Flatt for. I personally consider that as unlikely as a break-up of Berkshire. It's about the most important asset inside the Brookfield sphere, that you don't find in the consolidated BAM balance sheet, while it actually saturates everything in the sphere: Client relations. I personally think it's important for the clients to know that they are in the same boat as their asset manager. One starts tinkering with that if you break up the whole structure, I think.

I think this is correct - you can see Flatt has great respect for Berkshire and Buffett, one of the few firms Buffett has done JV's with.
BAM's alignment with shareholders and clients alike is under appreciated - they will do what is right for both.
Title: Re: BAM - Brookfield Asset Management
Post by: Jerry Capital on October 03, 2018, 05:15:46 AM
This thread completely misses the point.

BAM uses the LP subs as permenant capital resulting in perpetual fee streams. They did the same thing with TERP. This should eventually translate into a higher multiple on the fee stream than traditional buy/fix/sell private equity multiples.

They would never buy back or spin their LP units in their entirety. They may reduce ownership. The key to the structure is the alignment of the asset management business with the LPs and the private capital (i.e. BAM investing alongside private capital and LP capital).

As for the discount to NAV. It is nice to have but is only a small part of a thesis of long-term compounding of "long-life/real assets" and a high margin asset management business with more operating leverage left in the model.

As for BPY they are buying those units because they think they are undervalued, not for financial engineering reasons or as a hope to reduce the discount to NAV.

Thinking about "closing the discount" is extremely short-term thinking.
Title: Re: BAM - Brookfield Asset Management
Post by: Packer16 on October 03, 2018, 06:05:20 AM
I disagree that reducing the discount is about short term thinking.  This discount is going to be around as long as the structure is the way it is & is dead weight loss for everyone involved.  Now if the discount was 5 to 10% I would agree this is not a factor but the magnitude of the discount is an important factor.  Especially when part of your strategy is to buy LP units at 100 & the market will only value them at 70 when you hold them. 

BAM can do the spins of the LPs & selectively purchase LPs when they think they think they are cheap & spin them off at some time in the future.  Management can also maintain their ownership of the LP interests they now have in direct interests which will have a higher value.  The reason why these structures make sense for others is to maintain control but Brookfield has control via the GPs.  What is point of holding the LPs in BAM if they can retain control of the LP assets via the GP (and thus access to permanent capital) & retain management ownership/incentive of some of the funds directly?  I just do not see the benefits as all the benefits folks have been discussing can be retained via an LP spin-off with a reduced discount.  There would have to be some explanation but I think clients & investors would understand the economics have not changed but the structure has to increase everyone's value.

Maybe I am missing something about how the GP/LP structure works.  Can the LPs remove Brookfield as the GP if a certain number of LP units vote to remove them?  I do not think so.

Packer   
Title: Re: BAM - Brookfield Asset Management
Post by: KJP on October 03, 2018, 06:17:01 AM
I disagree that reducing the discount is about short term thinking.  This discount is going to be around as long as the structure is the way it is & is dead weight loss for everyone involved.  Now if the discount was 5 to 10% I would agree this is not a factor but the magnitude of the discount is an important factor.  Especially when part of your strategy is to buy LP units at 100 & the market will only value them at 70 when you hold them. 

BAM can do the spins of the LPs & selectively purchase LPs when they think they think they are cheap & spin them off at some time in the future.  Management can also maintain their ownership of the LP interests they now have in direct interests which will have a higher value.  The reason why these structures make sense for others is to maintain control but Brookfield has control via the GPs.  What is point of holding the LPs in BAM if they can retain control of the LP assets via the GP (and thus access to permanent capital) & retain management ownership/incentive of some of the funds directly?  I just do not see the benefits as all the benefits folks have been discussing can be retained via an LP spin-off with a reduced discount.  There would have to be some explanation but I think clients & investors would understand the economics have not changed but the structure has to increase everyone's value.

Maybe I am missing something about how the GP/LP structure works.  Can the LPs remove Brookfield as the GP if a certain number of LP units vote to remove them?  I do not think so.

Packer   

I don't think your post addresses the argument some people are making that ownership of LP units (appears to) align BAM with LP unitholders, making the LP itself a more attractive investment for third party investors. 
Title: Re: BAM - Brookfield Asset Management
Post by: Packer16 on October 03, 2018, 06:37:11 AM
What you really want aligned with the LPs is BAM management, the other BAM shareholders are along for the ride.  This can be done with them holding direct interests in the LPs which would be spun-off to them in the LP spin-off from BAM.  Going forward management would have to add to their LP holdings in current proportions held by BAM versus just holding BAM but I think this would be a calculation & would have a much smaller economic effect than a 30% discount on the value of the LPs held by BAM.  As a shareholder you could tailor you mix of LPs to your taste. 

Packer
Title: Re: BAM - Brookfield Asset Management
Post by: vince on October 03, 2018, 07:57:05 AM
Bizaro, can u tell us what the partners value discount is and a quick way to determine it ?
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on October 03, 2018, 08:01:05 AM
Quote
Maybe I am missing something about how the GP/LP structure works.  Can the LPs remove Brookfield as the GP if a certain number of LP units vote to remove them?  I do not think so.

I believe it is possible and has occurred, but is a rare occurrence. I believe it can occur when the fiduciary duty if the GP is breached and may depend on the partnership agreement. In any case, the hurdle is very high for the LP’s to remove the GP.
Title: Re: BAM - Brookfield Asset Management
Post by: Jerry Capital on October 03, 2018, 08:17:13 AM
What you really want aligned with the LPs is BAM management, the other BAM shareholders are along for the ride.  This can be done with them holding direct interests in the LPs which would be spun-off to them in the LP spin-off from BAM.  Going forward management would have to add to their LP holdings in current proportions held by BAM versus just holding BAM but I think this would be a calculation & would have a much smaller economic effect than a 30% discount on the value of the LPs held by BAM.  As a shareholder you could tailor you mix of LPs to your taste. 

Packer

You are overcomplicating this and are missing the key reasons they have structured the business in the way they have .

Your goal is to completely change the corporate structure of a $50 billion dollar company to reduce a discount to NAV. Bruce Flatts goal is to compound his personal capital at high rates for another 30 years or so.
Title: Re: BAM - Brookfield Asset Management
Post by: StevieV on October 03, 2018, 08:35:06 AM
I don't think BAM is going to change their structure.  So, I don't think you invest with the idea that they will.

That being the case, I don't see how Packer is wrong or mis-guided.  If BAM has $1 million cash, and buys $1 million in BPY, that stake is generally discounted to $700K by virtue of being held in the BAM structure.

BAM management may argue that the discount is unjustified.  That BPY LP units are undervalued.  And, given that, purchasing the BPY shares is the best use of capital.  Apparently that is what they do think (at least that buying BPY shares is their best use of capital).

Anyway, as I mentioned initially, BAM isn't going to change their structure of operation.  Accordingly, best to decide whether they are worth investing in under the current structure and plans.
Title: Re: BAM - Brookfield Asset Management
Post by: Jerry Capital on October 03, 2018, 08:41:46 AM

That being the case, I don't see how Packer is wrong or mis-guided.  If BAM has $1 million cash, and buys $1 million in BPY, that stake is generally discounted to $700K by virtue of being held in the BAM structure.


Let's take a step back. If BAM believes BPY IV is higher than the current MP they are creating value by purchasing shares, over the long-term that benefit acures to BAM shareholders and BAM management. Using your argument above they should just return all cash to shareholders liquidate all their investments in everything and close the discount. That is the definition of short-term thinking.
Title: Re: BAM - Brookfield Asset Management
Post by: StevieV on October 03, 2018, 08:54:17 AM

That being the case, I don't see how Packer is wrong or mis-guided.  If BAM has $1 million cash, and buys $1 million in BPY, that stake is generally discounted to $700K by virtue of being held in the BAM structure.


Let's take a step back. If BAM believes BPY IV is higher than the current MP they are creating value by purchasing shares, over the long-term that benefit acures to BAM shareholders and BAM management. Using your argument above they should just return all cash to shareholders liquidate all their investments in everything and close the discount. That is the definition of short-term thinking.

Two things:

(1) I don't have a problem with BAM buying shares of BPY, or with keeping them in the current structure.  BAM gets the distribution from the BPY units they own.  If BPY is a value, they will keep and grow the distribution at a nice rate and BAM will benefit from that.  Additionally, they could distribute the shares or otherwise try to close the discount at any time in the future.

(2) Even with (1), I don't think it is wrong for Packer to question why you would buy something that the market will give you an immediate 70% discount for, and why you wouldn't consider different structure.  Obviously, Packer can speak for himself.  I just disagree that he is off the mark.  I think his question is fair.  Regardless, I don't expect the structure to change.  So, the answer is, maybe there could be a better structure, but the structure isn't going to change anytime soon (my opinion).
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on October 03, 2018, 09:38:17 AM
Selling LP Units often incurs high taxes. The reason fir this is that distributions often are mostly return of capital and hence lower the tax basis. This makes it often uneconomical to sell LP units, after holding them für a while.
Also as mentioned before, LP like the GP being invested along them. This makes GP- LP conflicts less likely and also underpins confidence for capital raises.
Title: Re: BAM - Brookfield Asset Management
Post by: Sportgamma on October 03, 2018, 09:47:32 AM
Great discussion everyone.

I would add this:

BAM Discount
The assumption that BAM is trading at a 25% discount, implies that one would be willing to pay a 20x multiple for the Management Fees and 10x multiple for the "Target" Carried Interest from the asset management business. Given the quality of the revenue stream and the growth projections for AUM, those multiples might eventually produce a high internal rates of return over a period of 5-10 years. Nonetheless, the fact is you are paying for growth (not that there is anything bad about that, per se)

On the other hand, let's assume that you are only willing to pay a 10x multiple of the management fees and 5x multiple for the carried interest. You also might want to add a small "leakage" discount to the invested capital (tax and operating costs), lets say 3%. This would bring the $56B sum of parts value down to about $42.5B or basically the market value at the time of the investor presentation.

Capital Allocation
If we assume that the BAM discount is real, then the reinvestment decision of BAM management should focus on if the discount provides more value than the value creation of investing into a new partnership that create new streams of AM fees. It makes sense, that it could still be more lucrative to invest in funds than buying back BAM shares at a discount.

Title: Re: BAM - Brookfield Asset Management
Post by: Packer16 on October 03, 2018, 09:49:15 AM
Your logic assumes the discount for the BPY shares that are being purchased is going to decline which I disagree with & there is plenty of evidence to the contrary (over time holding company discounts rarely close).  What they are doing is turning 100 bills into 70 dollar bills and saying price & growth will make up for the discount.  Now if they think BPY is undervalued by 30% then by holding them in BAM, they will break even.  I never said anything about liquidation just discounts that are in the market & ways to remove them with little or no impact on management or incentives.  The label of short-term thinking (how that differs from long-term or just good thinking is beyond me) is beside the point that doing a spin-off would benefit all parties involved.  Who are losers in a spin-off scenario?

As to selling LP units, that is not what I am proposing.  You get the LP units & you can decide what to do with them.  I am sure institutional investors care little if the BAM managers hold the LPs directly or via BAM.  They may actually like the direct holdings better.

I agree this is not the way the structure is now but it would be interesting to see if there is a reason why economically it would not make sense.

Packer
Title: Re: BAM - Brookfield Asset Management
Post by: StevieV on October 03, 2018, 12:44:49 PM
Your logic assumes the discount for the BPY shares that are being purchased is going to decline which I disagree with & there is plenty of evidence to the contrary (over time holding company discounts rarely close).  What they are doing is turning 100 bills into 70 dollar bills and saying price & growth will make up for the discount.  Now if they think BPY is undervalued by 30% then by holding them in BAM, they will break even.  I never said anything about liquidation just discounts that are in the market & ways to remove them with little or no impact on management or incentives.  The label of short-term thinking (how that differs from long-term or just good thinking is beyond me) is beside the point that doing a spin-off would benefit all parties involved.  Who are losers in a spin-off scenario?

As to selling LP units, that is not what I am proposing.  You get the LP units & you can decide what to do with them.  I am sure institutional investors care little if the BAM managers hold the LPs directly or via BAM.  They may actually like the direct holdings better.

I agree this is not the way the structure is now but it would be interesting to see if there is a reason why economically it would not make sense.

Packer

Not sure if this is replying to me, or someone else.  But, I'll respond to the various points.:

(1)  Your logic assumes the discount for the BPY shares that are being purchased is going to decline which I disagree with & there is plenty of evidence to the contrary (over time holding company discounts rarely close)."  I don't assume that the discount will decline or disappear.  I do think that BAM could buy now, and spin them off later.

(2) "What they are doing is turning 100 bills into 70 dollar bills and saying price & growth will make up for the discount. Now if they think BPY is undervalued by 30% then by holding them in BAM, they will break even."  Agreed re 100/70.  That's why I originally posted.

However, I'll give one caveat.  The distribution at BPY (or any other sub) makes the situation is a little different than buying something without a significant distribution.  It is not all about the market agreeing.  BAM gets an income stream from the LP distributions, which it can then allocate in hopefully some useful way.  If the income stream is valuable enough, the money received from that income stream is deployed sensibly, and the market gives credit for that, then I'm not sure it is as necessary for it to re-rate.

To give an extreme example, let's say the market gave BAM a 50% discount for holding BPY.  BPY yielded 20% and grew the distribution at 20%/annum.  It would never be necessary for the market to ever re-rate BPY or the 50% discount BAM got for holding BPY.  The income stream alone would be worth the purchase.

(3) "The label of short-term thinking (how that differs from long-term or just good thinking is beyond me) is beside the point that doing a spin-off would benefit all parties involved."  Presumably this one is not directed at me.

(4) "Who are losers in a spin-off scenario?"  BAM generates a lot of cash beyond what is necessary to run the business.  They can invest it in their funds, buyback shares, pay a dividend, make acquisitions or buy shares of the subs (though they could buy shares of anything).  Perhaps you are thinking differently, but I don't think they would spin BPY and then start purchasing units again.  So, a spin would foreclose the last option. Obviously, it's not an option you like, but one management apparently does.
Title: Re: BAM - Brookfield Asset Management
Post by: bizaro86 on October 03, 2018, 01:10:08 PM
Bizaro, can u tell us what the partners value discount is and a quick way to determine it ?

Partners Value publishes their NAV adjusted for the warrants in every quarterly result. As of June 30th, 2018 their NAV was $34.50 USD, or about $44-$45 CAD. BAM is up from $53.33 to $56.98 since then. Given each PVF.UN represents about 0.97 BAM shares on a quick and dirty basis they're up about $3.50 this quarter (they have other assets, but BAM is the biggest). That puts them around $47-$48, and they last traded at $40.99. That feels to me like a smaller than normal discount, I'd guess it has usually been around 20-25%? Not sure, my entry points have all been at least 20% discounts to NAV.

See: http://www.pvii.ca/_Global/80/img/content/File/Quarterly/2018/Q2-18-PVI-LP-PR.pdf
Title: Re: BAM - Brookfield Asset Management
Post by: Spos on October 03, 2018, 01:36:15 PM
"The label of short-term thinking (how that differs from long-term or just good thinking is beyond me) is beside the point that doing a spin-off would benefit all parties involved.  Who are losers in a spin-off scenario?"

The way I see it, you compare doing the spins today to doing the spins 10 years down the road.  Assuming BAM continues to generate excess cash and uses that to do buybacks, if you do the spins now, you will be doing your buybacks at 100% of intrinsic value (as your discount closes).  If you do the spins 10 years from now, you will be doing the buybacks at 70% of intrinsic value, so your intrinsic value following the spin -once you close the discount in year 10- should be higher.

I believe it was in one of the annual reports that Buffett was talking about IBM and he made the point that if you're a long term shareholder of an IBM, a company that does a lot of buybacks, you would want the share price to be low, not high.  IMO, this is the same concept.

I also think this logic will always apply from the point of view of BAM's management, so they don't have an incentive to ever really do a spin.

Nice discussion, thanks all.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on October 04, 2018, 03:22:08 PM
... BAM can do the spins of the LPs & selectively purchase LPs when they think they think they are cheap & spin them off at some time in the future.  Management can also maintain their ownership of the LP interests they now have in direct interests which will have a higher value. The reason why these structures make sense for others is to maintain control but Brookfield has control via the GPs.  What is point of holding the LPs in BAM if they can retain control of the LP assets via the GP (and thus access to permanent capital) & retain management ownership/incentive of some of the funds directly?  I just do not see the benefits as all the benefits folks have been discussing can be retained via an LP spin-off with a reduced discount. There would have to be some explanation but I think clients & investors would understand the economics have not changed but the structure has to increase everyone's value.

Maybe I am missing something about how the GP/LP structure works.  Can the LPs remove Brookfield as the GP if a certain number of LP units vote to remove them?  I do not think so.

Packer

Those are some positions and questions, that actually qualify - at least, to me , personally. Time to go BAM digging - again! [To me, it's [ still] about the understanding of the whole inner workings of the Brookfield sphere, going forward.]

Thank you for your post, Packer.
Title: Re: BAM - Brookfield Asset Management
Post by: bigbluffzinc on October 04, 2018, 11:52:16 PM
I think people have liked seeing Flatt speak and I don't think I've seen these in this chat...  If this is old news in here my mistake...

https://www.youtube.com/watch?v=TpFOPHUhRBg

https://www.youtube.com/watch?v=pW8lAgpIPjo
Title: Re: BAM - Brookfield Asset Management
Post by: shoeless on October 05, 2018, 04:44:43 AM
thanks for sharing
Title: Re: BAM - Brookfield Asset Management
Post by: Packer16 on October 05, 2018, 07:08:28 AM
One other benefit of the current structure is new funds can be started if capital is scarce but given BAMs size I wonder if that is an issue.  They only have one more vertical (credit) they can move into so maybe as a larger firm with funds with plenty of liquidity & the asset manager generating plenty of cash this structure may no longer be needed. 

Packer
Title: Re: BAM - Brookfield Asset Management
Post by: Sportgamma on October 05, 2018, 08:25:08 AM
Packer, I'm curious, do you think there is a level of float% that would close the discount. Let's say that BAM would spin off a number of BPY LP shares that would bring the float to 51%. Do you think that would be sufficient for the market to value BBY differently?
Title: Re: BAM - Brookfield Asset Management
Post by: Packer16 on October 05, 2018, 11:47:51 AM
IMO if the amount of shares spun-off to make the total value of LPs and % of the total value of BAM less than 10%, then you are talking about less than a 2 to 3% discount (20 to 30% discount on 10% total value) which would be de minmus for me.  I believe even the discussion of a plan to do this by management would reduce the discount.
 
Packer
Title: Re: BAM - Brookfield Asset Management Inc.
Post by: John Hjorth on October 05, 2018, 12:31:00 PM
From an accounting perspective, BAM buying BPY units as recently taking place, is accretive to book value per BAM share. Minority interests are being bought out below BPY book value per BPY unit by the use of BAM cash [not BAM stock], from the perspective of BAM consolidated financials.
Title: Re: BAM - Brookfield Asset Management Inc.
Post by: Spekulatius on October 05, 2018, 04:39:29 PM
From an accounting perspective, BAM buying BPY units as recently taking place, is accretive to book value per BAM share. Minority interests are being bought out below BPY book value per BPY unit by the use of BAM cash [not BAM stock], from the perspective of BAM consolidated financials.

Are you sure about this? Why would buying BPY be accretive to BAM’s book value, unless BOY goes up in value of course and is valued at market.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on October 05, 2018, 06:08:12 PM
Yes, I'm sure - dead sure, Spekulatius,

- - - o 0 o - - -

Again, this is from an accounting perspective, not an IV perspective. [Important to note!]

- - - o 0 o - - -

BPY is not consolidated by BAM based on market value into BAM consolidated financials, instead the consolidation based on book values - "line by line", from BPY's book balance sheet.

That also means that minority holders of BPY [from a BAM perspective] in the consolidated BAM balance sheet are booked at book value.

Today, BPY closed at USD 19.94, while BPY equity per unit at End2018Q2 (https://bpy.brookfield.com/~/media/Files/B/Brookfield-BPY-IR/quarterly-reports/2018/bpy-2q18-interim-report.pdf) was 31.23 [p. 13].

Now where would you post this gain, if you were a BAM group accountant? - There are only two feasible answers: P/L or comprehensive income.
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on October 05, 2018, 07:12:45 PM

Today, BPY closed at USD 19.94, while BPY equity per unit at End2018Q2 (https://bpy.brookfield.com/~/media/Files/B/Brookfield-BPY-IR/quarterly-reports/2018/bpy-2q18-interim-report.pdf) was 31.23 [p. 13].

Now where would you post this gain, if you were a BAM group accountant? - There are only two feasible answers: P/L or comprehensive income.

Ok, understood. BPY trades below book value. That makes sense.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on October 05, 2018, 08:23:08 PM
Ok, understood. BPY trades below book value. That makes sense.

Actually, I was just trying to be straight here, from an accounting perspective.

- Some days, I speculate if BAM is actually trading at a "bloat discount" [ : -) ]
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on October 06, 2018, 06:17:19 AM
I don’t want to go off tangent, but if you like infrastructure, you can buy some of these assets fairly cheaply currently, without the additional layer of financial engineering (not meant in a negative sense) that BAM adds in.
I own ENB (one of my largest positions ), NGG, PPL (the latter two are US/ British utilities) WMB and KMI in this space. except, WMB, they are all buys, IMO. The first 3 all yield above 6%. You get paid well to wait.
Title: Re: BAM - Brookfield Asset Management
Post by: ValueMaven on October 07, 2018, 06:36:01 AM
I really like getting my dividends from BAM (which I reinvest back into BAM).

“Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.”
–John D. Rockefeller
Title: Re: BAM - Brookfield Asset Management
Post by: OnTheShouldersOfGiants on October 09, 2018, 09:51:16 AM
Can someone explain the large disposition on the 27th?

https://www.canadianinsider.com/node/7?menu_tickersearch=bpy
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on October 09, 2018, 11:37:47 AM
There is a SC 13D/A (https://otp.tools.investis.com/clients/us/brookfield_property_partners_lp1/SEC1/sec-show.aspx?Type=html&FilingId=12973761&CIK=0001545772&Index=10000) of September 19th 21st 2018 filed by PBY at SEC that ties up nicely on daily basis with the reported figures already linked to here. Perhaps the next one will shed some light on this particular transaction.

- - - o 0 o - - -

Edit: Fixed date.
Title: Re: BAM - Brookfield Asset Management
Post by: ValueMaven on October 14, 2018, 05:01:59 AM
Anything below $41 - $42 currently is a steal here.  I bought more last week
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on October 14, 2018, 09:14:27 AM
Agree and I did as well.
Title: Re: BAM - Brookfield Asset Management
Post by: Uccmal on October 15, 2018, 05:23:22 AM
Agree and I did as well.

I would but my combined Bam, bip, bpy, and bep holdings make up 25% of my total portfolio.  Unless it gets real cheap I am fully loaded. 

So lets hope Bruce doesn't have any dangerous or illegal hobbies. :-). 
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on October 20, 2018, 09:55:17 AM
BBU is valued at 5.2B and should be approaching 1B in EBITDA over the next year or so. Their income stream has become much more diversified, businesses are profitable and big players in their respective industries, they have continuous deal flow, and BBU participates in many deals that are significantly greater than a company their size can usually participate in
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on October 20, 2018, 04:41:39 PM
BBU is valued at 5.2B and should be approaching 1B in EBITDA over the next year or so. Their income stream has become much more diversified, businesses are profitable and big players in their respective industries, they have continuous deal flow, and BBU participates in many deals that are significantly greater than a company their size can usually participate in

Their enterprise value is $12.5B roughly so with  $1B EBITDA, they seem fairly valued. New deals will require new equity and debt, so it all depends on how they buy and how they manage the assets. increasing size alone is good for BAM, but not necessarily for BBU limited patterns.
Title: Re: BAM - Brookfield Asset Management
Post by: vince on October 20, 2018, 06:15:47 PM
BBU is valued at 5.2B and should be approaching 1B in EBITDA over the next year or so. Their income stream has become much more diversified, businesses are profitable and big players in their respective industries, they have continuous deal flow, and BBU participates in many deals that are significantly greater than a company their size can usually participate in

Their enterprise value is $12.5B roughly so with  $1B EBITDA, they seem fairly valued. New deals will require new equity and debt, so it all depends on how they buy and how they manage the assets. increasing size alone is good for BAM, but not necessarily for BBU limited patterns.

Now that is a great post!!
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on October 21, 2018, 05:20:44 AM
Good point about EV.

With regards to issuing debt or equity and how the deals work out, is that not true for most companies? BBU is the only LP who's kickback to BAM is based on share price. It seems like that aligns their interest better with common shareholders.

I appreciate the feedback.
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on October 21, 2018, 05:44:54 AM
Good point about EV.

With regards to issuing debt or equity and how the deals work out, is that not true for most companies? BBU is the only LP who's kickback to BAM is based on share price. It seems like that aligns their interest better with common shareholders.

I appreciate the feedback.

Yes, it is absolutely true that it all depends on the quality of deals and how the assets acquired are managed. I just wanted to point out the EV and the fact that funds need to be raised , because I think mentioning $1B in EBITDA and  $5.2B in market cap just by itself is misleading.

I mentioned this before, but I believe the real entity to own is BAM, because they can “skim the top” without providing capital. That’s the beauty of the GP/ LP structure.
Title: Re: BAM - Brookfield Asset Management
Post by: ValueMaven on October 21, 2018, 06:36:44 AM
What do others pay for BAM's Foreign Security Withholding on Stock Dividends??

I have very limited knowledge of this topic
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on October 21, 2018, 06:58:16 AM
The EV comment was well taken and not something I had considered in judging its evaluation.

My view is that if one is to invest in Brookfield, BAM is a must own. But, due to Mr market, one can find bargains here and there in the LPs. For instance BIP dropped quite a bit and I believe was at a great price in the high 30s. I also share the view that others have the BIP is a compounder. BBU may also be and currently has very little following relative to the others (also low volume, don't know if that means anything)
Title: Re: BAM - Brookfield Asset Management
Post by: Spekulatius on October 21, 2018, 07:27:15 AM
What do others pay for BAM's Foreign Security Withholding on Stock Dividends??

I have very limited knowledge of this topic

Should be 15% in a taxable account in the US and zero in an IRA. At least that’s how ENb works for me and I don’t see why BAM should be any different. Anyways, BAM dividend yield is so low, they it hardly matters.
Title: Re: BAM - Brookfield Asset Management
Post by: vince on October 24, 2018, 04:29:10 PM
Anyone have a handle on whether KKR is a good business and what it is worth.  Seems like they have a similar business model tp bam an d look even cheaper.  Any analysis would be greatly appreciated
Title: Re: BAM - Brookfield Asset Management
Post by: Packer16 on October 24, 2018, 05:02:44 PM
You need to take a look at BBU on a proportionate not consolidated basis.  If you do net debt is only $100m.  The EV to EBITDA is closer to 10x with a current EBITDA of $570 with a goal of increasing EBITDA to $900m to $1b over the next few years.  BBU buys companies in states of distress so there is typically a pick-up in EBITDA over time.  At the target BBU is reasonably priced.  BBU also has an after fee target rate of return of 15 to 20%.  (see investor day presentation)

As to BAM, they do hold the AM but it only represents 33 to 45% (depending upon how you value the AM) of its total asset value.  The other assets are minority interests in the partnerships whose value is discounted by the market.  The discount will not go away unless they spin-off these stakes.  So from a growth perspective BAM is a weighted average across all their platforms and the growth rates in the fees.  I would not be surprised that the growth of BIP & BBU would be higher than BAM, which is what has happened historically.  The real winners from the BAM fees are the employees as they get a more pure exposure to BAM's fee growth. 

Packer
Title: Re: BAM - Brookfield Asset Management
Post by: apparat on October 24, 2018, 06:04:38 PM
I was following along the discussion earlier in the thread - did you get a response as to why BAM management would prefer to keep the current structure without spinning off their remaining stakes in BBU, BIP etc?
Title: Re: BAM - Brookfield Asset Management
Post by: sdev on October 31, 2018, 08:39:43 AM
What's up with BEP post earnings?
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on October 31, 2018, 09:38:49 AM
It seems it got spooked and bucked. I hope nobody got tossed off.
Title: Re: BAM - Brookfield Asset Management
Post by: Uccmal on November 01, 2018, 09:57:57 AM
What's up with BEP post earnings?

I think this is a case where we just need to totally ignore the stock gyrations.  The nature of any of the brookfield subs is to have lumpy results due to the near continuous deal making.  These guys (BEP) are entrenched in an industry that could easily eclipse the size of the oil industry one day. 

People worry about the payout ratio.  This will ebb and flow as deals are made, capex is expended, gains are harvested, and so on.  The deals will just keep getting bigger. 
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on November 01, 2018, 06:53:36 PM
Agree.

One item that jumped out during both BEP and BPY conference calls was that they mentioned investors have shown interest in buying partial and/or majority stakes in assets in order to keep Brookfield on as operators. This is another signal of their ability to operate assets very well
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on November 03, 2018, 05:17:48 AM
BBU recorded a quarter in line with expectations. The share price
went up nearly 7% before dropping by about 10% from it's intraday high that may have been from,

The stock trades less then a million dollars a day
Broad market moves
Or a few tidbits from the call:
Westinghouse is doing fine but will be seasonal and very lumpy, this was a great quarter though.
Difficulties with the Brazilian water sanitization business (hopefully new government can settle this?)
Project issues with their middle East construction business. They expect to wind the business down sometime next year once these projects are completed.
A new smaller business they are acquiring ran into a development that the owner may have had police filings. Still in development and Brookfield has not committed the funds yet.


My takeaway is that Westinghouse is a great investment and the lumpiness is going to lead to poor quarterly comparisons, Brazil will hopefully turn around with the election past it, Middle East is a small business and will be over with soon.

The charges is in relation to a deal that has not gone through but is always a fear with Brookfield for me::

"
Cyrus Madon

So let me -- I'm going to leave the BRK question for Peter, who is very, very close to that business. But I do want to comment on OB Jeff we continue to have this business under contract. What has happened is that founder has been charged with some form of proceedings under some form of police proceedings. We don’t know the detail. We are not aware of any related issues at the company or with the company's management. We are still very keen on the industry. We are very keen on the business. But we are working through some structures in light of what happened to the founder. And we can't ultimately get comfortable we will walk away from this transaction but we are hoping we can find a way to make it work. So that’s the comment on OV and I'll turn it over to Peter to talk about BRK.
"
Title: Re: BAM - Brookfield Asset Management
Post by: chrispy on November 03, 2018, 05:25:06 AM
Similar to what Uccmal posted, BIP has lower FFO due to selling their Chilean power asset. They have something like 1.7b under contract or in the works that will juice 2019 to levels greater then 2017 and certainly in excess of this year. They also believe the Brazilian real is near it's lows which will benefit future quarters in relation to today

The dividend yield is about at it's historical average for BIP and growth is in the pipeline. This is a fine price to pay I believe.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on November 07, 2018, 03:42:20 PM
I don't ride the same day as I saddle with this thingy - I still need to get a better understanding of the whole BAM system on the go [please feel free to call it trial and error method, if you want].

From what has been discussed in this topic, and also covered in news releases etc. from BAM & BPY, the GGP deal is to some extent critical to the success of BPY [short/mid term, I think]. In short, it's a large transaction [& bet], and the to-do list is complicated, and long. Add to that the special BPR company structure, which I have tried to dive into today, to get a better understanding of that structure and it's financial standing.

I can't find any 2018Q3 10-Q for BPR as of now on the SEC website to study the structure. I can only find this BPR 8-K (https://www.sec.gov/Archives/edgar/data/1496048/000114420418056633/tv506005_8-k.htm). [Which by the way is absolutely rubbish to me.]

Honestly, is this all we get to look at for this thing called BPR? -I mean, it's a listed entity [for the sake of Christ].
Title: Re: BAM - Brookfield Asset Management
Post by: LongTermView on November 07, 2018, 04:40:57 PM
From what has been discussed in this topic, and also covered in news releases etc. from BAM & BPY, the GGP deal is to some extent critical to the success of BPY [short/mid term, I think].

I agree that GGP is important but I disagree on the short/mid timing. I think it will be a long term project and the redevelopments will be spread out over many years imo.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on November 07, 2018, 04:54:22 PM
I agree that GGP is important but I disagree on the short/mid timing. I think it will be a long term project and the redevelopments will be spread out over many years imo.

LongTermView,

Please don't hang your hat on my personal phrasing here too much [ : - ) ]. I mean, BAM isen't really in the business of postponing to tomorrow, what can be done today. But sure, the GGP deal has long term economic consequenses.
Title: Re: BAM - Brookfield Asset Management
Post by: cubsfan on November 07, 2018, 05:03:30 PM
From what has been discussed in this topic, and also covered in news releases etc. from BAM & BPY, the GGP deal is to some extent critical to the success of BPY [short/mid term, I think].

I agree that GGP is important but I disagree on the short/mid timing. I think it will be a long term project and the redevelopments will be spread out over many years imo.

I think they pretty much said that during their Capital Markets Day in September. They like the operations of GGP, but
BAM has the platform to transform GGP since GGP was a retail only operation. BAM brings a different set of skills to
the ballgame to add density and living units to some of their very well located urban locations. The potential for
that type of redevelopment is what BAM brings to the game. BAM is very supportive of the operating capabilities of GGP.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on November 07, 2018, 05:18:11 PM
I agree, Mike,

But how can we follow the progress [or lack of the same], if we're not furnished full reporting for BPR?
Title: Re: BAM - Brookfield Asset Management
Post by: cubsfan on November 07, 2018, 05:22:07 PM
I agree, Mike,

But how can we follow the progress [or lack of the same], if we're not furnished full reporting for BPR?

Sorry John, I misunderstood - that I can't help with.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on November 07, 2018, 05:26:23 PM
It's certainly OK, Mike, thanks,

Any fellow board member who can contribute here? - Honestly, I'm really confused here.
Title: Re: BAM - Brookfield Asset Management
Post by: Uccmal on November 08, 2018, 04:18:21 PM
Transcript:

https://seekingalpha.com/article/4220083-brookfield-asset-management-inc-bam-ceo-bruce-flatt-q3-2018-results-earnings-call-transcript

Title: Re: BAM - Brookfield Asset Management
Post by: cubsfan on November 08, 2018, 05:46:42 PM
Transcript:

https://seekingalpha.com/article/4220083-brookfield-asset-management-inc-bam-ceo-bruce-flatt-q3-2018-results-earnings-call-transcript

BAM looking to buyback a lot of capital over next 10 years. This management team is great.
Title: Re: BAM - Brookfield Asset Management
Post by: vince on November 08, 2018, 05:59:32 PM
Transcript:

https://seekingalpha.com/article/4220083-brookfield-asset-management-inc-bam-ceo-bruce-flatt-q3-2018-results-earnings-call-transcript

BAM looking to buyback a lot of capital over next 10 years. This management team is great.

I dont quite understand why they havent done that aggressively already.  They preach about the intrinsic value and how growth in value and closing of the gap results in 20 percent compounded returns for 10 years.  And I believe them.....so it really doesnt  make sense to me
Title: Re: BAM - Brookfield Asset Management
Post by: Jerry Capital on November 08, 2018, 06:01:41 PM
They would prefer the market to close the gap at BPY so they can collect higher management fees (which they don't get I'd they buy the BPY shares themselves)
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on November 08, 2018, 08:40:03 PM
BAM prefers to hold relatively high cash levels over buying BPY units as of now, to stay flexible going forward.

From the letter:

Quote
... But, while global economies are strong, at some point the strong fundamentals must slow down. With this in mind, we continue to prudently invest our capital, while remaining focused on preparing for this inevitability. ...

Please also refer to the description of cash at group level in the BAM 2017 financials.
Title: Re: BAM - Brookfield Asset Management
Post by: ValueMaven on November 10, 2018, 10:02:27 AM
Another great q...Always impressed w/mgmt...all 5 shareholder letters are very well written and must reads

Flatt has been laying out some very interesting valuation on the BAM structure recently...buybacks, incentive fees, divy increase, fee bearing capital up, valuation of the asset mgmt arm etc etc...
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on November 10, 2018, 01:06:12 PM
Another great q...Always impressed w/mgmt...all 5 shareholder letters are very well written and must reads

Flatt has been laying out some very interesting valuation on the BAM structure recently...buybacks, incentive fees, divy increase, fee bearing capital up, valuation of the asset mgmt arm etc etc...

Yes, the overall business seems to be in great momentum. Lots of stuff going on here and there all the time. But it's actually very hard to follow in detail, what's going on.

My major concern is still the accomplished GGP acquisition with regard to BPY. [Which I suppose also is why both BPY and BPR are so cheap at the moment.]
Title: Re: BAM - Brookfield Asset Management
Post by: ValueMaven on November 11, 2018, 08:22:32 AM
The 'float' to me generated by BAM's asset management arm (incentive fees and mgmt fee) is more attractive then Berkshire's 'insurance float' as it contains no liability risk on the back-end.  I realize this is a bit of a mute point given the differences in scale etc - but it is worth thinking about over the next 5yr - 10yr as a solid source of cash generation.

What do others think?

Title: Re: BAM - Brookfield Asset Management
Post by: no_free_lunch on November 11, 2018, 10:40:40 AM
The valuation models I have seen already include the fees, so the 'float' is already considered.
Title: Re: BAM - Brookfield Asset Management
Post by: gokou3 on November 11, 2018, 11:12:32 AM
The 'float' to me generated by BAM's asset management arm (incentive fees and mgmt fee) is more attractive then Berkshire's 'insurance float' as it contains no liability risk on the back-end.  I realize this is a bit of a mute point given the differences in scale etc - but it is worth thinking about over the next 5yr - 10yr as a solid source of cash generation.

What do others think?

I am quite long in BAM (via PVF.UN) and its LPs, but I have always wondered if the reason for BAM's (and other asset managers like BX) low valuation is their tail risk of bad investment performance.  Specifically, we have seen in recent years of a multi-year performance slump of various asset managers, e.g. Legg Mason, Greenlight, Och-Ziff, etc. which followed by the collapse of their own stock prices and asset outflow.  BAM has been on fire for quite a long time but the market may have priced in the possiblity that they cannot adapt to a cliche black-swam event and things turn out bad for a couple of years.

That said, I think one difference between BAM and a typical mutual/hedge fund is that BAM mostly have control of its investees and have many more levers to pull.  As long as they don't put both feet into unfamiliar industries / geographies they should continue to do fine.
Title: Re: BAM - Brookfield Asset Management
Post by: vince on November 11, 2018, 11:22:25 AM
The 'float' to me generated by BAM's asset management arm (incentive fees and mgmt fee) is more attractive then Berkshire's 'insurance float' as it contains no liability risk on the back-end.  I realize this is a bit of a mute point given the differences in scale etc - but it is worth thinking about over the next 5yr - 10yr as a solid source of cash generation.

What do others think?

I dont understand the comparison to float?  Float is a non interest bearing liability (ideally anyway), whereas mgmt fees and incentive fees are earnings from operations.
Title: Re: BAM - Brookfield Asset Management
Post by: Uccmal on November 20, 2018, 09:36:28 AM
In two months BAM has bought 7 million shares of BPY: 140 M US in two months on a market cap of around 5 Billion.  Thats 2.8% of the company and they show no signs of slowing down. 

At the same time they are buying their own shares: prefs and common.  At a slower rate but still well above any dilution from issuances. 

I like a company that does what they say.  I also like a company that buys shares at a discount.  These guys certainly have a good handle on this process unlike 90% of the others out there. 
Title: Re: BAM - Brookfield Asset Management
Post by: vince on November 20, 2018, 02:24:26 PM
In two months BAM has bought 7 million shares of BPY: 140 M US in two months on a market cap of around 5 Billion.  Thats 2.8% of the company and they show no signs of slowing down. 

At the same time they are buying their own shares: prefs and common.  At a slower rate but still well above any dilution from issuances. 

I like a company that does what they say.  I also like a company that buys shares at a discount.  These guys certainly have a good handle on this process unlike 90% of the others out there.

Dont you think they should be buying back more based on what they claim is their intrinsic value is now and over the next 5 years, in addition to the fact that they have lots of liquidity?
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on November 20, 2018, 02:40:19 PM
vince,

The BAM group core liquidity is the main basis, the tool and the key to stay opportunistic [and to some extent contrarian] for BAM to do large deals in its space in general. If BAM goes heavy on buybacks, it might end up constrained, ending up just floating with the general torrent, unable to act, when the opportunities appear.

Easy to say, hard to execute.
Title: Re: BAM - Brookfield Asset Management
Post by: vince on November 20, 2018, 05:54:23 PM
vince,

The BAM group core liquidity is the main basis, the tool and the key to stay opportunistic [and to some extent contrarian] for BAM to do large deals in its space in general. If BAM goes heavy on buybacks, it might end up constrained, ending up just floating with the general torrent, unable to act, when the opportunities appear.

Easy to say, hard to execute.
Hey John, I agree, the most important value driver going forward is their asset management business which depends in a huge way their ability to find decent places to put client capital which is enhanced by Bam capital going into the same deals.  It's just very hard from the outside when I can see how value creating those buybacks would be at these prices.  Another interesting point is the fact that they are buying Bpy....that shrinks the capitalization which (I think) reduces the base fees they collect from Bpy.  I don't believe you will see this type of behaviour from many other mgmts
Title: Re: BAM - Brookfield Asset Management
Post by: Shane on November 21, 2018, 05:47:29 AM
vince,

The BAM group core liquidity is the main basis, the tool and the key to stay opportunistic [and to some extent contrarian] for BAM to do large deals in its space in general. If BAM goes heavy on buybacks, it might end up constrained, ending up just floating with the general torrent, unable to act, when the opportunities appear.

Easy to say, hard to execute.
Hey John, I agree, the most important value driver going forward is their asset management business which depends in a huge way their ability to find decent places to put client capital which is enhanced by Bam capital going into the same deals.  It's just very hard from the outside when I can see how value creating those buybacks would be at these prices.  Another interesting point is the fact that they are buying Bpy....that shrinks the capitalization which (I think) reduces the base fees they collect from Bpy.  I don't believe you will see this type of behaviour from many other mgmts

Why would BAM buying BPY reduce the market capitalization?
Title: Re: BAM - Brookfield Asset Management
Post by: vince on November 21, 2018, 06:11:51 AM
vince,

The BAM group core liquidity is the main basis, the tool and the key to stay opportunistic [and to some extent contrarian] for BAM to do large deals in its space in general. If BAM goes heavy on buybacks, it might end up constrained, ending up just floating with the general torrent, unable to act, when the opportunities appear.

Easy to say, hard to execute.
Hey John, I agree, the most important value driver going forward is their asset management business which depends in a huge way their ability to find decent places to put client capital which is enhanced by Bam capital going into the same deals.  It's just very hard from the outside when I can see how value creating those buybacks would be at these prices.  Another interesting point is the fact that they are buying Bpy....that shrinks the capitalization which (I think) reduces the base fees they collect from Bpy.  I don't believe you will see this type of behaviour from many other mgmts

Why would BAM buying BPY reduce the market capitalization?

I just assumed that they wouldnt get mgmt fees on the part of capitalization that they owned but as I think about it more I'm starting to think its wrong
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on November 21, 2018, 06:31:59 AM
Why would BAM buying BPY reduce the market capitalization?

Shane,

From the perspective of the BAM group balance sheet, BAM is using cash to buyout BPY minorities. So the BAM group balance sheet is shrinking by doing these buybacks.
Title: Re: BAM - Brookfield Asset Management
Post by: khturbo on November 26, 2018, 12:16:54 PM
Anyone have the link where we can see how much BPY BAM is buying? I saw it once but can't seem to find it again.
Title: Re: BAM - Brookfield Asset Management
Post by: cubsfan on November 26, 2018, 12:27:47 PM
Anyone have the link where we can see how much BPY BAM is buying? I saw it once but can't seem to find it again.

Subsequent to the closing of the GGP acquisition by BPY, we have started to buy units of BPY in the open market. To date we have acquired approximately $200 million of units, with the Price to Value discrepancy of approximately $10 per unit. On just this acquisition of $200 million of units, we added $100 million to the Value of the equity in BAM.

https://bam.brookfield.com/~/media/Files/B/BrookField-BAM-IR/letters-to-unitholders/2018/Q3/F%20-%20BAM%20Q3_2018_Ltr_to_Shareholders.pdf

Is this what you are referring to..?
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on November 26, 2018, 12:52:30 PM
Perhaps the link in post #734 (http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/bam-brookfield-asset-management/msg347821/#msg347821) by OnTheShouldersOfGiants?
Title: Re: BAM - Brookfield Asset Management
Post by: khturbo on November 27, 2018, 06:35:45 AM
Ah, yes John thank you. That's exactly what I was looking for. Seems like they were buying at a good pace a couple of weeks ago. I really like this move. I try to estimate fair value for each of the listed partnerships and it seems clear enough that BPY is the cheapest of the three.

It also seems like purchases of BPY might be more accretive than repurchases of BAM, although that one's a bit more unclear to me. At any rate, it seems like a solid cash deployment option.

By the way, does anyone know of a way to kind of see exactly what they spend what they call their "cash available for distribution"? You can get a sense of what they're doing for example if they buy back stock the share count will go down or if they buy BPY on the open market their shares owned will go up, but I don't know of a way to figure it out with a bit more precision. It's obviously difficult since the consolidated financials have so many moving parts.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on December 03, 2018, 11:18:40 AM
Ritzau via Boersen.dk [December 3rd 2018] : Media : Giants are bidding up to DKK 26 B for Ørsted subsidiary (https://borsen.dk/nyheder/virksomheder/artikel/1/373326/medier_giganter_byder_op_til_26_mia_kr_for_oersted-selskab.html?utm_source=forside&utm_campaign=nyhed_03). [Unfortunately only in Danish.]

Brookfield is mentioned in the article as a bidder. The article appear undocumented. I haven't been able to find that particular Bloomberg News article mentioned.

Radius is the Ørsted subsidiary distributing power to customers primarily in the northern part of Sealand, strategically for sale by Ørsted.

My personal judgement here is, that most PE funds etc. won't stand a chance here as bidder, based on the political sentiment here in Denmark after the dividend cases etc. related to Macquarie investing in Copenhagen Airport and TDC. [Ørsted is state controlled, but listed.]
Title: Re: BAM - Brookfield Asset Management
Post by: vince on December 03, 2018, 11:35:33 AM
Ah, yes John thank you. That's exactly what I was looking for. Seems like they were buying at a good pace a couple of weeks ago. I really like this move. I try to estimate fair value for each of the listed partnerships and it seems clear enough that BPY is the cheapest of the three.

It also seems like purchases of BPY might be more accretive than repurchases of BAM, although that one's a bit more unclear to me. At any rate, it seems like a solid cash deployment option.

By the way, does anyone know of a way to kind of see exactly what they spend what they call their "cash available for distribution"? You can get a sense of what they're doing for example if they buy back stock the share count will go down or if they buy BPY on the open market their shares owned will go up, but I don't know of a way to figure it out with a bit more precision. It's obviously difficult since the consolidated financials have so many moving parts.

If you study their quarterly supplemental you should be able to figure it out, very informative with everything you need in that quarterly document
Title: Re: BAM - Brookfield Asset Management
Post by: khturbo on December 04, 2018, 01:16:31 PM
Yes I mean I think you can get broad strokes. You could see repurchase activity and any activity in buying / selling listed issuers but it would be tough beyond that I think as different valuations / debt levels move around. But point taken.
Title: Re: BAM - Brookfield Asset Management
Post by: khturbo on December 06, 2018, 08:12:29 AM
I haven't seen any BPY purchases in the last couple of weeks. I really hope they're buying in BAM units in bulk.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on December 06, 2018, 08:33:12 AM
How do you interpret the large transactions on December 4th 2018 (https://www.canadianinsider.com/node/7?menu_tickersearch=bpy), khturbo?
Title: Re: BAM - Brookfield Asset Management
Post by: rkbabang on December 06, 2018, 08:55:11 AM
How do you interpret the large transactions on December 4th 2018 (https://www.canadianinsider.com/node/7?menu_tickersearch=bpy), khturbo?

Large equal acquisitions and dispositions on the same day. It looks like exercising stock options for cash.
Title: Re: BAM - Brookfield Asset Management
Post by: saltybit on December 06, 2018, 03:01:13 PM
https://www.google.com/amp/s/seekingalpha.com/amp/article/4226664-went-wrong-brookfield-property-partners-part-1-core-retail

Post about BPY
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on December 06, 2018, 04:14:35 PM
How do you interpret the large transactions on December 4th 2018 (https://www.canadianinsider.com/node/7?menu_tickersearch=bpy), khturbo?

Large equal acquisitions and dispositions on the same day. It looks like exercising stock options for cash.

Thanks, rkbabang,

The one pair of trades attached to BAM, as indirect owner [by prior filings] makes some sense to me, the next pair of filings related to "RE LP Units (BPLP)" I do not understand - For the second pair of filings, please enlighten me in my darkness here.
Title: Re: BAM - Brookfield Asset Management
Post by: khturbo on December 06, 2018, 06:30:24 PM
I'm not quite sure what's going on there either, but I've seen this big matching transactions in large blocks that net out before and it doesn't affect their net ownership, so I just kind of ignore them.
Title: Re: BAM - Brookfield Asset Management
Post by: khturbo on December 06, 2018, 06:32:48 PM
What do you guys think about using IFRS to value BPY? I got into a discussion with the author of the article that saltybit mentioned in the comment section of his first article (I'm Kyler Hasson).

Personally, it seems super clear to me that if you use IFRS and you count all of the fees that BAM earns from BPY then you're double counting the fees by not deducting them. I get a NPV of ~$4-5 / share of the fees under normalish kinds of scenarios (I talk about it at greater length in that same comment section) but would be interested to hear how others think of it.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on December 07, 2018, 02:38:16 AM
Kyler,

From BAM Annual Report 2017, p. 80:

Quote
... As a result, we include 100% of the revenues and expenses of these entities in our consolidated statements of operations, even though a substantial portion of the net income in these consolidated entities is attributable to non-controlling interests. On the other hand, revenues earned, and expenses paid between us and our subsidiaries, such as asset management fees, are eliminated in our consolidated statements of operations; however, these items affect the attribution of net income between shareholders and non-controlling interests. For example, asset management fees paid by our listed partnerships to the corporation are eliminated from consolidated revenues and expenses. However, as the common shareholders are attributed all of the fee revenues while only attributed their proportionate share of the listed partnerships’ expenses, the amount of net income attributable to common shareholders is increased with a corresponding decrease in net income attributable to non-controlling interests. ...

So net, no double counting in the BAM financials. It's a logical consequence of generally accepted principles for consolidation, based on a control criteria, to the contrary of a ownership share criteria.
Title: Re: BAM - Brookfield Asset Management
Post by: rkbabang on December 07, 2018, 06:30:27 AM
How do you interpret the large transactions on December 4th 2018 (https://www.canadianinsider.com/node/7?menu_tickersearch=bpy), khturbo?

Large equal acquisitions and dispositions on the same day. It looks like exercising stock options for cash.

Thanks, rkbabang,

The one pair of trades attached to BAM, as indirect owner [by prior filings] makes some sense to me, the next pair of filings related to "RE LP Units (BPLP)" I do not understand - For the second pair of filings, please enlighten me in my darkness here.

I don't understand them either, I was just guessing.
Title: Re: BAM - Brookfield Asset Management
Post by: khturbo on December 07, 2018, 10:22:10 AM
Kyler,

From BAM Annual Report 2017, p. 80:

Quote
... As a result, we include 100% of the revenues and expenses of these entities in our consolidated statements of operations, even though a substantial portion of the net income in these consolidated entities is attributable to non-controlling interests. On the other hand, revenues earned, and expenses paid between us and our subsidiaries, such as asset management fees, are eliminated in our consolidated statements of operations; however, these items affect the attribution of net income between shareholders and non-controlling interests. For example, asset management fees paid by our listed partnerships to the corporation are eliminated from consolidated revenues and expenses. However, as the common shareholders are attributed all of the fee revenues while only attributed their proportionate share of the listed partnerships’ expenses, the amount of net income attributable to common shareholders is increased with a corresponding decrease in net income attributable to non-controlling interests. ...

So net, no double counting in the BAM financials. It's a logical consequence of generally accepted principles for consolidation, based on a control criteria, to the contrary of a ownership share criteria.

Ah yes sorry for being vague. I meant less of counting in the financials and more of how BAM carries the value on its balance sheet. What I mean is that if you accept the IFRS value for BPY but you also count the earnings that BAM gets managing BPY, then in my opinion you're double counting the value of the fees. IMO the NPV of the fees should be deducted from IFRS value of BPY units. I was wondering how different people thought about that.
Title: Re: BAM - Brookfield Asset Management
Post by: vince on December 07, 2018, 01:34:49 PM
Kyler,

From BAM Annual Report 2017, p. 80:

Quote
... As a result, we include 100% of the revenues and expenses of these entities in our consolidated statements of operations, even though a substantial portion of the net income in these consolidated entities is attributable to non-controlling interests. On the other hand, revenues earned, and expenses paid between us and our subsidiaries, such as asset management fees, are eliminated in our consolidated statements of operations; however, these items affect the attribution of net income between shareholders and non-controlling interests. For example, asset management fees paid by our listed partnerships to the corporation are eliminated from consolidated revenues and expenses. However, as the common shareholders are attributed all of the fee revenues while only attributed their proportionate share of the listed partnerships’ expenses, the amount of net income attributable to common shareholders is increased with a corresponding decrease in net income attributable to non-controlling interests. ...

So net, no double counting in the BAM financials. It's a logical consequence of generally accepted principles for consolidation, based on a control criteria, to the contrary of a ownership share criteria.

Ah yes sorry for being vague. I meant less of counting in the financials and more of how BAM carries the value on its balance sheet. What I mean is that if you accept the IFRS value for BPY but you also count the earnings that BAM gets managing BPY, then in my opinion you're double counting the value of the fees. IMO the NPV of the fees should be deducted from IFRS value of BPY units. I was wondering how different people thought about that.

I dont believe thats the right way to look at it.  Bam owns somewhere around 65% of bpy and thats counted as 65% of bpy's market cap.  But that value is determined by the market with bpy's earnings that are already net of the fees. I could be wrong though
Title: Re: BAM - Brookfield Asset Management
Post by: johnny on December 07, 2018, 01:44:34 PM
But that value is determined by the market with bpy's earnings that are already net of the fees. I could be wrong though

BAM presents its stake in BPY at book value, not market quote. That's the point KH is driving at. They're telling you to look at the underlying liquidation value of the real estate, and also telling you to put a 20x on the management fees they are receiving from Not Liquidating The Real Estate. As you say, knowing nothing, you'd assume an efficient market would discount the shares to compensate for the value lost to the external manager, so the question is how much the market is overshooting with its current 40% discount--it's certainly not 40%.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on December 08, 2018, 12:34:25 PM
Kyler, vince & johnny,

Thank you for your posts after the last one of mine. Sometimes communication via a message board can be hard and cumbersome ... - It dosen't exactly makes it easier that I've been doing my best to answer a question, that wasen't asked. [ : - ) ]

- - - o 0 o - - -

At least I think I understand Kyler's considerations and line of thinking about management fees now with respect to double counting or not.

- - - o 0 o - - -

Could BPY disregard the management fees while doing the fair value valuations for BPY's investment properties using af DCF model [Thereby getting higher valuations by disregarding/ignoring the load on cash flow from management fees]?

No, naturally not. If you look up the BPY notes to the income statement in BPY 2017 Annual Report, management fees are booked as ordinary operational expenses [also with cash flow effect], and are specified as a component of general and administrative expenses in note 28, p. F-57, upper part, as USD 168 M.

You are not allowed by IFRS to cherry pick expenses with direct cash flow effect, that you don't want to go into the DCF model. Cash flow is cash flow. Period.

PwC UK [November 2017] : Applying IFRS for the real estate industry (https://www.pwc.com/gx/en/audit-services/ifrs/publications/applying-ifrs-for-the-real-estate-industry.pdf).

- - - o 0 o - - -

Now the exactly same question about IFRS valuation of investment properties - this time not for BPY, but for BAM. It's not that hard to try to find the answer to that question. You simply walk through all the financials for all four subs and find all the LEGO bricks more or less hidden and scattered around in the +1K pages of financials for the four BAM subs and try to bolt it all together, and see what it gets you.

The conclusion is clear : BAM valuates BPY's investment properties to exactly the same values as BPY. No hanky-panky - no shagging with numbers.

Please see attached.

So BAM at group level valuates investment properties according to IFRS by use a DCF model, where management fees, which are eliminated in the BAM consolidation, are included as a cash flow burden in the DCF model.

The only unknown variables in the calculations are values in the separate categories of investment properties held by BAM the parent, or by subs of BAM controlled directly without involving BPY. The IFRS value of these investment properties is USD 5.321 B at YE2017.

That would be a good question at a future conference call to get an explanation & identification of these properties.
Title: Re: BAM - Brookfield Asset Management
Post by: bizaro86 on December 08, 2018, 12:44:21 PM
I'm on my phone so it's hard for me to check, but doesn't BAM consolidate BPY? They own a majority and have direction/control, so it seems like they should.

If that's the case, wouldn't the management fee from BPY to BAM be eliminated on consolidation?
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on December 08, 2018, 12:51:27 PM
bizaro,

BAM does full line-by-line consolidation of BPY, and management fees are eliminated. I have documented it in my post #795 (http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/bam-brookfield-asset-management/msg354259/#msg354259).
Title: Re: BAM - Brookfield Asset Management
Post by: gary17 on December 09, 2018, 08:36:29 AM
I must be missing something

I read BAM's report; the earnings attributed to common shareholders is $1.57 for the last 9 month of 2018...  So at $ 41... this is still 20x earnings... I am not getting why people seems to think this is a very attractive investment at current valuation.  Am I missing some important facts?   Would really appreciate someone able to enlighten me!

Thanks!
Gary
Title: Re: BAM - Brookfield Asset Management
Post by: racemize on December 09, 2018, 08:37:18 AM
I must be missing something

I read BAM's report; the earnings attributed to common shareholders is $1.57 for the last 9 month of 2018...  So at $ 41... this is still 20x earnings... I am not getting why people seems to think this is a very attractive investment at current valuation.  Am I missing some important facts?   Would really appreciate someone able to enlighten me!

Thanks!
Gary

I would recommend looking at the investor day presentation.
Title: Re: BAM - Brookfield Asset Management
Post by: Uccmal on December 09, 2018, 09:55:19 AM
Really good analysis being done on BPY by this fellow:

https://seekingalpha.com/article/4226664-went-wrong-brookfield-property-partners-part-1-core-retail

https://seekingalpha.com/article/4226967-went-wrong-brookfield-property-partners-part-2-core-office

Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on December 09, 2018, 11:34:55 AM
... The only unknown variables in the calculations are values in the separate categories of investment properties held by BAM the parent, or by subs of BAM controlled directly without involving BPY. The IFRS value of these investment properties is USD 5.321 B at YE2017.

That would be a good question at a future conference call to get an explanation & identification of these properties.

Today my thoughts have been circling about this particular BAM asset item of USD 5.321 B. It's a lot of value, and material compared to BAM BV. [YE2017 : BAM common equity USD 24.052 B, so gross [ex. eventual property debt] : 22%.]

I'm getting nosy and really persistent here [verging to become stubborn as some donkey]. Next, I'm going to dismantle and compare the notes in the financials about investment properties for BAM and BPY. By doing that, it must be possible to identify these investment properties. As basis, it should not be possible to "hide" a value that large in the BAM financials, when the notes are in some way structured and set as an asset directory.

Why is it so? [That there are investment properties owned by BAM, and not by the separate sub for that purpose: PBY?]: I don't know right now, but I hope to find out.

A possible explanation could be, that there at the formation of BPY years ago were certain properties considered "core-core"/"top notch"/"ultra-valuable", where BAM did not want to share the future progress in value and cash yield with the BPY minority LP unit holders.

[Like "the beer" in  this old Carlsberg commercial (https://www.youtube.com/watch?v=KuRBuqKVfnk), where everything is shared in the commune - women, toothbrushes and such - but not the beer! [I think English translation is not needed! [ : - ) ]]
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on December 10, 2018, 06:51:45 AM
Really good analysis being done on BPY by this fellow:

https://seekingalpha.com/article/4226664-went-wrong-brookfield-property-partners-part-1-core-retail (https://seekingalpha.com/article/4226664-went-wrong-brookfield-property-partners-part-1-core-retail)

https://seekingalpha.com/article/4226967-went-wrong-brookfield-property-partners-part-2-core-office (https://seekingalpha.com/article/4226967-went-wrong-brookfield-property-partners-part-2-core-office)

Thank you, Al,

Yes, Mr. Mazák is good. Here (https://seekingalpha.com/article/4227409-went-wrong-brookfield-property-partners-part-3-return-equity?app=1#alt2) is his part 3 article, in a row of 4, just released today.

However, I have to say, that his NAV development analysis is a bit flawed, because it skips changes over time in capitalization rates applied under the IFRS valuation of investment properties. [And without getting too impolite or even rude, that is surprising, considering he's a "pure play" numbers/math guy/"nerd", ref. his SA profile description.]
Title: Re: BAM - Brookfield Asset Management
Post by: vince on December 10, 2018, 11:34:20 AM
Kyler, vince & johnny,

Thank you for your posts after the last one of mine. Sometimes communication via a message board can be hard and cumbersome ... - It dosen't exactly makes it easier that I've been doing my best to answer a question, that wasen't asked. [ : - ) ]

- - - o 0 o - - -

At least I think I understand Kyler's considerations and line of thinking about management fees now with respect to double counting or not.

- - - o 0 o - - -

Could BPY disregard the management fees while doing the fair value valuations for BPY's investment properties using af DCF model [Thereby getting higher valuations by disregarding/ignoring the load on cash flow from management fees]?

No, naturally not. If you look up the BPY notes to the income statement in BPY 2017 Annual Report, management fees are booked as ordinary operational expenses [also with cash flow effect], and are specified as a component of general and administrative expenses in note 28, p. F-57, upper part, as USD 168 M.

You are not allowed by IFRS to cherry pick expenses with direct cash flow effect, that you don't want to go into the DCF model. Cash flow is cash flow. Period.

PwC UK [November 2017] : Applying IFRS for the real estate industry (https://www.pwc.com/gx/en/audit-services/ifrs/publications/applying-ifrs-for-the-real-estate-industry.pdf).

- - - o 0 o - - -

Now the exactly same question about IFRS valuation of investment properties - this time not for BPY, but for BAM. It's not that hard to try to find the answer to that question. You simply walk through all the financials for all four subs and find all the LEGO bricks more or less hidden and scattered around in the +1K pages of financials for the four BAM subs and try to bolt it all together, and see what it gets you.

The conclusion is clear : BAM valuates BPY's investment properties to exactly the same values as BPY. No hanky-panky - no shagging with numbers.

Please see attached.

So BAM at group level valuates investment properties according to IFRS by use a DCF model, where management fees, which are eliminated in the BAM consolidation, are included as a cash flow burden in the DCF model.

The only unknown variables in the calculations are values in the separate categories of investment properties held by BAM the parent, or by subs of BAM controlled directly without involving BPY. The IFRS value of these investment properties is USD 5.321 B at YE2017.

That would be a good question at a future conference call to get an explanation & identification of these properties.

So I was right even though i was dead wrong, lol
Title: Re: BAM - Brookfield Asset Management
Post by: khturbo on December 10, 2018, 11:52:01 AM
John thanks for responding in depth. I implicitly trusted that the valuations were clean between BPY and BAM, but it's good to see the hard numbers there.

I just emailed IR asking about the management fees and whether they're reflected in the IFRS value. I always thought that the IFRS value was simply the summation of the individual properties, which would imply that corporate level management fees aren't reflected, but I could be (and hope I am) wrong. I think Brookfield IR is usually pretty good at getting back to you within a couple of days so I'll let everyone know what they say.

One other thing is the IDRs. If you assume 5% distribution growth and use a 12% discount rate (I just used 7% yield + 5% growth as the approximate return on the stock so used the same dr on the IDRs) the NPV of the IDRs is a bit above $2 / BPY share. I think everyone would agree that that should come out of the value in some way. Whether you deduct the fees from the IDRs by BAM's 53% ownership percentage in BPY or you deduct ~$2 / share (or whatever your estimate is) from BAM's holdings in BPY, I think you have to do one of those or else you really are double counting.

You have the same issue with BIP and BEP. Hypothetically since BAM uses the market price in their SOTP for themselves you don't need to make adjustments as the market should account for IDRs in the prices. I personally prefer to value them independently for mine but I guess you don't need to.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on December 10, 2018, 11:31:01 PM
Thank you, Kyler,

Great initiative from you to get in contact with BAM IR about it. It's certainly better to ask the company and get confirmation [- or the opposite] with certainty, and perhaps also some supplemental elaboration. I'm looking forward to read the reply you'll get from BAM IR.
Title: Re: BAM - Brookfield Asset Management
Post by: jfan on December 11, 2018, 07:24:23 AM
... The only unknown variables in the calculations are values in the separate categories of investment properties held by BAM the parent, or by subs of BAM controlled directly without involving BPY. The IFRS value of these investment properties is USD 5.321 B at YE2017.

That would be a good question at a future conference call to get an explanation & identification of these properties.

Today my thoughts have been circling about this particular BAM asset item of USD 5.321 B. It's a lot of value, and material compared to BAM BV. [YE2017 : BAM common equity USD 24.052 B, so gross [ex. eventual property debt] : 22%.]

I'm getting nosy and really persistent here [verging to become stubborn as some donkey]. Next, I'm going to dismantle and compare the notes in the financials about investment properties for BAM and BPY. By doing that, it must be possible to identify these investment properties. As basis, it should not be possible to "hide" a value that large in the BAM financials, when the notes are in some way structured and set as an asset directory.

Why is it so? [That there are investment properties owned by BAM, and not by the separate sub for that purpose: PBY?]: I don't know right now, but I hope to find out.

A possible explanation could be, that there at the formation of BPY years ago were certain properties considered "core-core"/"top notch"/"ultra-valuable", where BAM did not want to share the future progress in value and cash yield with the BPY minority LP unit holders.

[Like "the beer" in  this old Carlsberg commercial (https://www.youtube.com/watch?v=KuRBuqKVfnk), where everything is shared in the commune - women, toothbrushes and such - but not the beer! [I think English translation is not needed! [ : - ) ]]

 Hi John,

I'm just curious where you got the USD 5.321 Other investment property number from? I've been searching for this differential between BAM and BPY's reports and can't seem to find it.

Thanks
Jerome
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on December 11, 2018, 07:37:16 AM
Hi Jerome, Welcome to CoBF! [ : - ) ],

You have to study the downloadable attachment to my post mentioning that particular figure. It's explained and documented there, cf. the content of my post.
Title: Re: BAM - Brookfield Asset Management
Post by: jfan on December 11, 2018, 11:49:53 AM
Thanks John.

Sorting through BAM's financials is a challenging task. I think you are right about BAM keeping some investment properties to themselves without placing them into BPY.

Looking back at BAM's and BPY's 2012 annual report. It would appear that at least from the property acquisition perspective that there were more BAM consolidated purchases than attributed to just BPY's activity.

As an example, in BAM's 2012 report, page 30 under Investment properties and PPE, there were $4.508 B of property acquisitions. Whereas in BPY's 2012 report, page 194 (F-22) note 5, there were only $2.58 B of property acquisitions. Similar thing occurred in 2013.

Unfortunately, their disclosure on these properties is not forthcoming.

The only other possibility is that they have re-allocated their sustainable timberland properties to higher value use (?Brazil agricultural lands).
They sold off $3+ Billion in timberland in 2013. The remaining is attributable to Acadian Timber Corp ~ $123 million (based on Market Value on Dec 2017) and the rest is unlisted ~ $613 million. This is usually located in the accounts receivable but again disclosure is not consistent to make a concrete conclusion that they were shifted out to investment properties.










Title: Re: BAM - Brookfield Asset Management
Post by: khturbo on December 11, 2018, 01:00:56 PM
The only unknown variables in the calculations are values in the separate categories of investment properties held by BAM the parent, or by subs of BAM controlled directly without involving BPY. The IFRS value of these investment properties is USD 5.321 B at YE2017.

I wonder if these properties are reflected as the "unlisted" investments? Unlisted was $5,885mm quoted and $4,797mm IFRS as per the discussion in at YE 2017. Seems pretty close.
Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on December 12, 2018, 03:03:24 AM
Ritzau via Boersen.dk [December 3rd 2018] : Media : Giants are bidding up to DKK 26 B for Ørsted subsidiary (https://borsen.dk/nyheder/virksomheder/artikel/1/373326/medier_giganter_byder_op_til_26_mia_kr_for_oersted-selskab.html?utm_source=forside&utm_campaign=nyhed_03). [Unfortunately only in Danish.]

Brookfield is mentioned in the article as a bidder. The article appear undocumented. I haven't been able to find that particular Bloomberg News article mentioned.

Radius is the Ørsted subsidiary distributing power to customers primarily in the northern part of Sealand, strategically for sale by Ørsted.

My personal judgement here is, that most PE funds etc. won't stand a chance here as bidder, based on the political sentiment here in Denmark after the dividend cases etc. related to Macquarie investing in Copenhagen Airport and TDC. [Ørsted is state controlled, but listed.]

Finans.dk [December 11th 2018] : Ørsted filters politically unwanted bidders (https://finans.dk/erhverv/ECE11065667/oersted-filtrerer-politisk-uoenskede-bejlere-fra/?ctxref=forside).
Title: Re: BAM - Brookfield Asset Management
Post by: jfan on December 12, 2018, 10:11:50 AM
The only unknown variables in the calculations are values in the separate categories of investment properties held by BAM the parent, or by subs of BAM controlled directly without involving BPY. The IFRS value of these investment properties is USD 5.321 B at YE2017.

I wonder if these properties are reflected as the "unlisted" investments? Unlisted was $5,885mm quoted and $4,797mm IFRS as per the discussion in at YE 2017. Seems pretty close.

No. The unlisted investments (IFRS amount $ 4797)on the pg3 of the 2017 annual report consists of Brookfield Energy Marketing ($801 Common equity), Brookfield Residential (common equity $2915), and $1081 of other unlisted investments. This "Other" category is consistent with the footnotes in the YE 2017 supplemental where its states $1.1 B of unlisted investments spread across real estate, private equity and sustainable resources.

Acadian is also follows similar IFRS Mark to Market accounting. Its market value is about $123 million. The sustainable resource common equity as quoted in the Infrastructure section of BAM's annual report is $736 million. My guess is that they have an excess of $613 million invested in other unlisted timberland resources.

Knowing this and the fact that the unlisted real estate investments are $72 (as disclosed in the 2017 supplemental).  There is probably $396 million in unlisted investments buried within the private equity portion.

Along the same lines, the "Other Listed" investments are Acadian Lumber and Norbord where BAM owns 45% and 49% of their respective shares. TERP is consolidated within BEP given that BAM owns Orion who in turns owns 51% of TERP.

If we estimate that the value of Acadian Lumber is $123 million and Norbord is $1801 million, plus the net cash and financial asset carried on the BAM corporate activities ($2255) gives you ~ $4179 million.

This estimate is roughly in line with the printed value of $4015 on BAM's annual report.

Knowing this, I think the most likely explanation for the $5.513 of other investment properties is that they are likely highly leveraged. The other investments in the real estate section ($72) is likely the residual amount.

BAM does state that they on occasion will use their corporate balance sheet to facilitate acquisitions so that they have a speed advantage when opportunities arise and so that they can close transactions efficiently.

Title: Re: BAM - Brookfield Asset Management
Post by: John Hjorth on December 12, 2018, 12:25:51 PM
Awesome posts from you gents recently, Kyler & Jerome!,

Please keep them coming! To me, it's like one guy asking a specific question, triggering another guy a new way to look at BAM things from another perspective, triggering a new analysis, and thereby new ways to look at it.
Title: Re: BAM - Brookfield Asset Management
Post by: Jerry Capital on December 12, 2018, 12:32:05 PM
Agreed thanks for your work.
Title: Re: BAM - Brookfield Asset Management
Post by: khturbo on December 13, 2018, 10:43:59 AM
Ok guys, just heard back from IR. Here's verbatim what I got back when I asked about management fees being reflected in NAV:

"The equity per unit we disclose reflects all assets and liabilities, not just the properties. Insofar as the management fee is reflected in net income, it’s also reflected in the equity per unit calculation."

I responded asking him to confirm that the management fees were reflected in net income as they appeared to be in the Q's. He replied that that was correct.

So the management fees are reflected in NAV, which means that it is certainly not double counting to put a multiple on the management fee and value BAM's stake in BPY at NAV (or some multiple thereof).

Agreed with the other posters. Lots of good info in here and appreciate all of the learnings!