Author Topic: BAM - Brookfield Asset Management  (Read 289824 times)

vince

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Re: BAM - Brookfield Asset Management
« Reply #960 on: March 14, 2019, 03:28:16 PM »
Came across Opportunity zones when FRP holdings (real estate developer and quarry owner) disclosed that they were investing a portion of the proceeds from a RE sale (with a lot of capital gains) in to a joint venture with another developer targeting an opportunity zone. Depending on how many zones will exist and how large they are, the concept could be very significant for a player like BAM, I would think. Put a fund together targeting Opp. zones, identify and execute positive ROI projects that make sense on their own merit, rake in the fees by allowing investors with capital gains on other investments to defer taxes.

Yes, it sure does, much appreciated.

I definitely agree about the potential, they could create some successful asset gathering with those funds.  But do you remember Bam specifically addressing the opportunity?

2018 Investor Day - BPY presentation, page 69.

Yes, it was BPY.  Long day there and lots of info, but of course, what applies to BPY applies to certain degrees to BAM. 

https://bpy.brookfield.com/~/media/Files/B/Brookfield-BPY-IR-V2/ir-day/2018/ir-day-2018-bpy-transcript-final.pdf

Yes, it sure does, much appreciated.  I am pasting what was said on pg 11 of Bpy transcript...."Now, one development advantage that we have, versus others, which I think is really worth noting, is that our
Greenpoint and Mott Haven, and at least 30 of the potential developments within General Growth Properties, are all
located within the opportunity zone, as established last year by the Federal Tax Bill. For those of you not familiar
with that, the Treasury Department has certified more than 8,700 census tracks across the U.S., as economically
distressed communities where new investments, under certain conditions, some of the details still being worked out,
can be eligible for very substantial preferential tax treatment.
And, just sort of paraphrasing some of the benefits, you would get a deferred gain of any rolled over investment into
these new investments through 2026. And, those deferrals are not only real estate deferrals, meaning not only
Brookfield Property Partners – 2018 IR Day Transcript
Wednesday, September 26, 2018 – 11:15 AM ET
Page 12
deferrals of gains that you experience in real estate investments, but they could be equity investments or outside of
real estate, so basically, embedded gains in equity stocks.
You, also, would get a step up to fair market value in your basis for investments made and held for more than ten
years, so those gains would not be subject to tax, as well. This plan is a very good deal for investors wanting to roll
over and shelter gains, as I said, including non-real estate gains and, no doubt, is intended to spur development in
these so-called distressed areas.
Based on calls that we've been receiving, honestly weekly, we're very optimistic that we'll be able to attract efficient
capital to help fund many of these new developments that we have in mind.


khturbo

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Re: BAM - Brookfield Asset Management
« Reply #961 on: March 15, 2019, 05:53:36 AM »
https://concentratedcompounding.com/bam1/

Here's an effort to calculate earning's power and valuation for $OAK along with some of the strategic benefits.

vince

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Re: BAM - Brookfield Asset Management
« Reply #962 on: March 15, 2019, 05:50:48 PM »
https://concentratedcompounding.com/bam1/

Here's an effort to calculate earning's power and valuation for $OAK along with some of the strategic benefits.

Thx

vince

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Re: BAM - Brookfield Asset Management
« Reply #963 on: March 15, 2019, 06:25:11 PM »
https://concentratedcompounding.com/bam1/

Here's an effort to calculate earning's power and valuation for $OAK along with some of the strategic benefits.

Good straightforward analysis, exactly what I was looking for.  I too like the deal and the starting yield.  I think he's too conservative on earnings growth.  Not only did OAK historically grow aum's at a better clip than his estimate, BAM's umbrella should help, at least a little.  The one thing I don't like about the deal is the fact BAM is using shares as currency.  So whatever discount BAM received, half of the discount was offset by using cheap shares.  It has always bothered me that Flatt doesn't appreciate the value of BAM shares (through issuance and non aggressive buyback) as much as he claims he does.  Obviously things are not that simple sometimes.....and who am I to question his superb overall value creation.  However, even a casual, back of envelope calculation shows significant undervaluation (with considerable liquidity at the parent) for extended periods within last 10 years.

villainx

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Re: BAM - Brookfield Asset Management
« Reply #964 on: March 15, 2019, 07:44:31 PM »
https://concentratedcompounding.com/bam1/

Here's an effort to calculate earning's power and valuation for $OAK along with some of the strategic benefits.

Good straightforward analysis, exactly what I was looking for.  I too like the deal and the starting yield.  I think he's too conservative on earnings growth.  Not only did OAK historically grow aum's at a better clip than his estimate, BAM's umbrella should help, at least a little.  The one thing I don't like about the deal is the fact BAM is using shares as currency.  So whatever discount BAM received, half of the discount was offset by using cheap shares.  It has always bothered me that Flatt doesn't appreciate the value of BAM shares (through issuance and non aggressive buyback) as much as he claims he does.  Obviously things are not that simple sometimes.....and who am I to question his superb overall value creation.  However, even a casual, back of envelope calculation shows significant undervaluation (with considerable liquidity at the parent) for extended periods within last 10 years.

I'm kinda thinking OAK wanted to participate in BAM's future.  Which is why the deal was structured that way. OAK leadership thinks BAM has a bright future and at least wanted to steer the shareholder base that way.  I could be wrong, but OAK shares had been languishing, and BAM makes too much sense not to have a stake.  I might be naive, but how else would Marks and OAK leadership look after their shareholder group?

I also dig what you say about BAM not valuing their shares properly.  1, There were restructuring or correcting through these multi year span, whether with BBU, GCP, or the spinoffs.  2, There were serious growth opportunities in the various subs to not worry about those first.  3, And now when there's a relative calm, and there's a serious push to repurchase, bam, OAK happened.  My point being, share buyback was always there, but something always came up. 


Cigarbutt

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Re: BAM - Brookfield Asset Management
« Reply #965 on: March 15, 2019, 08:31:25 PM »
^I would add (respectfully) that this is what happens when predator meets vulture.

The two parties have an unusual focus on value but this is not the typical distressed opportunity transaction. The nature and timing of the deal likely underlines that BAM is using shares as a currency only because they will receive as much in business value as they will give.

On Mr. Flatt ("the perfect predator"):
https://www.canadianbusiness.com/business-strategy/brookfield-asset-management-a-perfect-predator/

On Mr. Marks ("one of the biggest vulture investors"):
https://www.referenceforbusiness.com/history/Oe-Pa/Oaktree-Capital-Management-LLC.html

FWIW, the Villette and Vuillermot book alluded to in the above mentioned canadian business 2010 article is excellent and is also available in English. The book does not mention Mr. Flatt but refers to leaders that are often named in other discussions: B. Arnault, G. Agnelli, V. Bolloré, W. Buffett, S. Walton etc. The book title is From predators to icons.

Synergies are often exaggerated but IMO not in this case.
I guess it's like when two tribal leaders agree to make an alliance.
« Last Edit: March 15, 2019, 08:53:52 PM by Cigarbutt »

vince

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Re: BAM - Brookfield Asset Management
« Reply #966 on: March 16, 2019, 09:11:21 AM »
https://concentratedcompounding.com/bam1/

Here's an effort to calculate earning's power and valuation for $OAK along with some of the strategic benefits.

Good straightforward analysis, exactly what I was looking for.  I too like the deal and the starting yield.  I think he's too conservative on earnings growth.  Not only did OAK historically grow aum's at a better clip than his estimate, BAM's umbrella should help, at least a little.  The one thing I don't like about the deal is the fact BAM is using shares as currency.  So whatever discount BAM received, half of the discount was offset by using cheap shares.  It has always bothered me that Flatt doesn't appreciate the value of BAM shares (through issuance and non aggressive buyback) as much as he claims he does.  Obviously things are not that simple sometimes.....and who am I to question his superb overall value creation.  However, even a casual, back of envelope calculation shows significant undervaluation (with considerable liquidity at the parent) for extended periods within last 10 years.

I'm kinda thinking OAK wanted to participate in BAM's future.  Which is why the deal was structured that way. OAK leadership thinks BAM has a bright future and at least wanted to steer the shareholder base that way.  I could be wrong, but OAK shares had been languishing, and BAM makes too much sense not to have a stake.  I might be naive, but how else would Marks and OAK leadership look after their shareholder group?

I also dig what you say about BAM not valuing their shares properly.  1, There were restructuring or correcting through these multi year span, whether with BBU, GCP, or the spinoffs.  2, There were serious growth opportunities in the various subs to not worry about those first.  3, And now when there's a relative calm, and there's a serious push to repurchase, bam, OAK happened.  My point being, share buyback was always there, but something always came up.

I don't think there's any question that Mark's wanted Bam shares and therefore if Flatt really wanted the deal then he had to give some up.  In addition, I believe that Bam received a better price, possibly lower than other firm offers, because of their record and likely good future.  I also agree with your bullets and thats why I qualified my opinion by saying that it's not so simple sometimes.  I dont't want to sound too critical, Bam has been in my portfolio longer than any other stock.

villainx

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Re: BAM - Brookfield Asset Management
« Reply #967 on: March 16, 2019, 10:08:43 AM »
I'm constantly reminded of the difficult investing truism.  I'm always looking to add to BAM because it's a company (or the various front people) that I admire and believe in the business prospects.  But I'm also impatient for the value to justify.  Haha, stock price can't go up fast enough unless when I'm buying, which is also happens to be regularly.  No other scorecard other than share price for whether it's undervalued or not.

John Hjorth

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khturbo

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Re: BAM - Brookfield Asset Management
« Reply #969 on: March 17, 2019, 07:56:53 AM »
Vince and villainx, thanks for the comments. I agree with your guys's thoughts as well. I think there's definitely a possibility that Oaktree grows quicker than I estimated it might. Vince I think you had it right when you said that "BAM's umbrella should help, at least a little." I'm hoping for a bit more growth than I estimated and I think it's fairly reasonable. I think we'll get a good idea of it next time we get a recession. It seems like there could be LOTS of distressed debt.

I also agree on the issue of valuing the shares. I'm sure Marks and Karsh wanted shares and it makes sense to give some to get the deal done. But BAM should still have plenty of liquidity and cash left after the deal - $2.35 bb cash for the deal, probably $2.5bb+ in fcf to the parent this year, and $1.7bb in cash once they sell the piece of real estate they took onto their balance sheet to syndicate. They might have a draw for the real estate fund but should definitely have at least $1bb for repurchases and probably a bit more.

If they do value the stock correctly, and since they're done with the growth initiatives, it feels like they'll use all of that money for a repurchase. I hope so anyways just like you do.