BAM - Brookfield Asset Management

[bearprowler6]

Awesome quarter!  Flat really highlighted how strong the complex is right now and how they are buying back units.  BAM is one of my favorite stocks.  Also looks like the Partners units have been modified as well.... others??

 

what do you mean by modified?

 

https://www.ft.com/content/703f7cb7-674a-410c-82d7-d8ff18088390

 

Hopefully you will be able to access this article....

[bizaro86]

I couldn't get the article, and there is no update on Sedar for Partners Value. Is the change material?

[matts]

I worried it involved PVF as well, but the change is with Partners Limited, the very much private entity sitting on top of BAM. It has nothing to do with the public Partners Value Investments LP

 

 

 

 

Brookfield Asset Management has unveiled sweeping changes to its unusual ownership structure that for decades has given a secretive group of self-styled partners the right to wield huge influence over the $500bn investment firm.

 

 

 

The reforms strip Partners Limited, Brookfield’s governing “partnership”, of wide-ranging rights to control the NYSE-listed company.

 

Under the old structure, the Partners shareholders — not all of whom were identified in Brookfield’s annual securities filings — controlled a special class of shares that, along with their other interests, enabled them to appoint nine of the firm’s 16 directors and overrule motions supported by outside investors.

 

Those special shares will now be placed in a trust controlled by Bruce Flatt, Brookfield’s chief executive, and six other company officials, all of whom have been named. If a “fundamental disagreement” should break out among this inner circle, a designated back-up set of directors — which includes former British civil servant Gus O’Donnell — would temporarily take over the group’s powers.

 

[racemize]

I couldn't get the article, and there is no update on Sedar for Partners Value. Is the change material?

 

You can find it in the circular.  FT article isn't much different.

[fareastwarriors]

IKEA's shopping malls arm Ingka Centres plans U.S. entry in major play

 

https://www.reuters.com/article/us-ikea-ingka-centres-exclusive/exclusive-ikeas-shopping-malls-arm-ingka-centres-plans-u-s-entry-in-major-play-idUSKBN22Q2MF

[sundin]

No paywall:  https://technocodex.com/brookfield-revamps-unusual-ownership-structure/

 

Effectively this means more control for Jack Cockwell and Bruce Flatt.

 

Article mentions Gus O’Donnell as one of the 4 other directors. Anyone come across who the other 4 named directors may be?

[Uccmal]

I don’t know If people are making a big deal out of Bam’s ownership structure, or not, but it seems similar (more or less) to what you get with Berk, FFH, FB, Goog, MSFT or any number of other companies where the primary operators control the voting shares either via volume or multiples.  I t he case of a badly managed company like FFH it is bad.  In the case of a well managed company like Berk. It is good. 

 

I suppose if people think there is back room enrichment going on that is a different story.  A lot could be hidden in the back room I suppose but BAM has been operated like this for at least two decades.  That’s a long time to hide fraudulent activities. 

[bearprowler6]

I don’t know If people are making a big deal out of Bam’s ownership structure, or not, but it seems similar (more or less) to what you get with Berk, FFH, FB, Goog, MSFT or any number of other companies where the primary operators control the voting shares either via volume or multiples.  In the case of a badly managed company like FFH it is bad.  In the case of a well managed company like Berk. It is good. 

 

I suppose if people think there is back room enrichment going on that is a different story.  A lot could be hidden in the back room I suppose but BAM has been operated like this for at least two decades.  That’s a long time to hide fraudulent activities.

 

Al, as usual you cut through all the BS quite quickly. This is the key point. It is not so much the ownership structure that matters but the quality of the management. I hope you are keeping well.

 

[Xerxes]

I would also add Bombardier.

Family control turned into a liability.

[petec]

I would add that the argument that control is a liability when management is bad assumes that, in the absence of control, the market would choose a better manager. That is certainly not always true, and may not even normally be true. 3G, for example, say they find their best opportunities in companies that are not controlled, because the managers so often find ways to pad their own nests.

 

 

[Spekulatius]

I t he case of a badly managed company like FFH it is bad. 

 

That’s pretty heretical talking here.  It might get you confined to the “praising the virtues and glory of FFH” or the politics section.

[Uccmal]

I t he case of a badly managed company like FFH it is bad. 

 

That’s pretty heretical talking here.  Isn’t get you confined to the “praising the virtues and glory of FFH” or the politics section.

 

Yeah well.  I was a shareholder from 1996 to 2012 so I think I am qualified to comment honestly.  :-)

 

 

[Uccmal]

I would also add Bombardier.

Family control turned into a liability.

 

No kidding.  And government wanting to keep a home grown air business at all costs with no accountability. 

[StubbleJumper]

I would also add Bombardier.

Family control turned into a liability.

 

No kidding.  And government wanting to keep a home grown air business at all costs with no accountability.

 

 

The ultimate example in disastrous Canadian family control was probably Seagram's.  The Bronfman family had a strangle-hold on a large chunk of the booze-market, and then in one of those situations where talent seems to skip a generation, one of the up-and-comers in the family sold the booze business to get into the entertainment business.

 

 

SJ

[chrispy]

I think it is a classy move by Flatt to include various Brookfield leaders on applicable earnings calls

[John Hjorth]

I don’t know If people are making a big deal out of Bam’s ownership structure, or not, but it seems similar (more or less) to what you get with Berk, FFH, FB, Goog, MSFT or any number of other companies where the primary operators control the voting shares either via volume or multiples.  In the case of a badly managed company like FFH it is bad.  In the case of a well managed company like Berk. It is good. 

 

I suppose if people think there is back room enrichment going on that is a different story.  A lot could be hidden in the back room I suppose but BAM has been operated like this for at least two decades.  That’s a long time to hide fraudulent activities.

 

Al, as usual you cut through all the BS quite quickly. This is the key point. It is not so much the ownership structure that matters but the quality of the management. I hope you are keeping well.

 

Al always do. However, it's not totally BS to keep a focused eye on the controlling superstructure, with the aim to assess it & make judgements about how it evolves over time.

 

From the BAM 2020 management information circular, p. 8 :

 

... In addition, Mr. Timothy Price, a current director, is not standing for re-election to the Board. ...

 

From the BAM 2019 management information circular, p. 5 & 6 :

 

... About Partners Limited

 

Partners Limited is an Ontario corporation that was formed in 1995 and whose principal business mandate is to hold shares of the Corporation, directly or indirectly, for the long term. As at April 29, 2019, there were 38 Partners, and they collectively own, directly or indirectly, the common shares of Partners Limited. The following individuals, who are each direct or indirect shareholders of Partners Limited, are also current directors of the Corporation or named executive officers, as defined by applicable securities laws (“Named Executive Officers”), of the Corporation for 2018: Jeffrey M. Blidner, Jack L. Cockwell, J. Bruce Flatt, Brian D. Lawson,

Brian W. Kingston, Cyrus Madon and Samuel J.B. Pollock (see “Compensation Discussion and Analysis” on page 45 of this Circular for further information on “Named Executive Officers”). Additionally, Messrs. Cockwell, Kingston, Lawson, Madon and Pollock are directors of Partners Limited.

 

Partners Limited’s operations are governed by a shareholders’ agreement (the “Partners Shareholders Agreement”) to which each shareholder of Partners Limited (each, a “Partners Shareholder”), and each Partner, is a party. Certain decisions of Partners Limited require the approval of a majority of the Partners (irrespective of shares held) and other decisions require the approval of a majority or supermajority of shares held by the Partners Shareholders. Specifically, Partners Shareholders holding two-thirds of the shares of Partners Limited can at any time require a Partners Shareholder to sell his, her or its shares. The Partners Shareholders Agreement also provides that: (i) unless otherwise approved by holders of at least two-thirds of the common shares of Partners Limited, any sale of an interest in Partners Limited will only be made to other Partners Shareholders; (ii) any changes to Partners Limited’s by-laws, election of directors, dividend policy, principal investments, the issue or redemption of shares or admission of other individuals as Partners Shareholders require the approval of those holding at least two-thirds of Partners Limited’s common shares; and (iii) Partners Limited will offer to purchase 5% of its outstanding shares annually based on the stock market price of the Class A Shares, subject to Partners Limited’s financial capability at the time. An important business objective of Partners Limited, as expressed through the Partners Shareholders Agreement, is to ensure orderly succession of ownership, including Partners Limited’s direct and indirect ownership in shares of the Corporation.

 

For estate planning and other reasons, many of the Partners hold their interests in Partners Limited through holding entities on an individual or joint basis. One such holding entity (“Partners Holdings”) was the original sponsor of Partners Limited and is owned, directly and indirectly, by Jack L. Cockwell, J. Bruce Flatt and Timothy R. Price, all long-serving executives or former executives of the Corporation. Although Partners Holdings itself owns a majority interest in Partners Limited, none of the shareholders of Partners Holdings nor any other Partners own, on a look-through, proportionate basis, 50% or more of Partners Limited. The shareholders of Partners Holdings, as well as Partners Holdings itself, are signatories to the Partners Shareholders Agreement and are all therefore bound by its terms. Irrespective of Partners Holdings’ ownership percentage in Partners Limited and any arrangements between the shareholders of Partners Holdings, the Partners have the contractual ability to exercise control over material decisions of Partners Limited. ...

 

- - - o 0 o - - -

 

So, the baton is [just [- structure complicated, or not]] passed on.

[petec]

So one of the public market purchases was 7.3% of British Land:

https://www.bisnow.com/london/news/capital-markets/brookfield-buys-big-stake-in-british-land-104609#ath

 

Also I see BAM is selling some BEP:

https://seekingalpha.com/news/3577726-brookfield-renewable-in-500m-secondary-offering?utm_source=bloomberg&utm_medium=referral

 

 

[Xerxes]

https://www.reuters.com/article/us-brookfield-asset-commercial-real-esta-idUSKBN23H2UP

 

Pandemic will not be the end of office buildings, Brookfield CEO Flatt says

 

"But social distancing practices may ultimately be a boon for office building owners like Brookfield as companies seek to space out employees more. “We’ve had more tenants ask us for more space since this occurred than for less,” he said, “to accommodate more distancing."

[Gregmal]

https://www.reuters.com/article/us-brookfield-asset-commercial-real-esta-idUSKBN23H2UP

 

Pandemic will not be the end of office buildings, Brookfield CEO Flatt says

 

"But social distancing practices may ultimately be a boon for office building owners like Brookfield as companies seek to space out employees more. “We’ve had more tenants ask us for more space since this occurred than for less,” he said, “to accommodate more distancing."

 

I continue to be amazed by their balls. Yes, of course some of it is talking their book; but they also continue to put their money where their mouth is....in office and retail.

 

Personally owning select office and a mix of retail RE, I kind of agree, but it will be interesting nonetheless to see how this plays out. These are two of the most hated areas of the market, and have been for some time even prior to COVID.

[Shane]

https://www.reuters.com/article/us-brookfield-asset-commercial-real-esta-idUSKBN23H2UP

 

Pandemic will not be the end of office buildings, Brookfield CEO Flatt says

 

"But social distancing practices may ultimately be a boon for office building owners like Brookfield as companies seek to space out employees more. “We’ve had more tenants ask us for more space since this occurred than for less,” he said, “to accommodate more distancing."

 

I have to say... I find this to be concerning.  I think it is emotionally difficult for anyone in an entrenched position to recognize secular shifts that work against them.  How can this not be a negative for commercial office space?  At my firm, we have found employees are just as productive if not more productive at home.  Individuals with young children do seem to prefer coming into the office to get some peace and quiet, but the rest of the firm has now voted to come in ~3x per week on average even after the Pandemic is over.  We've sent everyone printers and monitors to set up home offices recognizing that this is a very long-term trend.  I hear the same from nearly everyone in my network.  We won't get rid of an office, but we won't prioritize it as a cost anymore either and we will likely downsize.

 

Additionally - aren't Twitter and Facebook permanently shifting to remote work?

 

[Gregmal]

Whats going on with respect to office, especially in lockdown areas, in the CRE space, is akin to forcing your significant other to sleep with other people. Theres absolutely zero good that can come of it. And the longer it goes on, the more normalized it gets for both parties. The problems that initially you deal with, hoping to eventually just go back to normal, the longer this goes on, you start figuring out how to solve. If it goes on long enough, it gets more comfortable and eventually you may even prefer it. For sure, a ticking time bomb.

 

I think the market is pricing public assets insanely opportunistically, so I agree with and like BAM's approach. But I think its hard to spin this as "a good thing".

 

For instance, you would think some areas are more resilient than others; my sister works for Lockheed and is based out of Orlando. Defense company, w/ high security clearance, southern red-ish state(no real lockdowns like on the coasts), at EARLIEST, they will be WFH until late August, but probably until end of year.

[fareastwarriors]

https://www.reuters.com/article/us-brookfield-asset-commercial-real-esta-idUSKBN23H2UP

 

Pandemic will not be the end of office buildings, Brookfield CEO Flatt says

 

"But social distancing practices may ultimately be a boon for office building owners like Brookfield as companies seek to space out employees more. “We’ve had more tenants ask us for more space since this occurred than for less,” he said, “to accommodate more distancing."

 

I have to say... I find this to be concerning.  I think it is emotionally difficult for anyone in an entrenched position to recognize secular shifts that work against them.  How can this not be a negative for commercial office space?  At my firm, we have found employees are just as productive if not more productive at home.  Individuals with young children do seem to prefer coming into the office to get some peace and quiet, but the rest of the firm has now voted to come in ~3x per week on average even after the Pandemic is over.  We've sent everyone printers and monitors to set up home offices recognizing that this is a very long-term trend.  I hear the same from nearly everyone in my network.  We won't get rid of an office, but we won't prioritize it as a cost anymore either and we will likely downsize.

 

Additionally - aren't Twitter and Facebook permanently shifting to remote work?

 

If everyone comes in at least 3 times a week, wouldn't the office space required be the same at least? Unless you guys plan to hot (hostel) desk?

[Xerxes]

I think commercial real estate doesn’t fall into “impaired” bucket.

I think it falls into “we-need-to-sit down and see how to take advantage of this but it will be a long haul” category. They were priced pre-covid as steady cash cows and got re-rated accordingly. 

 

I am working from home till September and we are looking at having post-covid half-WFH-office because of the change in the trend. But that doesn’t mean our offices are going away, just used differently.

 

Will there be pressure on rent; there will be no doubt.

[Xerxes]

See this article. I think it is worth reading.

I think too late for Brookfield to pivot on this but you can always get creative with RE.

 

https://www.economist.com/business/2020/05/30/the-e-commerce-boom-makes-warehouses-hot-property

[Shane]

https://www.reuters.com/article/us-brookfield-asset-commercial-real-esta-idUSKBN23H2UP

 

Pandemic will not be the end of office buildings, Brookfield CEO Flatt says

 

"But social distancing practices may ultimately be a boon for office building owners like Brookfield as companies seek to space out employees more. “We’ve had more tenants ask us for more space since this occurred than for less,” he said, “to accommodate more distancing."

 

I have to say... I find this to be concerning.  I think it is emotionally difficult for anyone in an entrenched position to recognize secular shifts that work against them.  How can this not be a negative for commercial office space?  At my firm, we have found employees are just as productive if not more productive at home.  Individuals with young children do seem to prefer coming into the office to get some peace and quiet, but the rest of the firm has now voted to come in ~3x per week on average even after the Pandemic is over.  We've sent everyone printers and monitors to set up home offices recognizing that this is a very long-term trend.  I hear the same from nearly everyone in my network.  We won't get rid of an office, but we won't prioritize it as a cost anymore either and we will likely downsize.

 

Additionally - aren't Twitter and Facebook permanently shifting to remote work?

 

If everyone comes in at least 3 times a week, wouldn't the office space required be the same at least? Unless you guys plan to hot (hostel) desk?

 

We will use up our current lease partly because we just expanded our footprint - so no hot seating this year.  The long-term goal is to provide hot seating for 25-50% of the office given it is pointless to pay for desks people aren't using. Also keep in mind we already had a few remote workers, but that wasn't the norm.  We've more or less been given the green light to live wherever we want now so I would imagine we have many more in 2021.