BAM - Brookfield Asset Management

[Spekulatius]

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.

[John Hjorth]

BAM 2017Q3 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.

[Cigarbutt]

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

 

[John Hjorth]

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.

[plato1976]

Is this one a sure double in 5 years?

 

BAM 2017Q3 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.

[flesh]

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!

[John Hjorth]

Is this one a sure double in 5 years?

 

BAM 2017Q3 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 . 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.

 

 

[John Hjorth]

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.

[james22]

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.)

[bookie71]

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.

 

[chrispy]

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.

[Uccmal]

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. 

[bizaro86]

From BAM perspective, BPY pays fees and GGP doesn't, so increasing BPY size is a benefit.

[LongTermView]

https://www.wsj.com/articles/a-global-real-estate-giant-whispers-were-number-one-1510937012

[no_free_lunch]

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.

[Spekulatius]

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.

[John Hjorth]

... 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.

[John Hjorth]

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. [ * ]

 

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.

[WhoIsWarren]

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

 

[chrispy]

This same piece has come up in Barron's and WSJ. it is addressed during BIP earnings call in the summer. Q2 I guess

[chrispy]

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 $$$

[John Hjorth]

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...].

[maxthetrade]

Good Interview with Bruce Flatt on Bloomberg:

https://finance.yahoo.com/video/brookfield-asset-management-trying-more-223839733.html

 

[cubsfan]

Max - thanks for posting. Excellent interview. I love this guy!

 

[longlake95]

Flatt is truly a cut above most CEO's.