BAM - Brookfield Asset Management

[John Hjorth]

Here, I think I speak on behalf of all invested in BAM & active in this topic,

 

The point of the recent discussion here on CoBF about BAM is to test the long thesis, by careful analysis of the financials [, by digging for accounting inconsistencies & non-prudent accounting practices etc.].

 

It's about longs taking aim & giving "the duck" their best shot, to take it down from the sky.

 

Tough, & not easy [especially not with BAM as the target]. In short, - & sorry to say - if you do not dive in yourself with actual work on what's discussed, you'll likely never understand what's been discussed in this topic recently about BAM.

 

[petec]

Exactly. I’m heavily long and plan to be for a very long time. I am happy with complexity, but not dishonesty, and (separately) the more I understand the better. Digging is a very good use of my time, and I appreciate the direction (from Normax et al) as to where to look.

[walkie518]

I don't  know if this was addressed in the discussion, but it's worth noting as BAM and/or by extension BPY investors

 

Brookfield recently purchased a building from SL Green for ~$447m, I don't want to write about the transaction so much as plenty can be found in the link below and elsewhere around the internet:

https://therealdeal.com/2020/02/18/brookfield-fund-buying-315-west-33rd-street-from-sl-green-for-447m/

 

The deal was at a multiple over what they paid for say Amex, but the context is quite different and should be appreciated.

 

That is, this purchase was likely not one to make money on a single investment but to gain more control over a given area ... they will have greater control over rents.  For this reason, why Brookfield invests in an area, it seems that they do what they can to buy more and more in spitting distance...

[cubsfan]

This Flatt/Marks interview is about a month old, but I don't think it was posted:

 

 

 

 

 

[petec]

BAM have been talking about opportunity in energy infrastructure for a while now. I wonder if they can get something done in this environment?

 

(Obviously they’ve done quite a bit - eg Enbridge, Teekay - but they referenced MLP carveouts and take privates and I wonder if now’s the time.)

[chrispy]

This could be a great opportunity for BAM - yield has dropped further giving institutions more of a reason to invest in real assets, rates are lower, Oaktree on board

[petec]

This could be a great opportunity for BAM - yield has dropped further giving institutions more of a reason to invest in real assets, rates are lower, Oaktree on board

 

Agreed. It’s *almost* like they saw it coming...

[petec]

OAK deal looking more and more prescient, too.

[Viking]

they hold lots of highly illiquid stuff and lots of debt. What if we get a big credit crunch? How will a recession impact their business?

 

I love the company. I love the space they are in. The next 6 months could be a mess.

[petec]

they hold lots of highly illiquid stuff and lots of debt. What if we get a big credit crunch? How will a recession impact their business?

 

I love the company. I love the space they are in. The next 6 months could be a mess.

 

Who are you referring to? BAM or OAK?

 

OAK is perfectly placed for a credit crunch. They have capital lined up to raise and invest in juicy distressed debt.

 

BAM has been lengthening loan terms throughout the structure for years. They’re indebted, but it’s the right sort of debt (long and low, largely). And they always find ways to benefit from dislocations.

 

They’ve said that a crisis would depress earnings in years 2-3 but increase them in years 5-7. I expect that to be true. Intrinsic value is rising as the share price falls.

[Gregmal]

I'd love to rebuy this at $40 along with BX at $35. Maybe Monday?

[chrispy]

I can see this being a benefit long term but urbanization which is core to their philosophy is the exact opposite of what people are being asked to do right now. Stay at home and don't visit any real estate. GGP properties will be hit hardest

[petec]

I can see this being a benefit long term but urbanization which is core to their philosophy is the exact opposite of what people are being asked to do right now. Stay at home and don't visit any real estate. GGP properties will be hit hardest

 

Sure but that’s *very* short term - weeks or months. Plus GGP charges rents, most of which aren’t directly related to footfall. The risk is actually more retailers going bust due to lower revenues and/or supply chain issues. My guess is GGP waives some rents for a few weeks but the impact of that on property values is next to nothing.

[chrispy]

I agree with what you say. It does seem like this could exacerbate some retail bankruptcies

[scorpioncapital]

What do you see in bam that can't be recreated by holding 3 high quality reit, bank, Insurance company, telecom or energy stock separately which is the composition of many of their subs.

 

[petec]

What do you see in bam that can't be recreated by holding 3 high quality reit, bank, Insurance company, telecom or energy stock separately which is the composition of many of their subs.

 

1) Smart, contrarian management who can invest globally where they find value. This is very different to even a good management team running an existing/fixed set of assets.

2) Ability to expand asset base and therefore fees by raising OPM. This is BAM's fundamental business and it is completely different to any of the examples you give.

3) Oaktree, which is capable of raising lots of capital countercyclically and earning good returns (=fees and carried interest) on it.

 

OK, 2 and 3 are two sides of the same coin.

[Spekulatius]

What do you see in bam that can't be recreated by holding 3 high quality reit, bank, Insurance company, telecom or energy stock separately which is the composition of many of their subs.

 

10x EBITDA leverage on mostly retail assets, Nobody else comes close.

[scorpioncapital]

So would you say it's sort of like an investment bank like a KKR where they kick back to themselves some of the assets in part or in full that they manage or recommend?

[investmd]

BAM and Flatt have an aura of great culture and integrity. However recently 2 things have come out challenging this concept.

 

First there was the unfavourable FT article  (https://www.ft.com/content/595a77d0-3867-11ea-a6d3-9a26f8c3cba4) with title of "$500B secretive investment firm". Perhaps the article wasn't researched very well...fair enough.

 

Recently, in Aquamarine's 2019 Annual letter, Guy Spier discusses about dealing with Brookfied Business Partners & BAM where his fund is mutually invested in a company called Teekay Offshore. Spier writes: "The stock price continued to drift down, despite the company’s solid business results. Then Brookfield made a buyout offer at a sharp discount from the market price. It was only then that I realized that Brookfield had no intention of treating the rest of Teekay’s unitholders fairly or as equal business partners. I’m at a loss to explain why Brookfield would behave this way, especially given the importance of protecting its reputation." He concludes with "Even the “best” players are sometimes not as upstanding or honorable as they might seem."

 

I feel I've been burned by Watsa's aura in the past and feel vulnerable to something similar with Flatt.

[Sportgamma]

BAM and Flatt have an aura of great culture and integrity. However recently 2 things have come out challenging this concept.

 

First there was the unfavourable FT article  (https://www.ft.com/content/595a77d0-3867-11ea-a6d3-9a26f8c3cba4) with title of "$500B secretive investment firm". Perhaps the article wasn't researched very well...fair enough.

 

Recently, in Aquamarine's 2019 Annual letter, Guy Spier discusses about dealing with Brookfied Business Partners & BAM where his fund is mutually invested in a company called Teekay Offshore. Spier writes: "The stock price continued to drift down, despite the company’s solid business results. Then Brookfield made a buyout offer at a sharp discount from the market price. It was only then that I realized that Brookfield had no intention of treating the rest of Teekay’s unitholders fairly or as equal business partners. I’m at a loss to explain why Brookfield would behave this way, especially given the importance of protecting its reputation." He concludes with "Even the “best” players are sometimes not as upstanding or honorable as they might seem."

 

I feel I've been burned by Watsa's aura in the past and feel vulnerable to something similar with Flatt.

 

What fiduciary duty does Bruce Flatt have towards Guy Spier as a Teekay shareholder? What fiduciary duties did Warren Buffett have toward the shareholders in Dempster Mill?

 

I'm not familiar with the case, is BAM as a controlling shareholder willingly trying to depress the price of Teekay. Otherwise, this is just a risk of investing alongside a vulture in a deep value situation...

[scorpioncapital]

Aren't there usually minority dissenting rights ? From what I understand only in control situation and most likely in Delaware , American corporations. Sometimes I see why Buffet likes USA legal system for investment. You have to know the rules of the game.

[Packer16]

BAM and Flatt have an aura of great culture and integrity. However recently 2 things have come out challenging this concept.

 

First there was the unfavourable FT article  (https://www.ft.com/content/595a77d0-3867-11ea-a6d3-9a26f8c3cba4) with title of "$500B secretive investment firm". Perhaps the article wasn't researched very well...fair enough.

 

Recently, in Aquamarine's 2019 Annual letter, Guy Spier discusses about dealing with Brookfied Business Partners & BAM where his fund is mutually invested in a company called Teekay Offshore. Spier writes: "The stock price continued to drift down, despite the company’s solid business results. Then Brookfield made a buyout offer at a sharp discount from the market price. It was only then that I realized that Brookfield had no intention of treating the rest of Teekay’s unitholders fairly or as equal business partners. I’m at a loss to explain why Brookfield would behave this way, especially given the importance of protecting its reputation." He concludes with "Even the “best” players are sometimes not as upstanding or honorable as they might seem."

 

I feel I've been burned by Watsa's aura in the past and feel vulnerable to something similar with Flatt.

 

The one item not mentioned is Brookfield gave unit holders an option to retain their interest.  Unfortunately, for most funds this would be an illiquid asset that may cost the fund more dollars in determining yearly value than the future returns.  I definitely give Brookfield credit for doing something I do not think KKR or any other PE Fund would do.

 

Packer

[Wabash02]

Hey all,

 

A while back someone posted a link to a Canadian(??) site that showed purchases that BPY made of their own stock.  Anyone recall that and/or have that link to share?

 

Thanks

[longlake95]

Probably canadianinsider.com

[matts]

https://ceo.ca/api/sedi/?symbol=bam&amount=&transaction=&insider=