Brookfield Corporation · NYSE:BN
Brookfield — Brookfield Asset Management — Investor Day (September 2005)
34 slides from Brookfield's investor day presentation, Sep 21, 2005
Slide 1: Brascan Investor Day: A Specialist Asset Management Company
BRASCAN A SPECIALIST ASSET MANAGEMENT COMPANY FOCUSED ON PROPERTY, POWER AND OTHER INFRASTRUCTURE ASSETS INVESTOR DAY 09.21.2005 NEW YORK Agenda Welcome Bob Harding Introduction and Corporate Overview George Myhal Property Market and Strategy Ric Clark Power Market and Strategy Richard Legault Speci
Slide 2: Management in Attendance; Forward Looking Statement
Management in Attendance Barry Blattman Brian Lawson Jeff Blidner Richard Legault David Boyle Kelly Marshall Ric Clark George Myhal John Feeney Sam Pollock Bruce Flatt Bruce Robertson Bob Harding John Stinebaugh Clifford Lai Katherine Vyse 3 Forward Looking Statement This Corporate Profile contains
Slide 3: In Profile
INTRODUCTION AND CORPORATE OVERVIEW GEORGE MYHAL In Profile Brookfield Asset Management is an asset management company, focused on property, power and infrastructure assets. The company has $40 billion of assets under management, including 70 premier office properties and over 130 power generating p
Slide 4: In Profile: Goal and Investment Approach
In Profile OUR GOAL: Increase cash flow and intrinsic value on a per share basis 7 In Profile INVESTMENT APPROACH Patience and discipline to invest Invest on a value basis on a value basis should deliver at all times attractive long-term returns Leverage the industry and Apply our industry operation
Slide 5: Where We Came From; Where We Are
Where We Came From FIVE PART STRATEGIC PLAN Monetize resource investments Reinvest in property, power and infrastructure operations Establish an asset management focus for future growth Build distribution and administrative capabilities Enhance return on capital 9 Where We Are BENEFITS OF ASSET MANA
Slide 6: Competitive Advantages; Recent Developments
Competitive Advantages COMPETITIVE ADVANTAGES Industry focus and operating expertise Open communication and fast decision-making Willingness to commit own capital Broad product offerings 11 Recent Developments Acquiring 24 office properties through $1.7 billion O&Y transaction to seed our Canadian o
Slide 7: Recent Developments; Assets Under Management
Recent Developments Acquired 20 Canada Square in Canary Wharf, increasing our exposure to quality U.K. office properties Sold remaining Falconbridge common shares to Xstrata: – effectively eliminated exposure to the mining and metals sector – generated total proceeds of $2.7 billion Originated over
Slide 8: Assets Under Management; Fund Strategy
Assets Under Management Over $40 Billion of Assets Under Management Timber and Infrastructure Specialty / Other Island timber Tricap Restructuring East Coast timber Bridge Lending Fund Brazil timber Real Estate Finance Fund Closed-end funds Real estate securities Bonds / ABS $1.2 Billion $20 Billion
Slide 9: Fee Structure; Institutional Partners
Fee Structure Specialized funds are the highest margin asset management products generating recurring fees, as well as incentive fees TYPICAL FEE STRUCTURE Recurring Base Fee 1% - 2% of fund Fees Asset Operational management fees Management (eg. leasing or property management) One Time 10% - 20% in
Slide 10: Future Goal: Private Investments and Public Securities
Future Goal . . . focused on the following areas . . . . Current PRIVATE INVESTMENTS Property Power Timber / Infrastructure Specialty - Office - Power - Timber - Restructuring properties generation - Government opportunities - Industrial - Opportunity properties - Corporate - Retail funds - Transpor
Slide 11: Property
PROPERTY RIC CLARK Property 22
Slide 12: Commercial Market Trends and Strategy
Property COMMERCIAL MARKET TRENDS Decline in interest rates has driven North American real estate prices to new highs Capitalization rates for commercial properties continue to fall, although still attractive relative to government bonds The commercial property markets have come through in sol
Slide 13: U.S. and Canadian Directly Owned Office
Property U.S. DIRECTLY OWNED OFFICE Among the highest quality office portfolios in North America Portfolio size $8 billion 25 million sq. ft. 23 major office properties Average ROE 22% BAM investment 50% Investment focus High quality office properties Select markets Central business districts Repres
Slide 14: U.K. Office; Core Canadian Office Fund
Property U.K. DIRECTLY OWNED OFFICE Canary Wharf / 20 Canada Square - Foundation for future growth in the U.K. market Portfolio size $2.5 billion gross assets BAM investment 15% of Canary Wharf 80% of Canada Square Target return 15%+ Investment focus High quality office properties Technologically ad
Slide 15: Brazil Retail Fund; Residential Market Trends
Property BRAZIL RETAIL FUND Fund under development that leverages current operations in Brazil Target fund size $600 million BAM investment $200 million Seeded with select owned retail properties Target return 20% Investment focus Retail properties High growth markets 29 Property RESIDENTIAL MARKET
Slide 16: Residential Strategy; Directly Owned Residential
Property RESIDENTIAL STRATEGY Reduce risk by selling residential lots and reducing inventory Expand business through the use of non-recourse land purchase options as opposed to owning large land parcels directly 31 Property RESIDENTIAL DIRECTLY OWNED Portfolio size $3 billion 80,000 building lot
Slide 17: Power
POWER RICHARD LEGAULT Power Low cost, environmentally preferred power generation in key interconnected markets Brazil North America 34
Slide 18: Power Market Trends and Strategy
Power POWER MARKET TRENDS Fossil fuels continue to drive power prices in North America We have benefited from the resulting higher electricity prices Higher fuel prices are also increasing the cost of new generation We expect this to improve the underlying value of our portfolio 35 Power POW
Slide 19: Power Strategy; Great Lakes Hydro Income Fund
Power POWER STRATEGY Acquisition Over $2 billion invested in since 2002 Growth Acquired 107 power plants and 2,374 MW Development Investment of $650 million in new franchises Growth 8 hydroelectric power plants (2 under construction) 1 co-generation facility New transmission infrastructure Wind proj
Slide 20: U.S. and Canadian Directly Owned Hydro
Power U.S. DIRECTLY OWNED HYDRO Portfolio size $2 billion (book) 78 facilities 1,547 MW of installed capacity 2005 average ROE 22% Investment highlights High quality hydroelectric assets Primarily Northeast (New England, New York) Interconnected to multiple markets Representative investment 769 MW R
Slide 21: Brazil Hydro; Other Directly Owned Power
Power BRAZIL DIRECTLY OWNED HYDRO Portfolio size $0.2 billion (book) 12 facilities 205 MW of installed capacity 2005 ROE (est.) 25% Investment highlights Small hydroelectric power plants Acquired and/or developed Long-term contracts – inflation adjustments Local currency financing Representative inv
Slide 22: Specialty Funds: Market Developments
SPECIALTY FUNDS BARRY BLATTMAN Specialty Funds MARKET DEVELOPMENTS Pension funds continue to shift their investment portfolios into tangible income producing assets as they seek: – Current cash flow and income – Portfolio diversification – Reduced volatility – Inflation protection There is a rap
Slide 23: Specialty Funds Strategy; Property Finance Fund
Specialty Funds STRATEGY Expand our timber management operations Develop new infrastructure funds under management, in select markets where we can meet our return criteria: – Airports – Ports Expand our specialty activities, with a focus on four areas: – Commercial property mezzanine financing
Slide 24: Commercial Bridge Lending Fund; Timber Fund
Specialty Funds COMMERCIAL BRIDGE LENDING FUND Fund size $800 million $35,000,000 Acquisition Facility To finance the acquisition and Capital commitment 45% development of 300,000 sq.ft. of retail, office and entertainment properties The undersigned provided the above financing Target return 10% - 1
Slide 25: Public Securities: Market Developments
PUBLIC SECURITIES CLIFFORD LAI Public Securities MARKET DEVELOPMENTS Both the equity and debt markets in North America are trading near their all-time highs The opportunity cost of holding cash has been significantly reduced with the flattening of the yield curve Corporate credit spreads have
Slide 26: Public Securities Strategy; Crystal River Capital
Public Securities STRATEGY Emphasis on fixed income yield type investments where we can apply our industry knowledge and expertise to generate superior returns Strict adherence to value-oriented philosophy, performing our own fundamental research and analysis of investments Focus our activitie
Slide 27: Brookfield Soundvest Funds; Adjustable Rate Trust
Public Securities BROOKFIELD SOUNDVEST FUNDS A growing family of income trust-related closed-end funds Target market Retail investors Investment focus Stable distributions through active management of portfolios of income trusts Representative annualized return 25% (to Sept 05) Fund portfolio Divers
Slide 28: Strong Financial Position
INVESTMENT HIGHLIGHTS BRIAN LAWSON Strong Financial Position Significant $4 billion liquidity Cash flow per share growth of 10% plus Financial $800 million of free cash flow per year strength Low levels of corporate debt Multiple expansion P/E of 16x with substantial unutilized opportunity capital 5
Slide 29: Cash Flow From Operations; Cash on Cash Return on Equity
Cash Flow From Operations Our principal financial objective is to enhance intrinsic value and cash flow over the longer term $2.34 $2.14 Cash Flow Per Share $1.58 $1.37 $1.14 $0.89 1999 2000 2001 2002 2003 2004 57 Cash on Cash Return on Equity 2001 2005 2010 Goal 30%+ + 20% 14% 58
Slide 30: Active Share Repurchase Program; Dividend Policy
Active Share Repurchase Program In recognition of the underlying cash flow growth, we have been consistently repurchasing shares at discounts to underlying value – approximately 34 million since 2000 at an average cost of $12.69 per share 12.6 * (Millions) Average/Year 8.2 million Shares Repurchased
Slide 31: Share Performance Highlights
Share Performance Highlights Brookfield Asset Management has established a 20-year track record of share price performance which exceeds the S&P and TSX indices Common Share Price Compound Growth* BAM S&P TSX Years 5 36% (11)% 1% 10 20% 10% 10% 20 16% 11% 9% * Inclusive of dividends 61 SUMMARY AND Q
Slide 32: Summary; Comparative Asset Managers
Summary STRATEGIC PRIORITIES Continue to build out operating platforms Invest cash resources to enhance returns: – Property – Specialty Funds – Power – Infrastructure – Timber Convert more mature assets on balance sheet into funds to enhance ROE of overall business and maintain flexibility in
Slide 33: Unique Platform: Only the Beginning
Unique Platform . . . . ONLY THE BEGINNING Substantial capital to invest alongside clients Operating expertise in specialty asset management Historical track record in operations Deal execution capabilities 65 BRASCAN A SPECIALIST ASSET MANAGEMENT COMPANY FOCUSED ON PROPERTY, POWER AND OTHER INFRAST
Slide 34: Brascan Investor Day
BRASCAN A SPECIALIST ASSET MANAGEMENT COMPANY FOCUSED ON PROPERTY, POWER AND OTHER INFRASTRUCTURE ASSETS INVESTOR DAY 09.21.2005 NEW YORK
Brookfield Asset Management — Investor Day (September 2005) on 6ix