Brookfield Corporation · NYSE:BN
Brookfield — Brookfield Asset Management — Investor Day (September 2009)
65 slides from Brookfield's investor day presentation, Sep 15, 2009
Slide 1: Brookfield Asset Management Investor Day
Brookfield Asset Management Inc. A GLOBAL ASSET MANAGEMENT COMPANY Focused on Property, Renewable Power and Other Infrastructure Assets Brookfield Asset Management Investor Day September 15, 2009
Slide 2: Cautionary Note Regarding Forward-Looking Statements
Cautionary Note Regarding Forward-Looking Statements This presentation contains forward-looking information within the meaning of Canadian provincial securities laws and other “forward-looking statements,” within the meaning of certain securities laws including Section 27A of the U.S. Securities Act
Slide 3: Brookfield Today
Overview Bruce Flatt Brookfield Today A global asset management company with over $80 billion of AUM Property Renewable Power Infrastructure 5 | Brookfield Asset Management Inc. 2
Slide 4: A Global Asset Manager
A Global Asset Manager Long-term, value-oriented investor 100 years of experience investing, operating and managing high quality assets globally Substantial capitalization – $20 billion permanent equity capitalization Sponsor and manage 20 private equity funds and partnerships since 2001 with capita
Slide 5: Business Strategy – Long Term Objectives are Unchanged
Business Strategy – Long Term Objectives are Unchanged Build and maintain “best-in-class” operating platforms Own high g quality q y assets through g leading g operating p g platforms p that generate g high g levels of sustainable free cash flow Finance assets on a conservative, long-term basis, wit
Slide 6: Moving to 2010 and Beyond
Moving to 2010 and Beyond All of our major businesses have performed as expected Our franchise, with institutions and financial counterparties, is better than ever The investment environment favours better returns than normal 10 | Brookfield Asset Management Inc. Acquisition Opportunities We are wel
Slide 7: Current Opportunities
Current Opportunities Acquiring high quality assets that are being sold into illiquid markets due to financial distress Utilizing strength of operating platforms to capture new businesses and build value Expanding institutional relationships by demonstrating strong relative performance of our strate
Slide 8: Recently Announced Initiatives
Recently Announced Initiatives $5B Real Estate Turnaround Consortium International pension funds and sovereign wealth funds Allocations of $300 million to $1 billion Global focus with emphasis on North America, Europe and Australasia C$1B Debtor-In-Possession Fund Economic Development Canada, CIBC a
Slide 9: Renewable Power Agenda
Renewable Power Richard Legault Agenda Overview of Portfolio Priorities Market Dynamics and Outlook – North America – Brazil Operating Profile – Positioned for Growth Future Growth Conclusion Q&A 17 | Brookfield Asset Management Inc. 8
Slide 10: Renewable Power Overview
Renewable Power Overview One of the world’s largest privately-held hydro portfolios – $12 billion* 3 Countries 3 countries: United States, Canada and Brazil 4,150 Installed Capacity (MW) 4,150 MW total installed capacity 63 River Systems 63 river systems 9 Power Markets 9 power markets ~1000 Employe
Slide 11: Priorities
Priorities 20 | Brookfield Asset Management Inc. Priorities Operations Deliver power to highest-value markets through secured transmission rights Continue to optimize portfolio and maximize revenues by generating during peak demand – 20% premium to market prices based on prior year’s track record Ma
Slide 12: Market Outlook – Key Drivers in North America
Market Dynamics and Outlook 22 | Brookfield Asset Management Inc. Market Outlook – Key Drivers in North America Reduced Supply response Outlook for industrial activity to reduced 2010-2011 in 2008/2009 demand Decrease in demand – Significant reduction in Load growth expected to 15% - 20% in North ne
Slide 13: Market Outlook – Gas Prices, Power Market and Carbon
Market Outlook – Gas Prices and Power Market New power plants needed in northeast North America 15,000 – 20,000 MW needed annually Forward Prices vs. CCGT(1) All-in Cost for load growth, post recession $/MWh 120 Shut-down of ageing plants $108 (400,000 MW of capacity 30 years or older) 100 New Engla
Slide 14: Market Outlook – Key Drivers in Brazil
Market Outlook – Key Drivers in Brazil Demand was less Market will Outlook for impacted than in y tight remain very g 2010-2011 North America Industrial demand Large hydro projects Economic recovery leads impacted by have long lead times to resumption of 4-5% recession: drop of 11% and are insuffici
Slide 15: Operating Profile – Positioned for Growth
Operating Profile – Positioned for Growth 28 | Brookfield Asset Management Inc. Operating Profile Stable cash flows and increasing operating margins – Contract profile provides downside protection – Ability Abilit to t consistently i t tl generate t premium i revenues from f un-contracted t t d asse
Slide 16: Operating Profile – Contract Profile and Storage Flexibility
Operating Profile – Current Hydroelectric and Wind Contract Profile 76% of LTA generation is under contract or hedged in 2010 and >45% contracted long term 80% of contracted revenue is with investment-grade counterparties Opportunity to capture value from un-contracted generation as energy prices ri
Slide 17: Operating Profile – Sensitivity Analysis
Operating Profile – Sensitivity Analysis Opportunity to capture value with rising energy prices We have significant leverage to increasing power prices with a low-cost position that protects us from downside risks 2011 Case C St Study d Sensitivity $1/mmbtu or Volume(1) Price(2) Total $7/MWh (TWh) (
Slide 18: The Renewable Power Opportunity
The Renewable Power Opportunity Key trends supporting continued growth in renewable power generation Widespread acceptance of climate change – Recognition of the impact of greenhouse gases – New N regulations l ti aimed i d att reducing d i coal-fired l fi d power; emergence off cap-and-trade Rising
Slide 19: Conclusion
Conclusion 36 | Brookfield Asset Management Inc. Conclusion Renewable energy is the fastest growing segment in the power business Hydro assets benefit from sustainable competitive advantages and a particularly strong credit profile in low-priced markets – Lowest cost, cost longest-life longest life
Slide 20: Q&A
Q&A 19
Slide 21: Property Agenda
Property Ric Clark Agenda Overview of Portfolio Operating Profile and Market Dynamics – Office – Development – Retail – Residential Accomplishments and Future Growth Conclusion Q&A 41 | Brookfield Asset Management Inc. 20
Slide 22: Global Reach With Local Insight
Global Reach With Local Insight One of the largest property investors worldwide BAM Global Real Estate Offices: Number of Offices 30 Number of Professionals 7,000 + Head Offices Operating Offices 42 | Brookfield Asset Management Inc. Global Property Operations $38 billion of property assets under ma
Slide 23: Office Portfolio
Global Office Operating Profile and Market Dynamics 44 | Brookfield Asset Management Inc. Office Portfolio 120 commercial property assets and 85 million square feet under management United States Canada Australia UK 60 Properties 29 Properties 20 Properties 11 Properties 47 m sq. ft. 20 m sq. ft. 10
Slide 24: Outlook in United States and Canada
Outlook in United States Challenges Office fundamentals continue to weaken – economic slowdown and lack of business and consumer confidence Employment figures could continue to decline into 2010 putting pressure on vacancy rates and economic fundamentals Tight credit constricting liquidity, pushing
Slide 25: Outlook in Australia and United Kingdom
Outlook in Australia Challenges Foreign banks have retreated home, making l di lending universe i smaller ll Remaining banks reluctant to lend on new deals even at higher interest rates Loan-to-value covenants continue to trigger mortgage pay-down requirements on otherwise stable assets Illiquid env
Slide 26: Global Office Operating Profile
Global Office Operating Profile Well positioned to ride out market downturn Average occupancy: 95.4% Average g annual lease rollover over next 3 years: y 5.7% Average lease duration: 8 years Average tenant quality: “A” rated Average net rent: 15% below current market Non-recourse financing: 93% Aver
Slide 27: Low Rollover Profile and Market Rent Upside
Low Rollover Profile Limited vacancy and minimal rollover exposure ensures continuity of cash flow, low capital expenditures and leasing costs 000's Sq. Ft. Current Country Occupancy Current 2009 2010 2011 2012 2013 2014 2015 2016+ Total U.S. 94% 2,659 605 1,607 2,623 3,497 7,143 2,975 3,922 17,402
Slide 28: High Quality Cash Flows and Long Duration Financing
High Quality Cash Flows Focus on high credit quality tenants ensures long duration cash flows 47% of leasable area is comprised of tenants rated A or better The balance of leasable area includes some of the world’s largest professional service firms Invested in markets with resilient economies that
Slide 29: Frequently Asked Questions
Frequently Asked Questions Questions Response U.S. Office Fund Brookfield’s share of the mezzanine debt is $0.8 billion refinancing fi i iin 2011 By 2011, net operating income of the Fund is expected to increase by 37% from acquisition Brookfield is well capitalized to fund any shortfall of the mezz
Slide 30: Property – Active Developments
Development Profile 58 | Brookfield Asset Management Inc. Property – Active Developments Approximately four million square feet of active developments which is 74% pre-leased Completed Under Construction Construction* Total Market Sq. Ft. % Leased Sq. Ft. % Leased Sq. Ft. % Leased U.S. 781 42% ― ― 7
Slide 31: Property – Held for Development
Property – Held for Development 16.3 million square feet in pipeline which will be selectively built out – 14.0 million square feet in North America – 2.3 million square feet in Australia Total capital invested to date of $0.8 billion Minimal ongoing capital expenditure required Will b build ild out
Slide 32: Global Retail Operating Profile
Retail Operating Profile 62 | Brookfield Asset Management Inc. Global Retail Operating Profile 25 centres – Brazil – 14 – Other Oth – 11 Average occupancy: 94% – Brazil – 94% – Other – 94 % Average lease duration: 7 years – Brazil – 5 years – Other – 10 years World Square Retail, Sydney 63 | Brookfi
Slide 33: Retail Outlook
Retail Outlook Challenges Vacancy rates in Latin America have moved up moderately while rental rates have flattened and in a few instances, declined Opportunities Continued growth in retail sales per square foot Brazil has overtaken Mexico as the most transparent real estate market in Latin America
Slide 34: Residential Portfolio and Outlook
Residential Portfolio 130,000 residential lot equivalents and 61 million square feet of condominium density provide the basis for future growth Brazil U.S. Canada Australia Condominiums Master planned Master planned Master planned communities communities communities and 61 million sq. ft of apartmen
Slide 35: Residential Operating Profile
Residential Operating Profile Quality developments and strong competitive positions in each market – Brazil – Leading g developer p in Sao Paulo and Rio de Janeiro with over 61 million square feet of condo development – Western Canada – leading developer with 23% market share and over 6,000 acres he
Slide 36: 2009 Accomplishments
Accomplishments and Future Growth 70 | Brookfield Asset Management Inc. 2009 Accomplishments Enhanced current returns through proactive management Completed 10 commercial developments (Australia 5 5, North America 5) on time and on budget Leased over 2.6 million square feet Refinanced $1.2 billion o
Slide 37: Investment Opportunities
Investment Opportunities As a result of challenging environment for real estate operators globally, there will be opportunities to buy assets or platforms at attractive returns Lack of funding, bleak investor sentiment and deteriorating coverage under loan- to-value covenants have reduced property v
Slide 38: Conclusion
Conclusion 74 | Brookfield Asset Management Inc. Conclusion Brookfield is very well positioned to benefit from the current environment Well located, highest quality commercial property portfolio generating stable cash flows One of the world’s largest real estate operating platforms providing unparal
Slide 39: Priorities
Priorities Invest consortium capital in high return real estate opportunities Although 80% of results highly stable, stable proactively manage all current assets and solidify current operations to maximize profitability Capitalize on U.S. housing woes as stabilizing market should yield opportunities
Slide 40: Infrastructure Agenda
Infrastructure Sam Pollock Agenda Overview of Portfolio Market M k tD Dynamics i and dOOutlook tl k Accomplishments and Future Growth Conclusion Q&A 79 | Brookfield Asset Management Inc. 39
Slide 41: Infrastructure – Current Portfolio
Overview of Portfolio 80 | Brookfield Asset Management Inc. Infrastructure – Current Portfolio ~$7 billion of assets under management in the Americas, UK and Australia Transmission Timber Social Agrilands Infrastructure $3 billion $3.5 billion $300 million $350 million 8,800 km in 2.5 million acres
Slide 42: Infrastructure Strategy and Transmission Profile
Infrastructure Strategy Long-life assets Acquire high quality Minimal sustaining capital requirements infrastr ct re assets infrastructure Stable cash flow due to barriers to entry or equivalent competitive advantage Apply disciplined Proactive business development to originate transactions approach
Slide 43: Operating Profile – Timber
Operating Profile – Timber Brookfield has built the sixth largest timberland estate in North America 2.5 million acres of high quality timberlands in eastern and western North America and Brazil Focus primarily on high quality Douglas fir and Whitewood 33,000 acres of higher and better use land Broo
Slide 44: Market Dynamics and Outlook – Transmission and Timber
Market Dynamics and Outlook – Transmission Transmission business continues to produce solid results despite impact of global recession – Supported by regulated frameworks and long long-term term contracts Favourable regulatory environments and growing electricity demand in our markets are increasing
Slide 45: Market Dynamics and Outlook – Timber cont’d
Market Dynamics and Outlook – Timber cont’d Favourable market conditions will allow implementation of our elevated harvest plan – 25% elevated harvest level for 10 10-year year period before returning to long long-run run sustainable yield level – Elevated harvest levels x 30% increase in pricing Æ
Slide 46: 2009 Accomplishments and Investment Opportunity
2009 Accomplishments Completed sale of Brazilian Transmission investment (TBE) for after tax proceeds of $275 million – Gain of $68 million Awarded $500 million, 480 km transmission development project in Texas Launched $400 million Colombia Infrastructure Fund Issued $300 million of long-term notes
Slide 47: Growth Opportunities – Transmission Operations and Platform
Growth Opportunities – Current Transmission Operations Existing network provides opportunities for participation in – Expected capacity upgrades in both markets – Customer-initiated expansion projects In second year of a five-year capital investment plan to invest $1 billion in upgrades and expansio
Slide 48: Texas Transmission Project and Timber Growth
Growth Opportunity – Leveraging our Transmission Platform Texas Transmission Development Project In January 2009, Brookfield and a partner awarded d d the th right i ht to t build, b ild own andd operate t $500 million of transmission lines in Texas Only participant without existing power operations
Slide 49: Current Investment Focus and Distressed Opportunities
Current Investment Focus North America South America Global – Opportunistic Regulated electricity and Regulated electricity and Regulated electricity and gas distribution gas distribution gas distribution Transmission systems Transmission systems Transmission systems Oil and gas pipelines Ports Tran
Slide 50: Brookfield Infrastructure Partners L.P.
Brookfield Infrastructure Partners L.P. Established as Brookfield’s primary vehicle to own and operate certain infrastructure assets on a global basis Structure Publicly-traded Publicly traded partnership Current yield ~ 6.5% managed by Brookfield Recently sold investment in Brazilian transmission f
Slide 51: Conclusion
Conclusion Global investors are increasingly embracing infrastructure as an asset class with compelling investment opportunities Growth in spending in this sector expected to average US$2 trillion annually through 2015 with increasing need for private vs. government investment Brookfield is well pos
Slide 52: Financial Review Agenda
Financial Review Brian Lawson Agenda Operating Performance Intrinsic I t i i Values V l Capitalization Currency and Interest Rates Liquidity Q&A 103 | Brookfield Asset Management Inc. 51
Slide 53: Operating Performance and Earnings Profile
Operating Performance We are benefiting from – Locked-in long-term revenues – Strong St operating ti margins i – Stable financing platform Commercial office – 95% leased with 8 year average term – Market rents exceed “in-place” rents by approximately 15% Renewable power – 80% of revenues sold forwar
Slide 54: Future Earnings Potential and Underlying Values
Future Earnings Potential Our base returns should be supplemented in the future by the following – Investment of current surplus liquidity – Normalized contributions from development assets and cyclical businesses – Reinvestment of free cash flow – Expansion of institutional fund activities and fees
Slide 55: Underlying Values – Going Concern Value; Solid Capitalization
Underlying Values – Going Concern Value – Illustrative* $36.50 Adjusted to Normalized Valuations(1) $8.00 $28 50 $28.50 Values Not Recorded Under IFRS $2.50 $26.00 IFRS Values(2) $4.00 $22.00 Share Trading Price $22.00 * For illustrative purposes only; not intended to be a forecast of future results
Slide 56: Solid Capitalization cont’d; Currencies and Interest Rates
Solid Capitalization cont’d Liabilities Property Shareholder Debt to (billions) Assets Corporate Subsidiary Specific Capital Capital Deconsolidated Book value $ 10.6 $ 2.3 $ 0.7 $ ― $ 6.3 28% Add: Underlying value adjustments 9.3 ― ― ― 9.2 Underlying value 19.9 2.3 0.7 ― 15.5 15% Add: Pro rata inter
Slide 57: Currency Views and Interest Rate Views
Currency Views We are naturally long foreign currencies BAM Equity U.S. 50% Canada 20% Brazil 15% Australia 10% UK 5% 100% We hedge foreign investments if we believe the currencies are meaningfully over-valued. l d Otherwise, Oth i we stay t naturally t ll long l We are comfortable with U.S. dollar
Slide 58: Liquidity and Capital Deployment
Liquidity and Capital Deployment Over the past two years, we have completed over $10 billion of financings and asset monetizations Our ability to do this is a direct result of the stability of our operating cash flows, the high quality of our assets, the conservative nature and flexibility of our fi
Slide 59: Significant Capital to Pursue Growth Opportunities
Significant Capital to Pursue Growth Opportunities Looking forward, we have over $10 billion of available capital to take advantage of the current environment and opportunities Currently over $3 billion of core liquidity Access to additional $7 billion of capital from partners to fund growth – $5 bi
Slide 60: Current Environment Improving
Conclusion Bruce Flatt Current Environment Improving Positive signs of a global economic recovery – Globally, central banks are supplying liquidity – Cost of capital and credit spreads are normalizing – The rapid deterioration of business fundamentals has stopped – Access to capital markets has impr
Slide 61: Well Positioned in the Current Environment
Current Environment Improving cont’d Though not all benefiting equally – Many companies and assets are overleveraged or poorly financed – Demand still lagging in consumer spending-related sectors – Labour market recovery still required for sustained recovery to take hold Opportunities for investment
Slide 62: Significant Franchise Value
Significant Franchise Value Our operations are able to leverage corporate expertise and the Brookfield brand to enhance underlying value over the long term BROOKFIELD Strategic direction Capital allocation Global relationships OPERATING PLATFORMS Access to deal flow f Transaction execution Operation
Slide 63: Final Thoughts
Final Thoughts This is an unprecedented period in recent history to acquire high quality assets and create value for investors Few companies have the capital, geographic presence, scale and depth of operations to take advantage of opportunities Brookfield has track record of expanding our operating
Slide 64: Bay Adelaide Centre Tour
Bay Adelaide Centre Tour Bob MacNicol 63
Slide 65: Management Team Presenting Today
Management Team Presenting Today Management Team Presenting Today Ric Clark, Senior Managing Partner Ric is the Senior Managing Partner, Property Operations. Ric joined Brookfield in 1996 and is responsible for the company's real estate operations. He is the CEO of Brookfield Properties and formerly
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