INVESTOR DAY 2011 - Brookfield Asset Management
INVESTOR DAY 2011 - Brookfield Asset Management
INVESTOR DAY 2011 - Brookfield Asset Management
You also want an ePaper? Increase the reach of your titles
YUMPU automatically turns print PDFs into web optimized ePapers that Google loves.
September 27, <strong>2011</strong><br />
<strong>INVESTOR</strong><br />
<strong>DAY</strong><br />
<strong>2011</strong>
Cautionary Note Regarding Forward-Looking Statements<br />
This presentation contains forward-looking information within the meaning of Canadian provincial securities laws and other “forward-looking statements” within<br />
the meaning of certain securities laws including Section 27A of the U.S. Securities Act of 1933, as amended, Section 21E of the U.S. Securities Exchange Act<br />
of 1934, as amended, “safe harbour” provisions of the United States Private Securities Litigation Reform Act of 1995 and in any applicable Canadian securities<br />
regulations. The words “strategy,” “objectives,” “outlook,” “priorities,” “build,” “maintain,” “continue,” “expand,” “opportunities,” “projected,” “expand,” “likely,”<br />
“expect,” “believe,” “could” and “should,” and derivations thereof and other expressions, including conditional verbs such as “will,” “can,” “may,” “would,” “could”<br />
and “should” are predictions of or indicate future events, trends or prospects or identify forward-looking statements. We may make such statements in this<br />
presentation, in other filings with Canadian securities regulators or the Securities Exchange Commission and in other communications. These forward-looking<br />
statements include, among others, statements with respect to: our financial and operating objectives and strategies to achieve those objectives; expansion of<br />
our relationships with institutional investors; our ability to capitalize on acquisition and development opportunities; expansion of our global footprint; the<br />
fundraising for seven funds in <strong>2011</strong> and 2012; our acquisition, development and operating expansion plans and opportunities; our strategic and operating<br />
priorities; our view and outlook of the industry conditions and investment environment in each of our core businesses and generally; our financing plans and<br />
objectives; our future operating performance, earnings and cash flows; our leasing pipeline in our office portfolio; targeted yields and returns at each of our<br />
businesses and overall; the creation and structure of <strong>Brookfield</strong> Renewable Energy Partners, including its anticipated benefits, financial performance, growth<br />
prospects, distribution profile, access to capital and successful completion; our ability to complete and effectively integrate acquisitions into existing operations<br />
and the ability to attain expected benefits; and other statements with respect to our beliefs, outlooks, plans, expectations and intentions.<br />
Although <strong>Brookfield</strong> believes that the anticipated future results, performance or achievements expressed or implied by the forward-looking statements and<br />
information are based upon reasonable assumptions and expectations, investors and potential investors should not place undue reliance on forward-looking<br />
statements and information because they involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or<br />
achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements and<br />
information. Factors that could cause actual results to differ materially from those contemplated or implied by forward-looking statements include: economic and<br />
financial conditions in the countries in which we do business; the behaviour of financial markets, including fluctuations in interest and exchange rates;<br />
availability of equity and debt financing and refinancing for the company and its affiliates; adverse hydrology conditions; tenant bankruptcies; regulatory and<br />
political factors within the countries in which we operate; acts of God, such as earthquakes and hurricanes; the possible impact of international conflicts and<br />
other developments, including terrorist acts; and other risks and factors detailed from time to time in the company’s form 40-F filed with the Securities and<br />
Exchange Commission as well as other documents filed by the company with the securities regulators in Canada and the United States, including in the<br />
company’s most recent year end <strong>Management</strong> Discussion of Financial Results under the heading “Business Environment and Risks.”<br />
We caution that the foregoing list of important factors that may affect future results is not exhaustive. When relying on our forward-looking statements to make<br />
decisions with respect to <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> and its affiliates, investors and others should carefully consider the forgoing factors and other<br />
uncertainties and potential events. Unless required by law, the company undertakes no obligation to publicly update or revise any forward-looking statements or<br />
information, whether written or oral, that may be as a result of new information, future events or otherwise.<br />
Currency<br />
All dollar figures are in U.S. dollars, unless otherwise indicated.<br />
2<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Agenda<br />
• Overview Bruce Flatt<br />
• Financial Review Brian Lawson<br />
• Global Property Ric Clark<br />
• General Growth Sandeep Mathrani<br />
• Infrastructure Sam Pollock<br />
• Power Richard Legault<br />
• Private Equity & Distress Investing Cyrus Madon<br />
• Conclusion Bruce Flatt<br />
3<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Overview<br />
Bruce Flatt
Current Environment: Half Empty – Half Full?<br />
Macro Challenges<br />
• U.S. economy is shaky<br />
• Europe is unstable<br />
• Stock, interest rate and currency<br />
markets are volatile<br />
• Credit crunch exists for some<br />
• Competitive environment<br />
for capital<br />
<strong>Brookfield</strong> Opportunity<br />
• Well capitalized with significant dry<br />
powder<br />
• Increasing client capital<br />
• Stable and growing cash flows<br />
• Unparalleled operating platforms<br />
• Global footprint to reallocate capital<br />
where opportunities are best<br />
• Track record of investing through<br />
economic turmoil<br />
• Significant depth of restructuring<br />
expertise<br />
5<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
We Have Momentum<br />
• Our core operations are performing well<br />
• We have established world class investment entities for offering income products to investors<br />
• Our relationships with institutional investors are expanding<br />
• We are capitalizing on a tremendous number<br />
of acquisition and development opportunities<br />
• Our global footprint is expanding in a measured way<br />
6<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Today: Leading Global Franchise<br />
100 offices or locations | 500 investment professionals | 18,000 operating employees<br />
North America<br />
$116 billion AUM<br />
UK, Western Europe &<br />
Middle East<br />
$4 billion AUM<br />
Asia & Australasia<br />
$18 billion AUM<br />
South America<br />
$16 billion AUM<br />
7<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Value of Our Global Footprint<br />
• We have an ability to allocate capital to the business or location which offers best risk/reward<br />
• We are never “forced” to invest where capital is plenty<br />
• This offers us access to a larger pool of international investors<br />
• We are better able to meet the needs of our international clients<br />
• It diversifies our cash flows<br />
8<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Client Capital<br />
• We are executing a dual strategy of public listed and private institutional capital<br />
• The Renewable Power reorganization is a major step forward in building out our flagship<br />
“income oriented” listed funds<br />
• We also continue to grow our institutional fund offerings which largely have an<br />
“opportunistic return” focus<br />
• We are well positioned for continued growth<br />
• Our performance has been “good to excellent”<br />
9<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Investment Performance<br />
Private Funds<br />
Core Plus<br />
Committed Capital<br />
(millions) Vintage Gross IRR 1<br />
Real Estate $ 3,910 2004 – 2007 10%<br />
Infrastructure 4,020 2006 – 2010 14%<br />
Timber 2,130 2005 – 2009 6%<br />
Opportunistic<br />
Real Estate $ 7,050 2006 – 2009 32%<br />
Private Equity 1,860 2001 – 2006 26%<br />
1<br />
Unless otherwise indicated, internal rates of return (including targeted rates of return) are presented on a “gross” basis (i.e., they do not<br />
reflect management fees, carried interest, taxes, transaction costs and other expenses to be borne by investors in our funds, which in the<br />
aggregate are expected to be substantial and which would reduce the actual returns experienced by an investor)<br />
Note: Past performance is not indicative of future results and there can be no assurance that any fund or investment will achieve comparable<br />
results, that our funds will be able to make investments similar to the historic investments presented herein (because of economic conditions,<br />
the availability of investment opportunities or otherwise)<br />
10<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Recognition as Leading Alternative <strong>Asset</strong> Manager<br />
• #1 ranked Global Real Estate Investment Manager by<br />
Institutional Real Estate Managers Guide (Total AUM)<br />
• Ranked among top 10 Global Fund Managers by<br />
Preqin Alternative <strong>Asset</strong>s<br />
– #4 Infrastructure Fund Manager<br />
(by Estimated Available Capital)<br />
– #8 Infrastructure Fund Manager<br />
(by Total Funds Raised 1 )<br />
– #9 Real Estate Fund Manager<br />
(by Estimated Available Capital)<br />
– #7 Real Estate Fund Manager<br />
(by Total Funds Raised 1 )<br />
1<br />
Total funds raised in last 10 years<br />
11<br />
| | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
We are Always Looking at New Ways to Access Capital<br />
Our Goals<br />
• To bring more of our assets under management into fee bearing entities that are pure play real<br />
asset investment vehicles<br />
• Each of our core operations will have one major flagship public entity and one flagship private<br />
fund, supported by smaller niche private equity funds, if opportunities exist<br />
• By end of <strong>2011</strong> we will have two major listed “Funds”<br />
– <strong>Brookfield</strong> Infrastructure Partners, and<br />
– <strong>Brookfield</strong> Renewable Energy Partners<br />
12<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
<strong>Brookfield</strong> – 2012<br />
<strong>Brookfield</strong><br />
(BAM)<br />
28% 73% 100% 100%<br />
<strong>Brookfield</strong><br />
Infrastructure Partners<br />
(BIP)<br />
<strong>Brookfield</strong> Renewable<br />
Energy Partners<br />
(BREP)<br />
<strong>Brookfield</strong><br />
Property Partners<br />
<strong>Brookfield</strong> Private<br />
Equity Partners<br />
<strong>Brookfield</strong> Americas<br />
Infrastructure Fund<br />
<strong>Brookfield</strong><br />
Real Estate<br />
Opportunity Funds<br />
<strong>Brookfield</strong> Special<br />
Situation Funds<br />
+ legacy / niche<br />
funds<br />
+ legacy / niche<br />
funds<br />
+ legacy / niche<br />
funds<br />
13<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
The Institutional Fund Raising Environment<br />
• Considerably better than it was two years ago<br />
– Real asset strategies are appealing for investors seeking stability and<br />
real returns<br />
– More money is being dedicated to alternatives<br />
– Clients are seeking fund managers with proven performance – which we have<br />
coming out of the recession<br />
– We are now recognized as one of a small group of leading global alternative<br />
asset managers<br />
Institutions need to earn more than 1% in bonds<br />
14<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Expansion in Private Funds<br />
2005 <strong>2011</strong><br />
Number of Fund Investors 13 105<br />
Third-Party Capital ($ billions) 2 53<br />
Number of Funds 5 21<br />
Average Commitment ($ millions) 156 163<br />
15<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
High Quality, Diversified International Client Base 1<br />
Investors by Geography 2<br />
22%<br />
Canada<br />
USA<br />
42%<br />
15%<br />
Asia<br />
South America<br />
1%<br />
8%<br />
Europe &<br />
Middle East<br />
12%<br />
Australia/<br />
New Zealand<br />
1<br />
Includes Private Fund and Public Securities clients<br />
2<br />
Based on dollars committed to Private Funds and Public Securities and Equity Strategies<br />
16<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Role of Private Funds<br />
• We are placing considerable emphasis on establishing very large capitalization listed funds<br />
which will own a substantial part of the capital in our major businesses<br />
• Private funds, however, will continue to be an important part of our business, for the<br />
following reasons<br />
– Better suited for more sophisticated investment strategies. Our listed funds<br />
have been positioned as lower volatility, high payout cash flow entities<br />
– Fee economics are likely better for certain investment strategies<br />
– They allow us to have deep relationships with major global investment partners<br />
– Capital can be drawn down over a committed period of time<br />
• Accordingly, we remain committed to establishing large flagship sector private funds,<br />
as well as selected niche strategies<br />
17<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Well Positioned for Growth<br />
• Over $24 billion institutional client commitments to private funds<br />
• $8 billion in dry powder<br />
• Seven funds in fundraising in <strong>2011</strong> and 2012, with target<br />
commitments of $7 billion – including $3 billion of <strong>Brookfield</strong>’s<br />
principal capital<br />
• Over 30 professionals worldwide committed to providing the<br />
highest level of service to investors<br />
18<br />
| | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Overview<br />
Business<br />
Value Creation
Value Creation<br />
We don‟t need “Transformational” deals to create value<br />
#1<br />
Operational Improvements<br />
for Revenue and Expenses<br />
#2<br />
Incremental Expansion of<br />
Existing Operations<br />
#3<br />
Acquisitions<br />
#4<br />
Re-financings to<br />
Surface Liquidity and<br />
Reduce Costs<br />
20<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
#1<br />
Operational Improvements<br />
• Leased 4.4 million square feet of office space in<br />
first six months<br />
• Accessed higher value markets for output from<br />
renewable power assets, generating over $25 million<br />
of incremental cash flow this year<br />
• Increased Brazil retail lease rates by 13% on renewals<br />
• Investing £30 million to double container capacity at<br />
UK port<br />
• Re-tenanted several U.S. malls with category leading<br />
retailers and added specialty anchor stores to increase<br />
traffic and sales<br />
• Increased operating margins by 10% in our construction<br />
business year-over-year (Q2)<br />
21<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
#2<br />
Selective Operating Expansions<br />
• New rail contracts to add incrementally<br />
– $150 –$200 million of EBITDA<br />
– Throughput of 24 million tonnes per annum<br />
• 400 MW of hydro and wind construction – $1.2 billion<br />
• Texas transmission project – $750 million<br />
• Strong renewable development pipeline – 2,000 MW<br />
• $2 billion of retail mall redevelopments<br />
• Headquarters office property for BHP Billiton in<br />
Australia<br />
22<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
#3<br />
Acquisitions<br />
• Two Chilean toll roads – $340 million<br />
• 30 MW hydro facility in Brazil – + $200 million<br />
• 370,000 square foot office property – $150 million<br />
• Two office towers in Australia – +$250 million<br />
• 75% interest in 1.8 million square foot office property in<br />
Midtown Manhattan – $520 million<br />
• 55% interest in 480,000 square foot luxury mall in<br />
St. Louis, MO<br />
• Timber and agricultural land acquisitions in our<br />
Brazil Funds<br />
23<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
#4<br />
Re-financing to Surface Liquidity and Lower Rates<br />
• $4.5 billion of unsecured corporate borrowings<br />
completed<br />
• $8.2 billion of asset specific financings completed,<br />
including<br />
– >$2 billion of retail property mortgages<br />
– $3 billion of office property mortgages<br />
• $1.5 billion of common share issuances<br />
• $900 million of equity/asset sales<br />
• $235 million of preferred share issuances<br />
24<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Overview<br />
Investment<br />
Environment
Our View of the Investment Environment…<br />
26<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Investment Environment – Australia<br />
• Benefitting from strong growth driven by the resource industry<br />
• Our focus is on expansion opportunities where we have incumbent status and benefit from<br />
barriers to entry…<br />
– <strong>Brookfield</strong> Rail<br />
– Expansion of our coal terminal<br />
– Office property developments – City Square in Perth; other Perth and Sydney opportunities<br />
– Construction company expansion<br />
• We are selectively pursuing acquisitions<br />
– Completed tuck-in office property acquisitions at attractive valuations<br />
– Recent trophy asset transactions have received premium valuations<br />
but some public market assets trading at discounts<br />
27<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Investment Environment – Brazil and Chile<br />
• Like Australia, benefitting from incredible growth drivers from resource industry,<br />
but also from strong demographic growth<br />
• Our established presence, together with less developed private investing market,<br />
gives us a competitive advantage over many in pursuing acquisitions<br />
• We continue to launch private funds targeting opportunities in a number of asset classes<br />
• Particular areas of interest include<br />
− Hydroelectric, both buy and build<br />
− Agriculture<br />
− Timberlands<br />
− Private equity<br />
• The agriculture story is incredible<br />
• We are seeing continued strong growth in residential and retail mall operations<br />
• We are focused more on complex transactions, particularly assets or<br />
businesses owned by European entities in distress, as trophy asset auctions<br />
command premium valuations<br />
28<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Investment Environment – Canada<br />
• Relative strength and stability of economy and capital markets has<br />
resulted in fewer acquisitions opportunities<br />
• Focused on organic growth through<br />
– Very strong office leasing markets<br />
– Continued energy driven strength in Alberta residential business<br />
– Selective hydroelectric and wind energy developments<br />
• We believe there may be favourable energy opportunities in the renewables sector<br />
and related infrastructure, i.e. transmission line investments<br />
• There are growth and selective niche opportunities which arise due to our market profile<br />
29<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Investment Environment – United States<br />
• Slow economy will favour the strongest assets<br />
• Housing remains weak, although opportunities are not readily apparent<br />
• Capital access is constrained for a number of owners – giving rise to opportunities<br />
• Wind energy acquisitions and property deal developments are attractive due to excessive<br />
hubris in prior years, and subsequent decline in energy and property prices<br />
• Low interest rates increase attractiveness of cash flowing assets<br />
• Consequently, we are focused on monetizing “clean assets” for premium valuations and<br />
reinvesting into quality assets that require refinancing and/or redevelopment activity<br />
• We are positioning ourselves to participate in broader infrastructure renewal and expansion<br />
across the U.S.<br />
• We would love to find another distressed GGP, where our capital<br />
is different from others<br />
• Our size offers us opportunities most don’t have<br />
30<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Investment Environment – Europe<br />
• We have been building our presence in Europe for three years with few<br />
transactions to date, but waiting for the right opportunity<br />
• While the ongoing sovereign debt crisis has created considerable paralysis, it has also created<br />
urgency and distress that proactive owners will have to respond to<br />
• We are particularly focused on European owners or financiers of infrastructure and energy<br />
businesses in Latin America<br />
• We are also working with a number of local entities to acquire assets or assist them recapitalize<br />
• Our ability to acquire on a value basis provides a greater margin of safety for investing in<br />
continental Europe<br />
• Like always, the pay-offs could be significant but they are not without risk – the number one,<br />
a Euro break-up<br />
31<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Looking Ahead: Strong Prospects for Continued Growth<br />
Developments<br />
Expanded & New Platforms<br />
Client Capital Additions<br />
Organic Growth<br />
32<br />
| | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Financial Strength<br />
Brian Lawson
Agenda<br />
• Key Themes<br />
• Financial Profile<br />
• <strong>Asset</strong> <strong>Management</strong> Update<br />
• Growth Potential<br />
34<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Key Themes<br />
• Operations performing well, but below full potential<br />
– Core assets provide stability and downside protection, with favourable growth prospects<br />
through price increases and capital rotation<br />
– Shorter cycle businesses (private equity and development) will benefit from eventual<br />
U.S. recovery<br />
• Continued emphasis on locking in low financing rates and extending term<br />
• Liquidity profile remains high – numerous acquisition and development opportunities<br />
• Poised to reap meaningful returns from asset management contracts<br />
35<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Capitalization and Liquidity<br />
Capitalization<br />
• Conservative and stable debt-to-capitalization<br />
12%<br />
– Corporate 14%<br />
– Proportionate 44%<br />
13%<br />
• Average 8-year term at corporate level<br />
• Continue to extend term and lock in lower rates across capital structure<br />
75%<br />
Liquidity<br />
• $4.3 billion core liquidity at June 30; $3.0 billion at corporate level<br />
• Nearly $20 billion of our invested capital in the form of listed securities<br />
• $8.1 billion of “dry powder” in funds<br />
36<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Three Interconnected Parts of the Business<br />
Intrinsic<br />
Value to<br />
<strong>Brookfield</strong><br />
Cash<br />
Flow<br />
(LTM 1 )<br />
Descriptions<br />
Manager $ 4 b $ 245 m • $53 billion of client capital under management<br />
Principal Capital 25 b 1,369 m • <strong>Brookfield</strong> capital invested alongside clients<br />
Services 1.6 b 129 m<br />
• Related services such as construction and<br />
corporate relocations<br />
Manager<br />
Intrinsic Value<br />
($33 billion total 2 ):<br />
Services<br />
12%<br />
5%<br />
Corporate 8%<br />
75%<br />
Principal Capital<br />
1<br />
Last 12 months<br />
2<br />
Includes corporate of $2.8 billion<br />
37<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Manager<br />
• 20+ private funds and 3 externally managed listed entities<br />
• LTM Performance:<br />
(millions)<br />
Base Fees $ 189<br />
Transaction and advisory 39<br />
Performance Income – recognized 17<br />
245<br />
Performance Income – unrecognized 354<br />
$ 599<br />
• Value creation through<br />
– Increasing capital under management Base Fees<br />
– Exceeding performance benchmarks Performance Income<br />
• Currently attributed $4 billion of intrinsic value<br />
38<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Principal Capital<br />
• $25 billion of net tangible asset value invested in operating platforms and funds alongside<br />
our clients<br />
• LTM Performance:<br />
(millions)<br />
Renewable Power $ 401<br />
Commercial<br />
office<br />
retail<br />
332<br />
98<br />
Infrastructure 172<br />
1,003<br />
Development 186<br />
Private Equity 180<br />
$ 1,369<br />
• Value creation through<br />
– Continuous improvement within operations and judicious capital allocation toward<br />
development, expansion projects and acquisitions<br />
39<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Financial Profile<br />
(billions)<br />
<strong>Brookfield</strong>‟s<br />
Invested Capital<br />
Client<br />
+ Capital =<br />
Total<br />
Capital<br />
Total<br />
<strong>Asset</strong>s<br />
Renewable Power $ 8 $ 2 $ 10 $ 16<br />
Commercial Properties Office 6 16 22 40<br />
Retail 4 5 9 37<br />
Infrastructure 2 10 12 18<br />
Development 3 2 5 15<br />
Private Equity & Finance 2 18 20 22<br />
25 53 78 148<br />
Services 2 2 2<br />
Corporate 2 2 4<br />
$ 29 $ 53 $ 82 $ 154<br />
40<br />
<strong>Brookfield</strong>‟s Invested Capital<br />
($29 billion total):<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.<br />
Office 19%<br />
27% Renewable Power<br />
Retail 14%<br />
7%<br />
7%<br />
Infrastructure<br />
10%<br />
Corporate<br />
Private Equity<br />
12%<br />
5% Development<br />
Services
Cash Flow Stability – Office<br />
(millions) 2010 2009 2008<br />
Net operating income 1 $ 1,053 $ 1,020 $ 997<br />
% occupancy 95% 95% 97%<br />
Average net rent (psf) $ 27.71 $ 26.84 $ 23.42<br />
1<br />
Normalized for constant currency exchange rates<br />
• 7-year average lease term<br />
• Occupancy over past 10 years<br />
– Max 97%<br />
– Min 93%<br />
– Avg 96%<br />
• In-place rents at 20% discount to market rents<br />
41<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Cash Flow Stability – Power<br />
(millions) 2010 2009 2008<br />
Revenues 1 $ 1,182 $ 1,036 $ 1,079<br />
Average realized price $ 80 $ 72 $ 79<br />
% long-term contracts 71% 52% 48%<br />
Contract price $ 86 $ 75 $ 72<br />
Impact of 10% variance in short-term price<br />
Total $ 29 $ 43 $ 50<br />
% of total revenues 2.5% 4.2% 4.6%<br />
1<br />
Normalized for constant currency exchange rates and long-term average hydrology<br />
• Average term of long-term contracts – 13 years<br />
• Solid counterparty credit quality<br />
42<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Cash Flow Stability – Infrastructure<br />
(millions)<br />
Net operating income 1<br />
Q2<br />
<strong>2011</strong><br />
Q1<br />
<strong>2011</strong><br />
Q4<br />
2010<br />
Utilities $ 117 $ 113 $ 106<br />
Transport and energy 62 71 54<br />
Total $ 179 $ 184 $ 160<br />
1<br />
Normalized for constant currency exchange rates<br />
• 80% of NOI governed by regulatory regime or long-term contracts<br />
• Increasing stability through additional take-or-pay contracts<br />
• Regulatory rate reviews provide real return step-ups<br />
43<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Client Capital – $53 Billion<br />
(billions)<br />
Private<br />
Funds<br />
1<br />
Listed<br />
Issuers<br />
Public<br />
Securities<br />
Other<br />
Listed<br />
Entities<br />
Total<br />
Renewable power $ 0.6 $ 1.7 $ $ $ 2.3<br />
Commercial properties 7.8 1.6 7.2 5.0 21.6<br />
Infrastructure 5.5 2.9 1.1 9.5<br />
Development 0.3 1.6 1.9<br />
Private equity and finance 3.4 14.0 0.7 18.1<br />
2<br />
$ 17.6 $ 6.2 $ 22.3 $ 7.3 $ 53.4<br />
3<br />
1<br />
Private funds capital includes $8.1 billion of uninvested capital<br />
2<br />
Publicly listed entities that are externally managed by <strong>Brookfield</strong> (i.e. <strong>Brookfield</strong> Infrastructure Partners)<br />
3<br />
Publicly listed affiliates of <strong>Brookfield</strong> without management contracts (i.e. <strong>Brookfield</strong> Office Properties)<br />
44<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Average Fee Structure<br />
Base Fees 1<br />
Carried<br />
Interest<br />
2<br />
Return<br />
Hurdle<br />
Private Funds<br />
Core and value add 100-150 bps 17% 9%<br />
Opportunistic and private equity 150-200 bps 20% 12%<br />
Weighted Average 125-150 bps 18% 10%<br />
Listed Issuers 125 bps 15/25% 15/25%<br />
1<br />
Excludes Turnaround Fund which pays a carried interest only, and Bridge Lending funds<br />
2<br />
Carried interest in Private Funds represents interest in excess distributions over invested capital; in Listed Funds represents interest in<br />
distributions over predetermined hurdle<br />
45<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
($ millions)<br />
Increasing Base <strong>Management</strong> Fees<br />
$300<br />
$50<br />
$250<br />
$40<br />
Fee Revenues 1<br />
$200<br />
$150<br />
$100<br />
$32<br />
$56<br />
$36<br />
$167<br />
$39<br />
$189<br />
$30<br />
$20<br />
Capital under <strong>Management</strong> 2<br />
($ billions)<br />
$50<br />
$134 $131<br />
$10<br />
$0<br />
2008 2009 2010 <strong>2011</strong> LTM<br />
$0<br />
Base <strong>Management</strong> Fees Transaction & Investment Banking Fees Capital under <strong>Management</strong><br />
1<br />
Excludes capital under management in Other Listed Entities<br />
2<br />
Transaction and Investment Banking Fees are activity based and include commitment fees, work fees, exit fees and advisory fees<br />
46<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
($ millions)<br />
Increasing Performance Revenue Streams<br />
Significant upside opportunity as earlier vintage funds begin to earn carried interest<br />
$300<br />
$250<br />
$200<br />
$399<br />
Fee Revenues 1<br />
$150<br />
$100<br />
$260<br />
$50<br />
$65<br />
$36<br />
$0<br />
$6<br />
$22 $25<br />
2008 2009 2010 1H <strong>2011</strong><br />
Realized<br />
Cumulative Unrealized<br />
1<br />
Carried interest is generated by Private Funds, and Incentive fees generated by listed entity and public securities<br />
47<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Dry Powder<br />
• We have $8.1 billion of un-invested capital allocations from our clients<br />
UN-INVESTED CLIENT CAPITAL<br />
$8.1 billion<br />
Infrastructure<br />
and<br />
Renewable Power<br />
$2.6<br />
$3.1<br />
Real Estate<br />
$2.4<br />
Private Equity & Finance<br />
48<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Long Contractual Life of Capital Under <strong>Management</strong> 1<br />
• Average remaining duration of invested capital for private funds of approximately nine years 2<br />
• 57% of fee-earning capital under management is subject to long-term lock ups<br />
(≥10 years or permanent)<br />
Time Period 3 Private Funds Listed Issuers Percentage<br />
10 Years 5.9 b - 25%<br />
Permanent 1.6 b 6.2 b 33%<br />
1<br />
Excludes capital under management in Public Securities and Other Listed Entities<br />
2<br />
Weighted based on net annualized base management fee<br />
3<br />
Time periods are measured from initial inception of a fund or account<br />
49<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Outlook for Growth<br />
Intrinsic Value LTM Cash Flow Growth Potential<br />
Core <strong>Asset</strong>s $19.5 b $1,003 m • Increase in contracted prices<br />
• Capital rotation<br />
Private Equity and<br />
Development<br />
Principal Capital 25.0 1,369<br />
5.5 366 • Substantial benefit from eventual<br />
U.S. recovery<br />
• Significant embedded gains<br />
Services 1.6 129 • Organic growth in construction<br />
and property services<br />
Corporate 2.8 275 • Investment of liquidity<br />
<strong>Asset</strong> Manager 4.0 245 • Highly scalable<br />
• Unrecognized performance income<br />
• Tremendous leverage to increases<br />
in client capital<br />
$33.4 b $2,018 m<br />
50<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Potential Values of Manager<br />
• The potential value of manager based on 15x multiple of varying gross margins on various<br />
levels of client capital is set out in the following table<br />
(billions, except bps) Client Capital 1<br />
$25 b $50 b $75 b $100 b<br />
75bps 2.8 5.6 8.4 11.3<br />
Gross Margin 2 150bps 5.6 11.3 16.9 22.5<br />
200bps 7.5 15.0 22.5 30.0<br />
1<br />
Excludes public securities<br />
2<br />
Base fees and performance income less direct expenses<br />
51<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Financial Strength<br />
Q & A
Global Commercial Properties<br />
Ric Clark
Agenda<br />
• Global Platform and Environment<br />
• Growth Drivers<br />
• Recent Growth Initiatives<br />
54<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Global Commercial Properties<br />
Global Platform<br />
and<br />
Environment
Global Reach with Local Expertise<br />
Regional property teams dedicated to some of the world‟s most dynamic & resilient markets<br />
CANADA<br />
$8.8 billion RE AUM<br />
44 RE Professionals<br />
2,350 RE Employees<br />
EUROPE & MIDDLE EAST<br />
$1.6 billion RE AUM<br />
34 RE Professionals<br />
2,455 RE Employees<br />
REAL ESTATE OFFICES<br />
Number of Offices 30<br />
Number of Employees 15,000<br />
U.S.<br />
$59.6 billion RE AUM<br />
108 RE Professionals<br />
3,545 RE Employees<br />
BRAZIL<br />
$8.6 billion RE AUM<br />
27 RE Professionals<br />
5,045 RE Employees<br />
AUSTRALIA & ASIA<br />
$8.5 billion RE AUM<br />
30 RE Professionals<br />
1,605 RE Employees<br />
56<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Key Regional Investment Drivers<br />
Market conditions provide attractive growth and consolidation opportunities<br />
North America<br />
• Supply and demand fundamentals remain sound in core office markets<br />
• Office leasing activity was strong through July; however lack of confidence in the U.S. and<br />
austerity measures have weakened demand since<br />
• Distressed assets requiring recapitalization and upcoming debt maturities through 2017<br />
provide opportunity<br />
Europe<br />
• Sovereign debt issues putting pressure on macro conditions and capital markets<br />
• Forced bank divestitures: €375bn in total assets in UK, Spain, Germany and Ireland<br />
• Largest debt funding gap globally<br />
• New regulations will impact lending and direct holdings<br />
• Amendments to German Investment Act (min. hold periods, redemption limitations, valuation<br />
regulations) will limit attractiveness of open-ended funds, reducing liquidity in prime investment<br />
markets<br />
57<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Key Regional Investment Drivers<br />
Australia<br />
• Supply and demand fundamentals remain sound in core office markets<br />
• Leasing activity remains strong and capital values of prime assets remain robust<br />
• Opportunities likely evolve from strategic shifts in capital allocation into "pure plays” and<br />
domestic investments<br />
• M&A activity given public REITs trading at discount to net tangible asset value<br />
Brazil<br />
• Social migration continues. Middle class now accounts for over 50% of the population<br />
• Credit availability increasing with consumer credit defaults at historic lows<br />
• Housing demand and mortgage affordability driving greenfield projects<br />
58<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
<strong>Brookfield</strong> Property Platforms<br />
One of the largest property owners globally, combining established property platforms<br />
and operational expertise with prudent investing<br />
BROOKFIELD GLOBAL<br />
REAL ESTATE<br />
$87 BILLION<br />
255 million square feet<br />
BROOKFIELD<br />
PROPERTY PARTNERS<br />
RESIDENTIAL &<br />
CONSTRUCTION SERVICES<br />
OFFICE<br />
RETAIL<br />
MULTI-FAMILY<br />
INDUSTRIAL<br />
OPPORTUNISTIC<br />
FUNDS<br />
RESIDENTIAL<br />
CONSTRUCTION<br />
SERVICES<br />
$37.0 BILLION<br />
125 properties<br />
88 million sq. ft.<br />
Development<br />
Potential<br />
24 million sq. ft.<br />
$34.2 BILLION<br />
180 regional malls<br />
165 million sq. ft.<br />
Development<br />
Potential<br />
1 million sq. ft.<br />
$5.3 BILLION<br />
10,000 owned<br />
apartments<br />
47,650 managed<br />
apartments<br />
$1.4 BILLION<br />
Emerging asset<br />
class for <strong>Brookfield</strong><br />
BREOF I, II<br />
RETIP/Protocol<br />
BREF I, II<br />
$9.1 BILLION<br />
120,000 lot<br />
equivalents<br />
64 million sq. ft.<br />
condo density<br />
Construction<br />
workbook of $8.7B<br />
27 million sq. ft.<br />
under construction<br />
Office Properties<br />
Incorporações<br />
Residential<br />
Brazil Retail<br />
59<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
<strong>Brookfield</strong> Property Partners Advantages<br />
Unmatched Access to Capital<br />
• Total assets of ±$78 billion<br />
• Equity capital of $12 billion<br />
• No corporate debt<br />
• Billions of uninvested committed capital in Opportunistic and Core Plus Funds<br />
• Further equity capital in “managed” entities of $20 billion<br />
Unparalleled Operating Capabilities<br />
• 88 million square foot office platform<br />
• 165 million square foot retail platform<br />
• Growing multi-family and industrial platforms<br />
Global Scale<br />
• Global operations<br />
60<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Focus for 2012<br />
Platforms<br />
• Capitalize on historically low interest rates to lower overall cost of capital<br />
• Recycle capital from mature or non-strategic assets into growth opportunities<br />
• Capitalize on supply / demand imbalance by advancing development / redevelopment once<br />
risk exposure has been minimized<br />
• Margin improvement, efficiency and leasing initiatives to increase profitability<br />
Investment Targets<br />
• Single asset acquisitions through platforms<br />
• Distressed debt for control<br />
• Recapitalizations of funds, corporate entities and operating companies<br />
• Existing properties and investment vehicles to facilitate partners in transition<br />
• Share buy-backs for listed vehicles<br />
61<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Recent Achievements<br />
Global Commercial Properties<br />
Growth Drivers
000's, square feet<br />
Office – Leasing Pipeline<br />
<strong>2011</strong> has potential to be best leasing year in our history<br />
• ~4.4 million square feet leased through June <strong>2011</strong>, with ~7 million square feet in serious<br />
discussions<br />
• Could result in an increase in NOI on an annual basis of $45 – $50 million<br />
• Could improve lease rollover exposure through 2016 by 12%<br />
12,000<br />
10,000<br />
8,000<br />
6,000<br />
4,000<br />
2,000<br />
-<br />
2007 2008 2009 2010 <strong>2011</strong>E<br />
Leasing to Date<br />
Serious Discussions<br />
(000’s, square feet)<br />
Leasing<br />
to Date<br />
Serious<br />
Discussions<br />
Potential<br />
Leasing<br />
Current<br />
Occupancy<br />
Potential<br />
Occupancy<br />
United States 2,116 3,500 5,616 91.3% 94.0%<br />
Canada 1,992 3,000 4,922 96.2% 96.7%<br />
Australia 335 500 835 99.3% 99.8%<br />
Total 4,443 7,000 11,443 93.3% 95.2%<br />
63<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Office – Market Rent Upside<br />
Mark to market opportunities support NOI growth<br />
• Average in-place rents across the portfolio are 20% lower than comparable market rents<br />
$65<br />
$60<br />
$55<br />
$50<br />
$45<br />
$40<br />
$35<br />
$30<br />
$25<br />
$20<br />
Rents by Market<br />
United States Canada Australia<br />
In Place<br />
Market<br />
(US$)<br />
In-Place<br />
Net Rent<br />
Market<br />
Net Rent<br />
Upside<br />
% Leases Rolling<br />
(<strong>2011</strong>-13)<br />
United States $ 24.38 $ 31.26 28% 23.1%<br />
Canada 26.80 30.60 14% 17.9%<br />
Australia 55.90 58.69 5% 7.5%<br />
Total $ 28.22 $ 33.73 20% 20.3%<br />
64<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Office – Recycling of Capital<br />
• A number of initiatives underway to recycle into more accretive endeavours<br />
– Selling assets in non-core markets when those markets are attracting significant interest<br />
– Selling non-core assets within core markets<br />
– Selling assets where we have maximized value<br />
– Targeting, on a conservative basis, minimum unlevered returns of 8% and levered<br />
returns of 12%<br />
(US$ millions)<br />
Property<br />
Market<br />
Total<br />
Amount<br />
Buyers<br />
IRR 1<br />
Total<br />
Equity<br />
<strong>Brookfield</strong>‟s<br />
IRR 2<br />
Dispositions<br />
Completed U.S. (3) $ 595 8% $ 240 47%<br />
Targeted Australia, U.S. (5) 1,100 8% 580 22%<br />
Total $ 1,695 8% $ 820 29%<br />
Acquisitions<br />
Completed Australia (2), U.S. (5) $ 2,290 9% $ 350 14%<br />
Targeted 500 8% 200 11%<br />
Total $ 2,790 9% $ 550 13%<br />
1<br />
Gross projected IRR. Unless otherwise indicated, internal rates of return (including targeted rates of return) are presented on a<br />
“gross” basis (i.e., they do not reflect management fees, carried interest, taxes, transaction costs and other expenses to be borne<br />
by investors in our funds, which in the aggregate are expected to be substantial and which would reduce the actual returns<br />
experienced by an investor).<br />
2<br />
Net IRR on sale of assets / Net projected IRR expected on acquisitions<br />
65<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Office – Active Development Pipeline<br />
• A development ready pipeline totalling ±10 million square feet<br />
– Total cost to build of $7 billion or $800 per square foot<br />
– Portfolio estimated to generate $545 million of incremental NOI once stabilized<br />
– New equity investment required totals $800 million 1<br />
– Targeted yield on cost of 8% - 10%<br />
– Targeted levered IRR’s of 15% - 20%<br />
(millions)<br />
Sq. Ft.<br />
City Square South – Perth 345<br />
100 Bishopsgate – London 950<br />
Manhattan West – New York 5,400<br />
Bay Adelaide Centre – Toronto 900<br />
Herald Block – Calgary 1,200<br />
Other 1,000<br />
Total 9,795<br />
1<br />
Assumes a 50% equity partner in Manhattan West<br />
66<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Multi-family – Strong Demand<br />
• Actively pursuing organic and acquisitive growth strategies to capitalize on strong demand for<br />
multi-family assets<br />
– Recently closed on approximately $1 billion of core-plus and development properties<br />
• Seven new apartment buildings with total project costs over $230 million<br />
• Nine new construction projects with total project costs of more than $700 million<br />
– Net operating income increased 8.6% year-on-year to June <strong>2011</strong> 1<br />
– Leveraging Fairfield’s operating expertise to pursue other multi-family portfolios and<br />
operating platforms<br />
1<br />
Reported on stabilized assets<br />
67<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
<strong>Brookfield</strong>‟s Private Real Estate Funds<br />
• <strong>Brookfield</strong>’s private real estate fund platform<br />
– Offering performance fee-generating investment products<br />
(funds, JV’s, co-investment opportunities)<br />
– Leverage <strong>Brookfield</strong>’s operating affiliates as sponsors of specialized,<br />
sector-specific investment offerings<br />
– Expand <strong>Brookfield</strong>’s property platform by developing strategic real estate<br />
partnerships with best-in-class local and sector-specific operators<br />
68<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Recent Achievements<br />
Global Commercial Properties<br />
Recent<br />
Growth<br />
Initiatives
Recent Growth Initiatives<br />
<strong>Brookfield</strong> Office Properties reorganized to become global pure-play office company<br />
Acquired significant portfolio of premium office assets in Australia and merged its residential business<br />
with <strong>Brookfield</strong> Homes to form <strong>Brookfield</strong> Residential Properties, North America’s sixth largest<br />
residential developer<br />
<strong>Brookfield</strong> Completes Recapitalization of General Growth Properties (“GGP”)<br />
$8 billion recapitalization<br />
Consortium committed $2.5 billion for 27% of GGP<br />
Subsequent to the recapitalization, <strong>Brookfield</strong> increased its aggregate ownership<br />
to approximately 40%<br />
<strong>Brookfield</strong> Completes Reorganization of Fairfield, a Multi-family Service Provider<br />
<strong>Brookfield</strong> acquired a 65% equity stake in Fairfield Residential<br />
<strong>Brookfield</strong> has committed to provide up to an additional $150 million to fund future<br />
investment opportunities<br />
<strong>Brookfield</strong> Completes Recapitalization of Legacy Partners Realty Fund II, LLC<br />
$157 million recapitalization of distressed office fund<br />
5.3 million sq. ft. portfolio of A and B Grade office assets in primary markets on the<br />
west coast of the U.S.<br />
<strong>Brookfield</strong> Office Properties acquired $2.3 billion of office assets over last 12 months<br />
Acquisitions made at average unlevered IRR of 9%<br />
70<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Global Commercial Properties<br />
Q & A
General Growth Properties<br />
Sandeep<br />
Mathrani
Agenda<br />
• Overview<br />
• Financial Review<br />
• Portfolio Operations<br />
• Capital Structure<br />
• Conclusion<br />
73<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
General Growth Properties<br />
Overview
Company Overview<br />
• Irreplaceable portfolio of world class properties<br />
– 166 regional malls, including 30 mall spin-off<br />
– Interests in international joint ventures<br />
• $33 billion in total assets<br />
• Over $3 billion in annual revenues<br />
• $1.3 billion of liquidity<br />
Note: All figures as of June 30, <strong>2011</strong>, except revenues that are annualized six months ended June 30, <strong>2011</strong>, Total Property Revenues at share<br />
75<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Exceptional Long-Term Value in the GGP Mall Franchise<br />
• Only a handful of mall companies in North America of size<br />
– GGP is number two<br />
– Number three is only half the size<br />
• Highly diversified across the U.S. in markets with strong<br />
supporting demographics and employment<br />
• NOI extremely resilient through the recession and rents<br />
currently rising<br />
• Significant redevelopment opportunities in the portfolio which<br />
will be highly accretive to earnings<br />
• Strong tenant relationships and asset management knowledge<br />
will be invaluable if GGP expands internationally<br />
76<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Current Strategic Focus<br />
• Focus on GGP Core Mall (“GGP Malls”) portfolio<br />
– Concentrate leasing efforts to maximize long-term cash flows<br />
• Spin-off 30 mall Rouse Properties’ portfolio, on track to be completed by year end<br />
• Continue to dispose of non-core strips and office<br />
• Allocate capital to highest return investments where opportunities arise<br />
• Deleverage company through contractual amortizations and corporate debt retirement<br />
• Continue opportunistic refinancing of debt to lock in lower rates, extend maturities and smooth<br />
out maturity ladder, taking advantage of unique open-at-par debt<br />
77<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Current Strategic Focus cont‟d<br />
GGP Today<br />
Malls<br />
GGP Tomorrow<br />
GGP Malls<br />
Core Malls<br />
Offices<br />
Rouse Properties<br />
Value-Add Malls<br />
Strip Centres<br />
Divestible <strong>Asset</strong>s<br />
Non-core Malls, Office<br />
& Strip Centres<br />
Closed and under contract to sell<br />
24 non-core assets, totaling<br />
~$1.3 billion with ~$500 million in<br />
net proceeds<br />
78<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Rouse Properties‟ Spin-Off<br />
• Different operating, capital and geographic focus than the GGP Malls’ portfolio<br />
• Properties will benefit from a dedicated management team focused exclusively on<br />
executing specialized asset management strategies that differ from the GGP Malls’<br />
portfolio<br />
• Key GGP metrics post-divestiture<br />
Tenant Sales per square foot<br />
Occupancy<br />
Core NOI Growth<br />
Debt<br />
(Based on historical results through June 30, <strong>2011</strong> or as of June 30, <strong>2011</strong>)<br />
Resulting in potentially improved public market valuation metrics for GGP<br />
79<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
High Quality, Nationally Diversified Portfolio<br />
GGP Malls‟ Portfolio: 136 malls / 57.7 million square feet<br />
ALA MOANA CENTER<br />
Honolulu, HI<br />
Sales PSF : ~$1,200<br />
Occupancy: 98.4%<br />
FASHION SHOW MALL<br />
Las Vegas, NV<br />
Sales PSF: ~$950<br />
Occupancy: 96.6%<br />
TYSONS GALLERIA<br />
Note: Includes only U.S. regional malls. Excludes Rouse Properties, Office, Strip, and Special Consideration properties<br />
McLean, VA<br />
Sales PSF: ~$800<br />
Occupancy: 91.6%<br />
80<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Current Portfolio Composition 1<br />
(SF in thousands)<br />
No. of<br />
Properties<br />
Total<br />
GLA 2<br />
Mall & %<br />
Freestanding 3 Leased<br />
GGP Malls 136 136,930 57,724 93.3 89.6<br />
% of<br />
NOI<br />
Post Rouse Properties<br />
Spin-off = 97% of total<br />
Rouse Properties 30 21,067 9,085 87.7 7.1<br />
Total U.S. Regional Malls 166 157,998 66,809 92.5 96.7<br />
International 16 5,488 5,488 97.4 1.4<br />
Strip Centres 14 2,273 135 84.1 0.9<br />
Office 26 2,748 40 64.2 1.0<br />
Target to dispose<br />
within next 12-36<br />
months<br />
Total 222 168,507 72,472 91.9 100.0<br />
1<br />
Information presented as of / for the six months ended June 30, <strong>2011</strong>, except “% of NOI” based on trailing 12 months ended June 30, <strong>2011</strong><br />
2<br />
Gross Leasable Area (GLA): Total gross leasable space at 100%<br />
3<br />
Total in-line mall shop and out-parcel retail locations<br />
81<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
General Growth Properties<br />
Financial<br />
Review
Core NOI Summary<br />
• GGP Malls’ core NOI increased<br />
– Attributable to contractual rent bumps on in-place leases, increased occupancy<br />
• Total core NOI was negatively impacted<br />
– By lower termination fees, a major office tenant vacating, and the 2010 sale of our<br />
Turkish operations<br />
($ in Thousands)<br />
YTD ended<br />
June 2010<br />
Core NOI<br />
YTD ended<br />
June <strong>2011</strong><br />
Core NOI<br />
Percent<br />
Change<br />
QTD ended<br />
June 2010<br />
Core NOI<br />
QTD ended<br />
June <strong>2011</strong><br />
Core NOI<br />
Percent<br />
Change<br />
GGP Malls $ 933,644 $ 955,204 2.3% $ 472,374 $ 474,501 0.5%<br />
Rouse Properties 79,391 75,128 (5.4%) 39,919 37,548 (5.9%)<br />
International 1 15,327 16,637 8.5% 5,332 7,866 47.5%<br />
Termination Fees 17,654 7,783 (55.9%) 6,332 2,246 (64.5%)<br />
Office, Strip & Non-Recurring 2 30,147 17,612 (41.6%) 17,464 5,437 (68.9%)<br />
Core NOI $ 1,076,163 $ 1,072,364 (0.4%) $ 541,421 $ 527,597 (2.6%)<br />
1<br />
International 2010 Core NOI includes income from Turkish operations which were disposed of in 2010 – 2010 YTD ($3.4m); 2010 QTD ($1.3m)<br />
2<br />
Non-recurring: Relates to various one-time items resulting in the 2010 YTD and QTD figures overstated by $8.7M and $9.8m, respectively<br />
83<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
$ PSF Spread<br />
Square Feet Leased<br />
(in millions)<br />
Leasing Spreads – Volumes and Comparative Cash Lease Spreads<br />
3.0<br />
2.5<br />
2.9<br />
Commencement <strong>2011</strong> Commencement 2012<br />
2.0<br />
2.2<br />
1.5<br />
1.0<br />
0.5<br />
-<br />
1.2<br />
1.5<br />
0.8<br />
0.4<br />
0.9<br />
0.6<br />
0.1 0.2 0.1<br />
Renewal New<br />
New < 9 months Renewal New New < 9 months<br />
0.3<br />
$20<br />
$15<br />
$10<br />
$19.32<br />
$5<br />
$-<br />
$7.45<br />
N/A<br />
$(3.89) $(3.85)<br />
$0.31<br />
$(2.50)<br />
$5.02<br />
N/A<br />
$0.45<br />
$(5)<br />
$(10)<br />
Renewal New New < 9 months Renewal New New < 9 months<br />
Leased prior to <strong>2011</strong> Leased post <strong>2011</strong><br />
84<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
General Growth Properties<br />
Portfolio<br />
Operations
Percentage of Expiring Portfolio SF<br />
Balanced and Manageable Lease Expirations<br />
• GGP Malls: Annual lease expiries average ~10% per annum from 2012 – 2016<br />
50.0%<br />
Lease Expiration Schedule 2012+<br />
48.1%<br />
49.5%<br />
40.0%<br />
30.0%<br />
20.0%<br />
10.0%<br />
11.6%<br />
11.3%<br />
10.3% 9.3% 10.4% 10.0% 9.7% 9.8% 9.9% 10.1%<br />
0.0%<br />
2012 2013 2014 2015 2016 Subsequent<br />
GGP Malls & Rouse Properties<br />
GGP Malls (Excl. Rouse Properties)<br />
Note: Represents contractual obligations for space in regional malls or predominantly retail centres and excludes traditional<br />
anchor stores and Specialty Leasing license agreements with terms in excess of 12 months as of June 30, <strong>2011</strong><br />
86<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Impact of Unemployment on Tenant Sales?<br />
• The GGP Malls’ demographic consists of educated middle to upper class consumers which are<br />
virtually fully employed<br />
Total Unemployment Rate vs With College Degree<br />
10%<br />
9%<br />
9.1%<br />
8%<br />
7%<br />
6%<br />
5%<br />
4%<br />
4.3%<br />
3%<br />
2%<br />
1%<br />
0%<br />
Total<br />
w/College Degree<br />
87<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Comparative Sales PSF<br />
Strong Improvement in Tenant Sales Trends<br />
• Tenant sales are nearing the 2007 peak, with GGP Malls approaching $500 per square foot<br />
• Sales growth has outpaced rents. Assuming last year’s sales were applied to current rents,<br />
GGP Malls’ occupancy cost would increase from 13.5% to 14.4%<br />
– 100 bps increase in occupancy cost results in NOI in excess of $100 million<br />
$500<br />
$484<br />
$488<br />
$480<br />
Peak sales $471 PSF including Rouse Properties (2007)<br />
$472<br />
$465<br />
$460<br />
$458<br />
$457<br />
$449 $450<br />
$446<br />
$440<br />
$438<br />
$437<br />
$426<br />
$430<br />
$420<br />
$419<br />
$400<br />
Q4 '09 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11<br />
GGP Malls & Rouse Properties<br />
GGP Malls (Excl. Rouse Properties)<br />
Note: Reflects comparative rolling 12 month tenant sales for mall stores less than 10,000 square feet<br />
88<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Percent Leased<br />
Improving Occupancy Trends<br />
95.0%<br />
• GGP Malls’ SNO 1 ~300 bps<br />
• GGP SNO ~ 300 bps<br />
• 100bp increase to occupancy ~<br />
incremental NOI of $25 - 40 million<br />
94.5%<br />
94.0%<br />
93.0%<br />
92.0%<br />
92.6%<br />
92.1%<br />
91.8%<br />
92.3%<br />
92.9%<br />
93.6%<br />
92.9%<br />
93.2% 93.3%<br />
92.4% 92.5%<br />
93.8%<br />
91.0%<br />
90.0%<br />
91.2%<br />
91.6% 91.6%<br />
• GGP Malls’ Temp leases ~ 600 bps<br />
• GGP Temp leases ~ 700 bps<br />
• GGP Malls’ Temp leases ~ 600 bps<br />
• GGP Temp leases ~ 700 bps<br />
• 100bp conversion to perm ~<br />
incremental NOI of $15 - 25 million<br />
89.0%<br />
Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 <strong>2011</strong> Q2 <strong>2011</strong> Q4 <strong>2011</strong><br />
Target<br />
GGP Malls & Rouse Properties GGP Malls (Excl. Rouse Properties)<br />
1<br />
Signed Not Opened<br />
Note: Prior periods have been restated to reflect discontinued operations<br />
89<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Square Feet (in millions)<br />
<strong>2011</strong> Leasing Done, Good Progress Towards 2012 Targets<br />
• There is negligible remaining <strong>2011</strong> lease expiration exposure<br />
• For 2012, approximately one-half of the lease expiration exposure has been addressed<br />
7.0<br />
6.0<br />
Expiring Lease Exposure <strong>2011</strong>-2012<br />
6.3<br />
5.0<br />
4.0<br />
3.0<br />
2.0<br />
1.0<br />
2.3<br />
~250 K<br />
remaining<br />
exposure<br />
~ 50%<br />
-<br />
July <strong>2011</strong> - Dec <strong>2011</strong> 2012<br />
Approved Commencement<br />
Remaining Expirations<br />
90<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
General Growth Properties<br />
Capital<br />
Structure
Capital Structure Overview<br />
Flexible Capital Structure<br />
Highlights<br />
Cash $0.8b<br />
GGP consolidated property level debt<br />
($14.6b)<br />
Rouse Properties’ property level<br />
secured debt ($1.1b)<br />
GGP unconsolidated property level<br />
secured debt ($2.5b)<br />
Total corporate and subsidiary debt<br />
($2.0b)<br />
• Average debt maturity of five years<br />
– Only 18% matures prior to 2014<br />
– $2.6 billion of variable rate debt<br />
– $300+ million of amortization per year<br />
• Weighted average interest rate of 5.28%<br />
• Majority of debt is non-recourse to GGP<br />
• $750 million undrawn revolving credit facility<br />
Equity ($12.1b) 1<br />
1<br />
Reflects the closing price per share on September 14, <strong>2011</strong> of $12.81<br />
2<br />
All figures as of June 30, <strong>2011</strong>, except for share buybacks<br />
92<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Refinancing Progress<br />
• Significant refinancing progress was made in <strong>2011</strong> to extend term and reduce interest rates<br />
Prior Loans<br />
New Loans<br />
Number of loans 1 19 19<br />
Loan Amount at Share 2 $2.5b $3.1b<br />
Proceeds at Share n/a $0.6b<br />
$1.2b Life Company<br />
$1.9b CMBS<br />
Interest Rate 5.81% 5.10%<br />
Remaining Term 2.5 Years 9.9 Years<br />
1<br />
Assumes ~$1.0 billion of loans currently rate locked and anticipated to close in <strong>2011</strong><br />
2<br />
$3.9 billion of New Loans, at 100%. $1.7 billion Life Company, $2.2 billion CMBS<br />
• Manageable 2012 maturities provide GPP with flexibility given the current capital markets<br />
dislocation<br />
– 2012 secured debt maturities = $2.4 billion ($1.6 billion at share)<br />
– Already in preliminary discussions on over $650 million of 2012 maturities<br />
93<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
$ billions<br />
Debt Maturity Schedule<br />
• GGP’s near-term debt maturity exposure is manageable<br />
– Corporate level maturities through 2015 are comprised primarily of The Rouse Company<br />
LLC (“TRC” not to be confused with Rouse Properties) Bonds<br />
– $6.7 billion of property level debt, subsequent to 2012 is open-at-par enabling<br />
opportunistic refinancing<br />
10<br />
9<br />
8<br />
7<br />
6<br />
5<br />
4<br />
3<br />
2<br />
1<br />
0<br />
Debt Maturity at Share 1 – Balances as of Maturity Date<br />
0.2<br />
9.3<br />
0.4<br />
0.6<br />
2.7<br />
0.7<br />
1.6<br />
1.7<br />
0.5<br />
2012 2013 2014 2015 2016+<br />
Corporate & Subsidiary Debt<br />
1<br />
Reflects balloon payment maturities as of June 30, <strong>2011</strong><br />
Property Level Debt<br />
94<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
General Growth Properties<br />
Conclusion
Key Take-Aways<br />
• Lease, lease, lease<br />
– Drive occupancy and lease spreads to maximize long-term cash flows<br />
• Focus on GGP Malls’ portfolio<br />
– Complete Rouse Properties’ spin-off<br />
– Sell non-core strip centres and office<br />
• Use $1.3 billion of liquidity and significant operating cash flow generation to appropriately<br />
allocate capital, including accretive acquisitions and redevelopment opportunities<br />
• Continue refinance strategy, lowering rates and appropriately laddering maturities, while<br />
continuing to deleverage<br />
• Maintain / expand Brazilian retail platform<br />
96<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
General Growth Properties<br />
Q & A
Infrastructure<br />
Sam Pollock
Agenda<br />
• Overview of Infrastructure Business<br />
• Demonstrated Stability<br />
• Infrastructure Investment Environment<br />
• Growth Pipeline and Opportunities<br />
• Strategic Priorities<br />
99<br />
| <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Overview of Infrastructure Business<br />
• <strong>Brookfield</strong> Infrastructure Group is a global asset manager<br />
– Operations in North America, Europe, Australasia and South America<br />
– 90 investment professionals<br />
– 3,000 operating employees<br />
Diversified Portfolio of Premier Infrastructure <strong>Asset</strong>s<br />
Utilities<br />
Transport & Energy<br />
Timber<br />
$9 billion<br />
Regulated assets in<br />
North and South<br />
America, Europe and<br />
Australasia<br />
$3 billion<br />
Diversified port, rail and<br />
energy operations in<br />
North America,<br />
Europe and Australia<br />
$4 billion<br />
2.6 million acres of<br />
high quality timberlands<br />
in North and South<br />
America<br />
$16 billion of AUM<br />
100 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Overview of Infrastructure Business cont‟d<br />
• Financial results reflect strong year-over-year growth<br />
– Driven by acquisition of Prime Infrastructure<br />
• 80% of cash flow is contracted or regulated<br />
• Investment initiatives to date have been extremely successful<br />
• Investors are attracted to strong current yield<br />
Operating Cash Flow<br />
US$ millions<br />
$120<br />
$106<br />
$100<br />
$80<br />
$64<br />
$60<br />
$40<br />
$20<br />
$-<br />
H1 2010 H1 <strong>2011</strong><br />
As at June 30, <strong>2011</strong><br />
Entity<br />
Ticker<br />
Symbol<br />
1-Year<br />
Return<br />
3-Year<br />
Return<br />
Yield<br />
<strong>Brookfield</strong> Infrastructure Partners L.P.<br />
Listed on TSX and NYSE; market cap of ~$4 billion<br />
<strong>Brookfield</strong> Americas Infrastructure Fund<br />
$2.7 billion private infrastructure fund<br />
BIP 67% 16% 5%<br />
Private Fund 27% 1 N/A 10% 2<br />
1<br />
Unless otherwise indicated, internal rates of return (including targeted rates of return) are presented on a “gross” basis (i.e., they do not<br />
reflect management fees, carried interest, taxes, transaction costs and other expenses to be borne by investors in our funds, which in the<br />
aggregate are expected to be substantial and which would reduce the actual returns experienced by an investor).<br />
2<br />
Annualized as at December 31, 2010<br />
101 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Infrastructure<br />
Demonstrated<br />
Stability
Utilities Platform<br />
• Strong performance driven by world-class regulated assets<br />
Operating Cash Flow Growth<br />
Key Attributes<br />
US$ in millions<br />
$60<br />
$50<br />
$40<br />
$34<br />
$30<br />
$20<br />
$50<br />
– Stable revenues with inflationary growth<br />
– Earn return through regulated or contractual<br />
framework on capital employed<br />
– Virtually 100% of revenues are regulated or<br />
contractual<br />
– Diversity across regulatory regimes<br />
$10<br />
$-<br />
H1 2010 H1 <strong>2011</strong><br />
– Significant opportunities to invest in system<br />
expansions at attractive returns<br />
103 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Utilities Highlights<br />
• $1.1 billion of refinancing in H1 <strong>2011</strong>, taking advantage of low interest rate environment<br />
Operation<br />
Australian terminal operations<br />
Refinancing<br />
$600 million financing, 9/12-year U.S. private<br />
placement<br />
S.A. electricity transmission operations<br />
$305 million loan, 18-year (avg) local bond offering<br />
Australasian energy distribution<br />
operations<br />
$245 million refinancing, 9/12/15 year U.S. private<br />
placement<br />
104 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Transport & Energy Platform<br />
• Stable performance driven by access fees to critical infrastructure<br />
– Benefit from increased movement of energy, freight and bulk commodities<br />
– Favourable results despite economic head wind<br />
Operating Cash Flow Growth<br />
Key Attributes<br />
US$ in millions<br />
$35<br />
$30<br />
$25 $23 $23<br />
$20<br />
$15<br />
$10<br />
– High barriers to entry<br />
– Diversity of businesses mitigates impact of<br />
fluctuations in demand from any one sector,<br />
commodity or customer<br />
– Well positioned to benefit from increases in<br />
demand for commodities and the global<br />
movement of goods<br />
$5<br />
$-<br />
H1 2010 H1 <strong>2011</strong><br />
– 70% of EBITDA is supported by long-term<br />
contractual revenues<br />
105 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Transport & Energy Highlights<br />
• Extending contractual profile<br />
– Signed four contracts for expansion of Australian rail road and renewed two contracts<br />
with existing customers<br />
– 60% of rail revenue now covered by take-or-pay arrangements vs. 0% in 2009<br />
• Re-opening facility at UK Port for steel customer planning to restart production by <strong>2011</strong><br />
– Negotiating take-or pay contract<br />
– Prior to its shutdown in 2010, EBITDA contribution was £6 – £8 million annually<br />
106 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Timber Platform<br />
• Solid performance driven by well located timberlands with high quality species<br />
– Cash flow growth from higher sales and prices<br />
– Log prices increased 13%, volumes up 30% year-over-year<br />
Operating Cash Flow Growth<br />
Key Attributes<br />
US$ in millions<br />
$40<br />
$35<br />
$30<br />
$25<br />
$20<br />
$15<br />
$15<br />
$38<br />
– Scarce, high value, premium asset<br />
– Market access and location<br />
– Favourable industry dynamics<br />
– Diversified product mix in highly productive<br />
climate<br />
$10<br />
$5<br />
$-<br />
H1 2010 H1 <strong>2011</strong><br />
– High margin business with sustainable cash<br />
flows<br />
– Flexibility to adjust volumes to meet demand<br />
107 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
`98<br />
`99<br />
`00<br />
`01<br />
`02<br />
`03<br />
`04<br />
`05<br />
`06<br />
`07<br />
`08<br />
`09<br />
`10<br />
`11F<br />
Timber Highlights<br />
• Expanding sales into Asia to meet market demand<br />
– Exports to China have increased from 0% of exports two years ago to 53% today<br />
• Chinese government pushing construction to increase housing affordability<br />
– 10 million units of affordable housing startups planned for this year<br />
• Continued market resiliency expected as heading into autumn which is high season for<br />
construction<br />
China: Annual Housing Starts<br />
Annual units (millions)<br />
18<br />
16<br />
14<br />
12<br />
10<br />
8<br />
6<br />
4<br />
2<br />
0<br />
Year<br />
108 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Infrastructure<br />
Investment<br />
Environment
Global Investment Environment for Infrastructure<br />
• Commodity and energy driven infrastructure projects<br />
– Long-term greenfield commitments<br />
• Government privatization<br />
– Global phenomena with near-term focus on Europe<br />
• Deleveraging of European construction companies<br />
– Knock-on effect of sovereign and bank crisis in Europe<br />
• Strong appetite for debt and equity of contracted cash flowing businesses<br />
– Significant capital searching for safe haven<br />
110 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Infrastructure<br />
Growth Pipeline<br />
& Opportunities
Growth in Utilities<br />
• <strong>Brookfield</strong> has highly attractive growth opportunities in its utility project pipeline of $1.4 billion<br />
Immediate Opportunities<br />
North American<br />
Transmission<br />
Acquisition<br />
Texas<br />
Transmission<br />
Project<br />
• 330 MW, 39 km transmission cables<br />
serving Long Island<br />
• Regulated revenue framework<br />
• Capacity contracted for 30 years, indexed<br />
to inflation<br />
• Partnership to build, own and operate<br />
~ 600 km of transmission lines in Texas<br />
• Closed $580 million construction financing<br />
• Construction of $750 million project to<br />
commence early 2012<br />
• Acquired in August <strong>2011</strong> for $188 million<br />
112 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Growth in Utilities – Spotlight on Australia Coal Terminal Expansion<br />
• Land located 4 km north of <strong>Brookfield</strong>’s existing Australian<br />
coal terminal operations<br />
• <strong>Brookfield</strong> named as one of two preferred proponents<br />
• New site estimated to be able to support new coal export<br />
capacity of 150 Mtpa 1<br />
Expansion<br />
Current terminal<br />
• Undergoing land allocation process<br />
• <strong>Brookfield</strong> has received access requests for 162 Mtpa<br />
Next Steps:<br />
Timing:<br />
Costs:<br />
Long Term<br />
Pre-feasibility study will follow land allocation<br />
Targeting early 2017 for first coal shipments<br />
Development costs estimated at A$5 billion<br />
1<br />
Million tonnes per annum<br />
113 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Growth in Transport & Energy<br />
• Over $550 million in organic growth projects underway<br />
Australian<br />
Rail Expansion<br />
UK Port Expansion<br />
• Six significant projects of which 75%<br />
are fully contracted to date<br />
• Volumes to increase by 45%<br />
• Remaining capital costs of A$500 million<br />
• $150-200 million of incremental<br />
EBITDA per year<br />
• Project will nearly double container<br />
capacity to 450,000 TEUs 1<br />
• Phase One to be completed in Q4<br />
• Total project costs of ~£30 million<br />
• Annual incremental EBITDA of<br />
~£5 million<br />
1<br />
Twenty foot equivalent unit<br />
114 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Growth in Transport & Energy – Spotlight on <strong>Brookfield</strong> Rail<br />
• 14.5 Mtpa of further potential volume growth from existing customers<br />
• New customers exploring mining opportunities in our franchise area<br />
– Substantial export commodity growth expected for Midwest, Yilgarn &<br />
Southwest regions<br />
– Focus primarily on new coal and<br />
iron ore projects<br />
– Working with port authority and miners<br />
to explore integrated infrastructure<br />
development<br />
115 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Growth in Timber<br />
Prospects for log prices are very positive<br />
• Mountain pine beetle infestation of British Columbia, Alberta and the U.S. continues<br />
– ~20% of timber supply for North America structural framing lumber no longer<br />
available for 40-60 years<br />
– Our timberlands are not affected<br />
• Withdrawals of timberlands for conservation<br />
• Increasing demand from Asian markets<br />
• U.S. housing market recovery<br />
– U.S. housing markets at unsustainable low levels<br />
– U.S. Pacific Northwest timberlands will benefit from optimal locations<br />
U.S. Housing Starts<br />
In thousands<br />
2,500<br />
2,000<br />
1,500<br />
1,000<br />
500<br />
0<br />
Average<br />
1990 1995 2000 2005 2010<br />
116 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Growth in Timber – Brazil<br />
• Significant potential in the Brazil timber market<br />
– Strong civil construction activity<br />
• Increasing home ownership rates<br />
• Preparations for FIFA World Cup and Olympic events<br />
• Brazil timberlands are very attractive<br />
– Rapidly growing, competitive and well capitalized range<br />
of converting industries<br />
– Deep and growing economy<br />
– Reasonable land prices – can buy well outside of auctions<br />
• ~$215 million (77%) in Brazil Timber Fund is now invested<br />
– 16% gross IRR 1 since inception<br />
Ownership has doubled since 2009 to 98,000 ha across four Brazilian states<br />
1 Unless otherwise indicated, internal rates of return (including targeted rates of return) are presented on a “gross” basis (i.e., they do not reflect<br />
management fees, carried interest, taxes, transaction costs and other expenses to be borne by investors in our funds, which in the aggregate are<br />
expected to be substantial and which would reduce the actual returns experienced by an investor).<br />
117 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Acquisitions Strategy<br />
Utilities<br />
Utilities<br />
Acquire businesses within current franchise areas and<br />
geographical footprint<br />
T&E<br />
Transport<br />
& Energy<br />
Establish new operating platforms<br />
(i.e., toll roads, airports, storage facilities)<br />
Pursue value opportunities in distressed markets<br />
Timber<br />
Timber<br />
Focus on emerging markets and government privatizations<br />
118 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Recent Acquisition – Chilean Toll Roads<br />
• <strong>Brookfield</strong> consortium acquiring majority interests in two toll roads<br />
for $340 million<br />
• Direct result of European outreach program<br />
• Attractive investment – key arteries in Santiago’s urban roadway<br />
– Rapid economic growth in Chile in last 20 years<br />
– Metropolitan region represents 48% of total GDP 1<br />
– Cash flow growth from above inflation tariff increases and<br />
excess road capacity<br />
Autopista Vespucio Norte (“AVN”)<br />
• Targeted to generate levered, after-tax returns of 12-15%<br />
• Expected to close in fourth quarter, subject to third-party consents<br />
Tunel San Cristobal (“TSC”)<br />
Establishes new toll road platform in a country we know well<br />
1<br />
Instituto Nacional de Estadisticas<br />
119 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Infrastructure<br />
Strategic<br />
Priorities
Strategic Priorities<br />
• Enhance stability of operating cash flow<br />
– Maintain a diversified business across sectors and geography<br />
– De-risk business by extending duration on debt and customer<br />
contracts<br />
• Pursue measured and opportunistic growth<br />
– Expand and upgrade existing networks<br />
– Acquisitions within platforms<br />
– Acquire new platforms on value basis<br />
121 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Infrastructure<br />
Q & A
Renewable Power<br />
Richard Legault
Table of Contents<br />
• Overview of the Renewable Power Business<br />
• Power Markets – Drivers and Outlook<br />
• Growth Strategy and Opportunities<br />
• Combination of <strong>Brookfield</strong>’s Renewable Power Businesses<br />
• Priorities for 2012<br />
124 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Renewable Power<br />
Overview of the<br />
Renewable<br />
Power Business
One of the Largest Pure-play Renewable Platforms<br />
• 4,800 MW of installed capacity 1<br />
• Primarily hydroelectric, the highest value renewable asset<br />
• 2,000 MW development pipeline<br />
• 67 river systems across 10 markets in 3 countries<br />
Predominantly Hydro Profile 2 Portfolio Well-Balanced to Core Markets 2 Strong Regional Diversification 2<br />
Generation by Technology<br />
4,800 MW<br />
Other 4%<br />
Generation by Market<br />
More than 18,000 GWh<br />
Generation by Region<br />
67 river systems<br />
Brazil Midwest<br />
Wind<br />
10%<br />
Hydro<br />
86%<br />
Brazil<br />
20%<br />
U.S.<br />
40%<br />
Canada<br />
40%<br />
Brazil Southeast<br />
Brazil South<br />
Louisiana<br />
New<br />
England<br />
BC<br />
New York<br />
Ontario<br />
Québec<br />
California<br />
U.S. Midwest<br />
1<br />
Includes 400 MW of projects under construction 2<br />
Assumes long-term average generation<br />
126 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Efficient Regional Operating Platforms<br />
Our goal is to leverage our operating and development capabilities to create value<br />
in the business<br />
• Currently managing the construction of seven wind and hydro projects ($1.2 billion)<br />
• Integrated over 20 single asset and portfolio hydro acquisitions over the last 10 years<br />
• Built (or building) 16 hydro plants and five wind farms since 2003<br />
CANADA UNITED STATES BRAZIL<br />
• 36 generating facilities – 1,839 MW<br />
• Growing wind platform<br />
• 350 staff and NERC 1 certified control<br />
centre<br />
• 106 generating stations – 2,272 MW<br />
• 400 staff and NERC certified system<br />
control centre<br />
• Significant storage<br />
• 37 hydro generating stations – 674 MW<br />
• Comprehensive operating, power<br />
marketing and project development<br />
platform, which includes 250 staff<br />
1<br />
North American Electric Reliability Corporation<br />
127 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Stable, High Quality Cash Flow<br />
Stable cash flows<br />
supported by highly<br />
contracted<br />
portfolio<br />
• Approximately 80% of 2012 generation is contracted with PPAs and<br />
financial contracts, mitigating price risk<br />
• PPAs have 13-year average duration with highly creditworthy<br />
counterparties and built-in inflation adjustments<br />
• Significant diversification and water storage in North America<br />
• No material hydrology exposure in Brazil<br />
Uncontracted<br />
21%<br />
Financial Contracts<br />
11%<br />
41%<br />
Government<br />
Distribution Companies<br />
8%<br />
19%<br />
Industrial & Retail<br />
128 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Compounded Annual Growth<br />
Cash flows or Net<br />
Operating Income<br />
increased by an<br />
average of 23 %<br />
per year from<br />
2000-2010<br />
• Optimization and maximizing the option value of the portfolio<br />
• Secured long-term revenue contracts at attractive rates<br />
• Enhanced productivity of the facilities through planned capital program<br />
• Developed high value projects in North America and Brazil<br />
• Completed 20 transactions since 2001 and integrated them into a unified<br />
platform<br />
(millions)<br />
1000<br />
800<br />
600<br />
400<br />
Net Operating Income<br />
23% CAGR<br />
$469<br />
$874<br />
200<br />
0<br />
$109<br />
2000 2005 2010<br />
1<br />
Adjusted for long-term average generation<br />
2<br />
Excludes realization gains<br />
129 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Renewable Power<br />
Power Markets<br />
– Drivers and<br />
Outlook
Power Markets – Key Drivers<br />
Gas markets in<br />
North America<br />
will continue to be<br />
oversupplied through<br />
2012<br />
• Shale gas production creating ongoing surpluses in North America<br />
• Lower gas prices continue to push electricity prices to cyclical lows<br />
• Gas prices expected to increase with need to invest new capital in<br />
shale operations<br />
Key drivers for<br />
renewable energy<br />
growth remain<br />
strong<br />
• Wide acceptance of need to reduce carbon footprint on a global basis<br />
• Significant issues with competing technologies (coal / nuclear)<br />
• Strong need for energy self sufficiency driving renewable policy<br />
Emerging markets<br />
in LATAM need new<br />
supply to meet strong<br />
demand growth<br />
• Brazil’s strong economic growth continues to drive demand<br />
• Expect delays in commissioning of large scale hydro projects<br />
• Policy is pushing diversification of supply base to biomass and wind<br />
• Fundamentals continue to be very strong in Brazil and other emerging<br />
markets in the region<br />
131 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Outlook for 2012-2016 in Our „„Core Markets‟‟<br />
Canada<br />
Pressure to contain<br />
rate increases<br />
United States<br />
A return to<br />
sustainable gas<br />
prices<br />
Brazil<br />
Perfect storm<br />
in 2014<br />
1<br />
Renewable Power Standards<br />
• Renewable programs may experience short-term political pressure<br />
• Growth will continue to be driven by need to replace aging infrastructure<br />
• Incentives will continue to be in the form of long-term contracts<br />
• Major regional differences: role of gas likely to increase in British Columbia,<br />
solar expected to come down in Ontario, transmission build-out in Quebec<br />
expected to export renewable power to U.S. markets<br />
• Pace of renewable capacity additions expected to rise with increasing<br />
RPS 1 targets<br />
• Gas prices expected to increase to sustainable levels by 2013-2014<br />
• Expect need for baseload capacity by mid-decade, and will likely be<br />
renewables or gas fired facilities<br />
• Wild cards are: form of renewable incentives; growth of U.S. economy;<br />
and timing of plant retirements<br />
• Expect demand growth to accelerate, fueled by major infrastructure<br />
investments expected to support 2014 Soccer World Cup, 2016 Olympics<br />
• Expecting significant delays in supply pipeline (large hydro and wind) and<br />
tightening reserve margins in 2013-2014<br />
• Wild cards are use of gas in supply mix (LNG or other imports) and growing<br />
middle class<br />
132 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Renewable Power<br />
Growth Strategy<br />
and Opportunity
Growth Strategy<br />
Our goal is to double our renewable power portfolio over five years<br />
Markets with<br />
attractive dynamics<br />
and high barriers<br />
to entry<br />
• High value regional markets with strong barriers to entry<br />
United States: West coast and East coast markets<br />
Canada: primarily in Ontario, British Columbia and Saskatchewan<br />
Brazil: Southern states driving the country’s growth<br />
• Add platform in new market with similar attributes<br />
Highest value,<br />
longest-life<br />
renewable<br />
technologies<br />
• Maintain predominant hydroelectric focus<br />
• Wind in markets where the resource has high scarcity and terminal value<br />
• Add renewable technology which complements current portfolio<br />
Arbitrage “build<br />
or buy” to<br />
optimize returns<br />
on capital<br />
• Flexibility and expertise to invest across the spectrum of development,<br />
construction or operating phases in our core technologies<br />
• 2,000 MW greenfield development pipeline in Canada, United States and Brazil<br />
• Build on track record of acquiring late stage projects<br />
Leverage global<br />
<strong>Brookfield</strong> platform<br />
in transaction<br />
outreach program<br />
• Leverage <strong>Brookfield</strong>’s global reach to secure transactions<br />
• In the next five years, secure acquisition of scale portfolio or platform<br />
• Benefit of broader transaction expertise – restructuring and capital markets<br />
134 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Projects Under Construction<br />
A significant part of our<br />
growth in <strong>2011</strong>/2012<br />
will be from projects to<br />
be commissioned<br />
• We continue to make progress on seven construction projects<br />
• Projects are on scope, schedule and budget<br />
• Adds 431 MW or about 10% to our overall portfolio<br />
• Total investment of approximately $1.2 billion<br />
Project<br />
Capacity<br />
(MW)<br />
Generation<br />
(GWh)<br />
Location<br />
Commercial<br />
Operating Date<br />
Hydro<br />
Serra dos Cavalinhos II 29 45 Brazil Q1 2013<br />
Pezzi 19 99 Brazil Q1 2013<br />
Lower St. Anthony Falls 10 63 Minnesota Q3 <strong>2011</strong><br />
Glen Ferris 6 41 West Virginia Q1 2012<br />
Wind<br />
Comber Wind 166 535 Ontario Q4 <strong>2011</strong><br />
Coram 102 264 California Q1 2012<br />
Granite Reliable 99 275 New Hampshire Q4 <strong>2011</strong><br />
135 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Development Pipeline<br />
<strong>Brookfield</strong> will continue<br />
to look for late stage<br />
opportunities or will<br />
build out our project<br />
pipeline<br />
• Positioned to acquire, build and integrate additional third-party projects<br />
• 2,000 MW pipeline of organic development potential<br />
• Hydro, wind and pumped storage opportunities<br />
• Opportunities in each core market provide for development flexibility<br />
Development Pipeline (MW) 1<br />
Hydro Wind Pump Storage Total<br />
Canada 270 960 - 1,230<br />
U.S. 75 - 300 375<br />
Brazil 400 - - 400<br />
Total 745 960 300 2,005<br />
1<br />
Based on 100% of total potential project capacities based on management estimates<br />
136 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
<strong>Brookfield</strong> Approach – Granite Reliable Wind<br />
• Acquired majority interest in 99 MW wind project from a distressed seller (Q4 2010)<br />
• Leveraged <strong>Brookfield</strong>’s restructuring expertise and resources<br />
• U.S. power platform completed remaining development activities<br />
– Secured regulatory approvals<br />
– Facilitated government loan guarantee program and investment tax credits grants<br />
– Secured project financing<br />
• Commercial operating date expected Q4 <strong>2011</strong><br />
• U.S. power platform will integrate Granite into its operations in Boston, MA<br />
137 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Renewable Power<br />
Combination of<br />
Renewable<br />
Power<br />
Businesses
Transaction Overview<br />
The strategic combination will establish <strong>Brookfield</strong> Renewable Energy Partners (BREP)<br />
as one of the world‟s largest listed “pure play” renewable power businesses<br />
• Publicly traded partnership model that has been highly successful for BIP<br />
• We have requested to be listed on the Toronto Stock Exchange and will plan to file for NYSE<br />
listing in early 2012<br />
• <strong>Brookfield</strong> will receive one limited partnership unit of BREP for every <strong>Brookfield</strong> Renewable<br />
Power Fund (Fund) unit, and will receive additional units of BREP for contributing the assets of<br />
<strong>Brookfield</strong> Power<br />
• On completion, <strong>Brookfield</strong> will own approximately 73% of BREP on a fully-exchanged basis<br />
and the public unitholders of the Fund will own the remaining 27%<br />
• BREP will assume all obligations related to approximately C$1.1 billion of unsecured public<br />
bonds issued by <strong>Brookfield</strong> Power as well as the obligations related to the C$250 million<br />
preferred shares issued by a subsidiary of the Fund<br />
139 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Relationship with <strong>Brookfield</strong><br />
BREP will benefit from the continued sponsorship and management of <strong>Brookfield</strong><br />
Continue strong<br />
relationship<br />
with <strong>Brookfield</strong><br />
• BREP will be <strong>Brookfield</strong>’s primary vehicle through which it will<br />
acquire renewable power assets on a global basis<br />
<strong>Brookfield</strong> will be the<br />
Managing General<br />
Partner of BREP<br />
• Managing general partner will be a wholly-owned subsidiary of<br />
<strong>Brookfield</strong><br />
• <strong>Brookfield</strong> will be entitled to incentive-based distributions providing<br />
strong incentive to increase distributions<br />
<strong>Brookfield</strong> will<br />
provide<br />
asset management<br />
services<br />
• Managed by the same team of experienced professionals that have<br />
led the renewable power business since the 1990s<br />
• <strong>Brookfield</strong> will provide services relating to the origination of<br />
acquisitions, financings and oversight of the business<br />
• <strong>Brookfield</strong> will be entitled to receive a base management fee of<br />
$20 million plus 1.25% of future increases in total capitalization 1<br />
1<br />
Market capitalization, recourse borrowings and preferred equity<br />
140 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Key Commercial Agreements<br />
<strong>Brookfield</strong> retains<br />
future upside and<br />
downside<br />
on energy prices<br />
• New PPA for New York generation will cover 3,500 GWh annually<br />
• $75/MWh escalated annually at 40% of inflation<br />
• 25 years with 20-year extension<br />
• Through the Energy marketing agreement, BAM will continue to market<br />
BREP’s energy portfolio<br />
Counterparty<br />
Profile<br />
8%<br />
New U.S. PPA 1<br />
11%<br />
26%<br />
55%<br />
<strong>Brookfield</strong><br />
Governments<br />
Industrial & Retail<br />
Distribution Companies<br />
Existing Fund PPAs 2<br />
1<br />
Incremental PPA provided by BAM for U.S. portfolio at $75/MWh<br />
2<br />
<strong>Brookfield</strong> will retain previously existing PPAs provided to the Fund which are predominantly<br />
offset with third-party contracts<br />
141 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Financial Highlights<br />
The business will benefit from strong operating and development platforms that have a track<br />
record of optimizing assets and supporting growth<br />
• Initial distribution of $1.35 per unit<br />
• Attractive payout ratio with target of approx. 80% of distributable cash and 60% of AFFO<br />
• Anticipate $100 million annually of surplus cash flows to reinvest in growth opportunities<br />
• BREP assumes corporate level debt of existing power business (BRPI)<br />
• BRPI’s investment grade ratings are expected to be maintained by BREP<br />
BREP<br />
Total power assets<br />
Next 5-year average proforma distributable cash<br />
Next 5-year average per unit distributable cash<br />
> $13 billion<br />
$490 million<br />
$1.85 per unit<br />
Issued units (millions) 265.2<br />
Project level debt (non-recourse)<br />
Corporate level debt<br />
$4.1 billion<br />
$1.1 billion<br />
Target payout ratio 80%<br />
Weighted average PPA term<br />
24 years<br />
1<br />
Includes three wind projects and four hydro projects currently under construction<br />
2<br />
Shown on a fully-exchanged basis<br />
142 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Transaction Benefits<br />
The combination provides numerous benefits to <strong>Brookfield</strong><br />
• Establishes a global flagship vehicle well positioned to grow on a global basis<br />
– Enhances liquidity and access to capital for the renewable business<br />
– Provides competitive cost of capital and currency to grow in this sector<br />
– Listings on the New York and Toronto stock exchanges<br />
• Simplifies corporate structure and expands BAM’s asset management business<br />
– Global mandate<br />
– <strong>Management</strong> fees on incremental value of capital deployed by BREP<br />
– Incentive distributions to BAM<br />
• Strong value proposition to Fund unitholders<br />
• <strong>Brookfield</strong> continues to retain risk/reward proposition with respect to future power prices<br />
• BAM retains 73% ownership and same economic interest<br />
143 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Renewable Power<br />
Strategic<br />
Priorities
Priorities for 2012<br />
Long-term dynamics for renewable power remain favourable<br />
Drive financial<br />
and operating<br />
results of BREP<br />
• Deliver on BREP’s financial expectations including $1.1 billion in EBITDA<br />
• Maximize value of asset flexibility and manage costs<br />
• Secure long-term contracts for un-contracted volumes if long-term<br />
price is attractive<br />
Deploy capital to<br />
high quality, high value<br />
opportunities in the<br />
renewable power sector<br />
• Develop inventory of top acquisition targets and opportunistically execute<br />
on transactions<br />
• Add $1 billion in renewable assets (developments or acquisitions)<br />
• Deliver construction programs on scope, schedule and budget<br />
• Advance development projects and begin construction of 45 MW hydro<br />
project on Kokish River in British Columbia<br />
Implement effective<br />
funding strategies to<br />
maximize financial<br />
flexibility and minimize<br />
cost of capital<br />
• Launch BREP and promote awareness of it as the leading pure-play<br />
renewable power business on a global basis<br />
• Achieve listing on the New York Stock Exchange for BREP<br />
• Strategic refinancing of project debt to enhance returns and minimize risk<br />
145 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Renewable Power<br />
Q & A
Private Equity & Distress Investing<br />
Cyrus Madon
Agenda<br />
• Private Equity & Distress in Profile<br />
• Case Studies<br />
• Private Equity in Brazil<br />
• Distress Investing Environment<br />
• Conclusion – Outlook<br />
148 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Private Equity & Distress Investing – Overview<br />
Private Equity &<br />
Distress Investing Group<br />
25 Professionals in<br />
North America<br />
$8 billion AUM<br />
• Sourcing opportunities<br />
• Transaction execution<br />
Private Equity<br />
Real Estate Infrastructure Renewable Power<br />
Funds<br />
Direct<br />
Investments<br />
149 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
A Strong History of Distress Investing<br />
Over three decades of distress investing and operational turnarounds<br />
1980s<br />
Carma<br />
Corporation<br />
Residential land<br />
developer<br />
BCE<br />
Development Co.<br />
Commercial real<br />
estate developer<br />
1990s<br />
Catalyst<br />
Energy<br />
Utility holding<br />
company<br />
O&Y (US) Inc.<br />
Commercial<br />
real estate<br />
developer<br />
Gentra<br />
Mortgage lender<br />
Triathlon<br />
Leasing<br />
Canada’s largest<br />
lessor of fleet vehicles<br />
Northgate<br />
Minerals<br />
Gold mining<br />
company<br />
Royal LePage<br />
Commercial and<br />
residential brokerage<br />
2000s<br />
Queensway<br />
Financial<br />
Property and<br />
casualty insurance<br />
Criimi Mae<br />
Full service<br />
commercial<br />
mortgage<br />
company<br />
Concert Industries<br />
Global<br />
manufacturer of<br />
non-woven airlaid<br />
fabrics<br />
Stelco<br />
Large<br />
diversified<br />
steel<br />
producer<br />
Western<br />
Forest<br />
Products<br />
Integrated<br />
forest<br />
products<br />
company<br />
Longview<br />
Fibre<br />
Integrated<br />
packaging<br />
company<br />
MAAX<br />
Products<br />
Manufacturer<br />
and distributor<br />
of bathroom<br />
fixtures and<br />
spas<br />
Hammerstone<br />
Corporation<br />
Industrial<br />
minerals<br />
company<br />
2010 ><br />
Prime (BBI)<br />
Global utilities,<br />
and transportation<br />
infrastructure<br />
GGP<br />
Premier retail shopping<br />
mall portfolio<br />
150 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Competitive Advantages<br />
As an owner operator with a global platform, we have significant advantages in<br />
creating value through distress investing<br />
Deal<br />
Sourcing<br />
• Knowledge and access through broad <strong>Brookfield</strong><br />
platform enhances proprietary deal flow<br />
• Operational<br />
improvements<br />
Operational<br />
Focus<br />
Depth &<br />
Breadth of<br />
Experience<br />
• Decades of successful distress<br />
investing and turnarounds<br />
Finance<br />
Legal<br />
Operations<br />
Legislation<br />
• Influence and control<br />
Active<br />
<strong>Management</strong><br />
Differentiated<br />
Strategy<br />
• Target complex situations that<br />
limit competition<br />
• Surface hidden assets<br />
• Capital preservation<br />
151 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Private Equity & Distress Investing<br />
Case Studies
Case Study: Armtec Infrastructure<br />
• Investment Type<br />
– $125 million senior secured loan<br />
• Business Overview<br />
– Manufacturer of pre-cast concrete, steel and plastic pipe products<br />
– End markets: infrastructure, commercial and residential<br />
construction<br />
– 47 manufacturing and sales facilities across Canada<br />
– Soft market conditions combined with operational challenges<br />
resulted in substantial but temporary impairment to earnings<br />
• Investment Thesis<br />
– Replacement of bank lender group and operating discipline<br />
are expected to return the company to historical profitability<br />
– Seven-year warrants provide upside if company outperforms<br />
– Leveraged <strong>Brookfield</strong>’s operational capabilities to execute<br />
a proprietary transaction on an accelerated basis<br />
– Senior secured loan is well protected by $300 million in tangible assets<br />
– Opportunity to earn equity returns with limited risk<br />
($millions)<br />
$100<br />
$80<br />
$60<br />
$40<br />
$20<br />
$0<br />
$80<br />
2009<br />
EBITDA<br />
$30<br />
TTM<br />
EBITDA<br />
1<br />
Trailing 12 months<br />
1<br />
• Target Return: 25%<br />
153 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Case Study: Ember Resources<br />
• Investment Type<br />
– $50 million initial equity investment<br />
• Business Overview<br />
– Financially distressed natural gas producer focused<br />
on coal bed methane and shallow gas in central Alberta<br />
– Extensive land holdings include 435 net producing<br />
wells and long-life gas reserves<br />
– Low production costs permit positive cash flow at<br />
highly depressed natural gas prices<br />
• Investment Thesis<br />
– Financial distress enabled <strong>Brookfield</strong> to partner with principal shareholder to take the company<br />
private at a 50% discount to NAV<br />
– Targeting 25% returns; significant additional upside in reserves and production should gas<br />
prices improve<br />
– Identified operational improvements, reserve enhancements and G&A savings<br />
– Limited risk due to low financial leverage and exceptionally low entry price<br />
• Target Return: 25%<br />
154 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Case Study: Longview Fibre Paper & Packaging<br />
• Investment Type<br />
– $114 million equity investment to acquire 100% of operations<br />
• Business Overview<br />
– Washington State-based producer of Kraft paper and<br />
integrated manufacturer of corrugated containers<br />
– One million ton pulp/paper mill and seven containerboard plants<br />
– Poorly managed with low productivity<br />
• Investment Thesis<br />
– Acquisition price represented working capital value only<br />
– Reduced headcount by over 700 (30%) and focused<br />
on high margin products<br />
– Preserved a $130 million pension surplus by revising<br />
the allocation of fund assets from equities to bonds<br />
– Cash flow generation and bond offering have<br />
generated $550 million in proceeds to-date<br />
– Excellent sale candidate given recent industry consolidation<br />
Longview<br />
Value Creation Summary<br />
Operational<br />
Improvements<br />
69% 31%<br />
<strong>Asset</strong> Value<br />
Enhancements<br />
.<br />
• IRR: 57%<br />
155 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Other Distress Investments<br />
We assist our operating platforms to execute on distress opportunities<br />
Real Estate<br />
• Fairfield Residential<br />
– Recapitalization of a best-in-class integrated asset<br />
manager focused on multi-family development and services<br />
• 450 West 33rd Street<br />
– Recapitalization of sponsor in return for 75% ownership<br />
in a 1.7 million square foot property<br />
Fairfield Residential<br />
• Legacy Office Vehicles<br />
– Recapitalization of a vehicle owning 5.3 million square feet<br />
of office space<br />
Infrastructure<br />
• Cross Sound Cable<br />
– Acquisition of a 330 MW electrical transmission cable<br />
from a bank lender<br />
Cross Sound Cable, New England<br />
156 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Private Equity & Distress Investing<br />
Private Equity<br />
in Brazil
Private Equity in Brazil<br />
• Brazil is a compelling market for private equity<br />
• Rapid growth of domestic market and competitive advantages support<br />
opportunities with strong returns<br />
• Fifth most populous and second youngest country among the world’s<br />
10 largest economies<br />
• Demographics, stable democracy and developing credit markets<br />
support increasing income and expenditure on discretionary items<br />
• Current growth is strong and expected to continue over the long term<br />
• <strong>Brookfield</strong> has over 110 years of experience and a proven track record<br />
of building and growing businesses in Brazil<br />
• Deep, local relationships, regional insight, 7,000 employees and<br />
$13 billion in AUM<br />
158 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Private Equity in Brazil<br />
• <strong>Brookfield</strong> is well positioned to generate proprietary investment opportunities and execute<br />
growth initiatives within our businesses<br />
• Targeting opportunities in growth sectors with simple and scalable business models<br />
– Control opportunities with growing cash flows<br />
– Financing for organic growth, modernization and acquisitions<br />
– Ability to create value by solving strategic operational, financial and governance<br />
challenges<br />
• Wide variety of industries where <strong>Brookfield</strong> has a competitive advantage<br />
• 12 person local team dedicated to private equity opportunities in addition to significant<br />
local resources<br />
159 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Private Equity & Distress Investing<br />
Distress<br />
Investing<br />
Environment
Distress Investing Environment – U.S.<br />
• Continued macro challenges<br />
– High levels of unemployment and fiscal deficits<br />
– S&P downgrade<br />
– Housing market is still in disarray<br />
– Political posturing<br />
• Certain industries and regions remain fundamentally<br />
challenged (housing, forest products, merchant power,<br />
U.S. Southwest)<br />
• More recently, credit markets have weakened<br />
• Capital is now more expensive, or unavailable, for<br />
lower grade issuers and weak sponsors<br />
• Current environment should enable <strong>Brookfield</strong> to<br />
surface opportunities in property, infrastructure and<br />
private equity<br />
INDEX PERFORMANCE INDEX PERFORMANCE (S&P 500) (S&P 500)<br />
120.0<br />
110.0<br />
100.0<br />
90.0<br />
80.0<br />
Dec-10 Feb-11 Apr-11 Jun-11 Aug-11<br />
INTEREST INTEREST RATES RATES AND BOND AND BOND YIELDS YIELDS<br />
10.00<br />
8.00<br />
6.00<br />
4.00<br />
2.00<br />
-<br />
Dec-10 Feb-11 Apr-11 Jun-11 Aug-11<br />
Barclays Capital US High Yield: B<br />
Barclays Capital US Aggregate: Corporate Investment<br />
Grade<br />
Source: Economist, Standard & Poors<br />
161 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Distress Investing Environment – Europe<br />
• Sovereign default risk significant concern with<br />
global implications<br />
• Weak economic data in Europe has added to<br />
negative sentiment – German economy grew by<br />
only 0.1% in Q2<br />
• Bank liquidity risk remains a concern with<br />
regulators failing to address market fears<br />
– Recent bank trading values and corporate<br />
and high yield spreads have weakened<br />
substantially<br />
INDEX PERFORMANCE INDEX PERFORMANCE<br />
150<br />
125<br />
MSCI Euro MSCI EUR Bank<br />
100<br />
75<br />
50<br />
Sep-10 Dec-10 Mar-11 Jun-11 Sep-11<br />
Source: www.oanda.com, CapitalIQ, Economist<br />
BOND SPREADS BOND SPREADS<br />
• Opportunities for distress across sectors, but<br />
particularly those dependent on bank financing<br />
– Potential bank asset sales represent<br />
significant opportunity<br />
2000<br />
1500<br />
1000<br />
Euro bb-b non-financial fixed and floating rate …<br />
Euro non-periphery non-financial<br />
• <strong>Brookfield</strong> is very well positioned to pursue<br />
distressed real estate and infrastructure<br />
investments in Europe<br />
500<br />
0<br />
1/4/2008 1/4/2009 1/4/2010 1/4/<strong>2011</strong><br />
162 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Investing – China<br />
• China continues to experience strong growth<br />
and is expected to be the world’s largest economy<br />
within 10 years<br />
• Government leaders have mandated slowing<br />
growth and inflation<br />
INDEX PERFORMANCE INDEX PERFORMANCE<br />
150<br />
MSCI China China RTO<br />
125<br />
100<br />
75<br />
50<br />
• Banks to reduce growth in loans on real estate<br />
– Stock markets have declined over past 12 months<br />
25<br />
-<br />
Sep-10 Dec-10 Mar-11 Jun-11 Sep-11<br />
– Several Chinese companies with North American<br />
listings have experienced severe contractions<br />
in valuation amid governance concerns<br />
– $US debt markets for many Chinese issuers have closed<br />
– Potential opportunities to assist liquidity constrained companies in industries<br />
well known to <strong>Brookfield</strong><br />
163 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Investing Environment – India<br />
• High growth economy with favourable<br />
demographics, investment grade sovereign rating<br />
and developing capital markets<br />
• Interest rates have risen over the last 18 months<br />
in response to very high inflation<br />
• Bank lending has tightened markedly, particularly<br />
in real estate, in response to Reserve Bank of India<br />
requirements<br />
• Economic growth has slowed and stock markets<br />
have weakened<br />
• Market weakness exacerbated by foreign capital<br />
outflows and investor concerns around governance<br />
and corruption<br />
• Potential opportunities for <strong>Brookfield</strong> in<br />
infrastructure and real estate in a liquidity<br />
constrained environment<br />
INDEX PERFORMANCE INDEX PERFORMANCE<br />
105<br />
95<br />
85<br />
75<br />
65<br />
55<br />
Dec-10 Feb-11 Apr-11 Jun-11 Aug-11<br />
Sensex NSE Infra NSE Realty<br />
FOREIGN FOREIGN DIRECT DIRECT INVESTMENT INFLOWS ($BN) ($B)<br />
$50<br />
$40<br />
$30<br />
$20<br />
$10<br />
$0<br />
2005 2006 2007 2008 2009 2010<br />
Source: Economist, Standard & Poors, UNCTAD<br />
164 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Private Equity & Distress Investing<br />
Outlook
Positive Outlook for Distress Investing<br />
• Current environment suits <strong>Brookfield</strong>’s style of investing<br />
• Our strategy and approach to distress investing gives us a competitive advantage<br />
• High quality assets are available in numerous global jurisdictions<br />
• Our investment teams are actively pursuing opportunities<br />
166 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
Private Equity & Distress Investing<br />
Q & A
Conclusion
The Opportunities Are Vast<br />
• Our core operating platforms are performing well<br />
• We are extremely well positioned in this environment to take advantage of growth<br />
opportunities<br />
• Our global platform opens doors inaccessible to others<br />
• We have a strong balance sheet, significant liquidity and dry powder to fuel our growth<br />
• Our funds and strategies are also performing well<br />
• We are increasingly seen as a leading alternative asset manager with a solid track record<br />
and a differentiating expertise in real assets<br />
• We have an outstanding team in place<br />
In-depth operating, restructuring and financial expertise and years of experience<br />
working together<br />
• We remain very positive about the future<br />
169 | <strong>Brookfield</strong> <strong>Asset</strong> <strong>Management</strong> Inc.
September 27, <strong>2011</strong><br />
Q & A
September 27, <strong>2011</strong><br />
<strong>INVESTOR</strong><br />
<strong>DAY</strong><br />
<strong>2011</strong>