Recap of the Brookfield Asset Management Earnings Report

November 19, 2019 | Investments, News, Real Estate

dThe Brookfield Asset Management earnings report emerged last week. The company had another solid quarter. Fee-related earnings before performance fees increased 35% over the prior-year quarter.

Brookfield also continued to be very effective at fundraising.

The company raised $2 billion of private fund capital in the quarter, bringing the total third-party money raised over the last twelve months to just short of $30 billion. The firm also added $102 billion of private fund fee bearing capital as a result of the closing of their purchase of Oaktree, a leading credit manager.

Since 2015 assets under management have been growing, on average, by 23% a year.

Brookfield Asset Management Earnings Report

In the letter to shareholders, CEO Bruce Flatt identified several attractive investment opportunities going forward.

The firm likes data infrastructure assets. The firm currently owns the leading independent telecom tower operator in France, with over 7,000 towers and active rooftop sites. Brookfield also recently secured an exclusive agreement to invest in one of the largest privately-owned tower businesses in the world. This company that owns 130,000 telecom towers that support Reliance Jio in India.

Another two billion people will likely move into cities around the world by 2050. Flatt and his team see office properties and high rise residential urban condo developments as opportunities.

“Instead of downsizing to a small house and living in the suburbs, the empty nesters are now moving to the vibrancy of the cities, with all of their benefits—such as museums, galleries, sports arenas, theatres and concert halls,” he wrote in a shareholder letter. “This trend is accelerating and making cities better, and land and apartments are increasingly valuable.”

On the ensuing conference call, he expressed enthusiasm for continued investment in real assets.

“If this low-interest-rate environment continues, which, at the moment, it looks like it will, we think that capital will increasingly be allocated to alternatives as a means of meeting required return targets,” he said. “We think that many institutional investors will continue a push towards holding allocations of up to 60% in alternatives.”

Opportunity in India

Anuj Ranjan, the Managing Partner and CEO, India, and the Middle East, expressed great enthusiasm for the investment climate in India. Brookfield has operated in India for a decade. It now has about $16 billion invested in real assets across India. Mr. Ranjan discussed the firm’s entry into India back in 2008.

“Now, while we entered India in 2008, we did not close our first major transaction until 2014,” Ranjan said. “Since India was a new market for us then, we were guided by our philosophy of being patient and invested capital only where we saw value opportunities. Initially, when we arrived in India, the country was going through an economic boom that was reflected in valuations that we thought were too high. So we decided to spend the first five years understanding the market and building out our operating capabilities on the ground.”

In 2012, the company saw the first signs of distress and value-oriented pricing and bought its first commercial office property. Today it owns 30 million square feet of high-quality office space in several major markets in India. The company also recently purchased an integrated luxury hospitality group, which has 3,000 owned and managed keys.

Building on Infrastructure

Its India infrastructure business consists of a Platform with five national highways, the only cross-country gas pipeline, and telecom towers.

The company’s renewable power business owns and operates over 500 megawatts of capacity across solar and wind assets. The private equity group at Brookfield India and the Middle East has also bought a financial services group. This arm created a financial services business that provides credit to residential developers who lack access to traditional bank financing.

Mr. Ranjan summed up his vies on this emerging market.

“To conclude, we’re excited about the opportunity India provides,” he said. “On the one hand, we have the fastest-growing major economy in the world, taking steps to access their enormous population by including them in the formal economy. On the other hand, in the short term, liquidity is scarce, and the credit markets are in distress, creating a tremendous opportunity for private capital providers like us.”

As long as interest rates stay low, Brookfield Asset Management should successfully deploy in real assets around the world.

That trend should help the company to deliver strong earnings quarter after quarter.

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