Earnings Call: Q4 2010

Feb 18, 2011

Hello. This is the Chorus Call conference operator. Welcome to the Brookfield Asset Management 2010 Year End Results Conference Call and Webcast. As a reminder, all participants are in a listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. At this time, I'd like to turn the conference over to Catherine Vyse, Senior Vice President, Investor Relations and Communications of Brookfield. Please go ahead, Ms. Vyse. Thank you, operator, and good morning, ladies and gentlemen. Thank you for joining us for our Q4 year end conference call. On the call with me today are Bruce Flat, our Chief Executive Officer Brian Lawson, our Chief Financial Officer and Sachin Shah, Managing Partner. Brian will first discuss the highlights of our operations and our financial results. Bruce will then provide some comments on the current investment environment and our investment needs and opportunities. I would like at this time to remind you in responding to questions and in talking about our new initiatives and our financial and operating performance, we may make forward looking statements. These statements are subject to known and unknown risks and future results may differ materially. For further information for investors, I would encourage you to review our annual information form or our annual report, both of which are available on our website. With that done, I'd like to turn the call over to Brian. Great. Thank you, Catherine, and good morning. I'll first start off with some of the highlights. Our operating cash flow for the year was $1,500,000,000 that's up a little bit over 2,009 and similar to 2,008. We believe this illustrates the resilience of our operations. The results reflect substantial growth in our property, infrastructure and residential development cash flows and this more than offset the impact of unusually low water levels on our renewable power business and a somewhat lower level of investment gains. We also recorded a substantially higher contribution from our asset management activities. We achieved total return of $3.77 per share or 12%. This is consistent with our objective. The increase reflects the cash flow generated within the business, increases in the net tangible value of our assets and appreciating the value of our asset management business. I'll make a few comments on that later on in my remarks. The value of the asset management franchise as measured by capital under management, base management fees and performance based returns, which leads into that increase in value all improved during the year. We invested nearly $6,000,000,000 of our own capital alongside our clients into new opportunities during 2010. This includes nearly $2,000,000,000 in the 1st 6 weeks of 2011. Of note, this included $1,000,000,000 approximately $1,000,000,000 of our capital as part of the 2.6 $1,000,000,000 cornerstone investment by us and our clients into the restructuring of General Growth Properties. We also invested an additional $1,700,000,000 into general growth common shares during early 2011. This increases the combined interest in GGP for our consortium to nearly 40% and our direct interest to approximately 20%. We also acquired the remaining 60% of a global infrastructure portfolio for approximately $1,100,000,000 and this is in addition to $2,500,000,000 invested in a variety of other activities during the year. We completed $18,000,000,000 of capital raising initiatives, including $2,000,000,000 in the 1st 6 weeks of 2011. These activities have enhanced our liquidity, funded investment initiatives and enabled us to extend our debt maturity profile at low cost of capital. One result of this is the extension of our corporate maturity profile at Brookfield and the power business to 8 years 10 years respectively at an average rate on new debt issues of 5.2%. And we also advanced several transactions to simplify our structure and better position key operating companies to create enhanced value for shareholders. We established our flagship commercial office company, Brookfield Office Properties as a global pure play office company by merging in our interest in our Australian office portfolio. We're also in the process of merging our U. S. Residential operations with those of Brookfield office, the Canadian business to create a unique North American residential company. And in addition, the merger of Brookfield Infrastructure and its partially owned Australian subsidiary to simplify the ownership structure and also establish Brookfield Infrastructure as a global leader in that business with a $3,500,000,000 market capitalization. And in addition to these, our operating teams completed a number of important initiatives to increase values and cash flows and we're working on a number of attractive growth opportunities including expansion of our existing operations and potential acquisitions. So turning to each of the major areas of our business. On the asset management side, contribution there increased to $350,000,000 This excludes $224,000,000 of performance based income that accumulated during the year, but which is deferred for accounting purposes. Base management fees were higher. This is due to the new funds and increased capital under management. To that end, we added more than $4,000,000,000 of new commitments to our real asset funds, including the launch of a 2 point infrastructure fund and $1,000,000,000 of additional equity capital from our listed infrastructure company. The base management fees are now tracking at On the power operations, they contributed net cash flow and realization gains of nearly $550,000,000 The realization gains stem from the sale of interest in our Canadian Renewable Energy business, totaled approximately $290,000,000 We did experience low hydrology levels, as I mentioned, in Ontario, Quebec and New York. This, together with our reduced interest in the Canadian operations, in lower cash flows. Generation was 10% below long term average and 9% below last year. This was partially offset by higher price contracts. Realized prices were up 11% over last year to $81 per megawatt hour. And we also recorded an increase in cash flow from the new wind facilities and other generating facilities that we brought online during the year. Reservoirs were 6% above average levels at year end. This reflects strong water flows at the end of the 4th quarter and positions us well coming into 2011. And we've also recently benefited from higher prices due to colder winter weather. We advanced the development of 8 hydro and wind facilities. These should in aggregate add 1500 gigawatt hours of annual generation at mid teens levered returns at a total project cost of roughly $1,500,000,000 We also concluded a number of short and long term power sales agreements to stabilize revenues and support development initiatives. The commercial office side, we've got a contribution there of $364,000,000 This reflects 4% increase in rents on a same property basis. We leased 7,200,000 square feet, maintained our lease profile at 95% occupancy and a 7.2 year average term. The average rent in the portfolio increased to $28 per share sorry, per square foot. That continues to be roughly 10% below market rents. And we advanced a number of development activities, including our premier City Square office development in Perth and a prime office site in the City of London. And we also acquired undervalued properties in Washington DC and Houston that encompass 2,100,000 square feet. The cost there was approximately $435,000,000 On the infrastructure side, cash flows there more than doubled to $130,000,000 A lot of this came from the global portfolio that we acquired in the Q4 of 2009 and therefore had a full year contribution in the current year That contributed $74,000,000 These businesses are largely regulated or contractual in nature. This provides for stable operating results that will increase with inflation and the investment of additional capital. Our timber business, which is more correlated with the economic cycle contributed $23,000,000 compared to $10,000,000 last year. This business is well positioned to benefit from increased demand from Asia and has the ability to substantially increase harvest levels that are currently well below sustainable levels. And we've developed a substantial pipeline of expansion projects within our various infrastructure businesses that will enable us to put capital to work in this business in addition to a broad range of attractive acquisition opportunities. On the residential development side of the business, the contribution there increased by $120,000,000 to nearly $200,000,000 this year. This includes our opportunity investments activities as well. On the residential side, Daia contributed nearly $80,000,000 of the increase. That benefits from an increased number of project completions in Brazil and better margins in North America. Of no contracted sales in Brazil were up more than 50 percent over the prior year. The remaining $46,000,000 of the increase related to disposition gains within our opportunity property funds. Finally, our private equity and finance results benefited from improved operating results at a number of the companies held within our distressed investment and private equity portfolios. And this reflects a better operating environment, but also the restructuring initiatives carried out over the past several years. Now turning to total return and our measurements there, as I mentioned, we increased our intrinsic value of our common shares by $2,400,000,000 during the year. This is $3.77 per share during the year. The components of the increase include operating cash flow, increases in the values of our net tangible assets and appreciation in the value of our asset management franchise, based on continued growth in capital under management and the associated fees. The largest contributor to our total return during the year was our cash flow of $1,500,000,000 most of which was retained in the business. Valuation and appraisal gains related to our net tangible assets totaled roughly $1,000,000,000 during the year of which $400,000,000 of that was included as gains in our cash flow. As a reminder, the valuation and appraisal gains are based on year end appraisals and valuations and include the gains recorded in our IFRS financial statements. Certain assets that are not reflected at fair value under IFRS, so we have provided management estimates for those differences to arrive at a more complete and consistent determination of net asset value. The increase in values reflect lower discount rates and the impact of higher exchange rates on assets in Australia, Brazil and Canada. This is partially offset by a reduction in the energy prices that we expect to realize within our renewable power operation over the next few years. And this year in response to many inquiries, we've provided an assessment of the value of our asset management franchise, which we determined to be $4,000,000,000 at year end and increased by $500,000,000 during the year. This value, which is an important component of the intrinsic value of our company and which we continue to increase, reflects the current capital under management for our clients and the associated fees as well as the potential growth in capital and fees. Taken together, our intrinsic value was $37.45 per share at year end and that's up from $34.20 per share on a comparable basis at the end of 2,009. And so with that, I will hand the call over to Bruce. Thank you, Brian, and thank you everyone for joining the call today. I'll deal with a couple of items today and dealing first with market conditions and Brian said a few of these things. But we continue to see very positive sequential and year over year growth in virtually all of our businesses and we believe that this will continue to be the case through 2011. Obviously, as everyone knows, job creation remains slow, but the ultimate recovery in employment levels bodes well for our shorter cycle businesses, which would be the residential development and our timber businesses, which are obviously dependent on consumer confidence and the employment outlook. To make the point about recovery, I'll make just a few specific comments. For example, office leasing is currently very robust with a pipeline in most of our major markets exceeding that of the past 3 years. Sequential retail sales were up 14 has been up 14 straight months to year end in our retail malls. Our construction contract book is up almost 50% from 12 months ago. Sales in our Brazilian homebuilding business are up 60% from last year and virtually every one of our businesses which were affected by economic declines have and are seeing recovery. In the context of all of this, the stock market I guess usually looks at that forward looking and our share price did increase 53% in 2010 that is on top of 51% in 2009 as many of you know. Although despite these gains, I don't need to tell any of you how many increases it takes to recover from a year like 2,008. But after taking into account these numbers, the 10 year compound return as stated in our information is 26 percent on a share plus dividend basis and 18% over 20 years. But I would warn people that we try to compound at 12% to 15% and if we're lucky, we might do a little better than that, but that's our goal with the business over the longer term. Turning to investment themes and what we're thinking today, I'll reflect just on a couple of items and while continuing to run our businesses, we generally put our excess resources to more macro themes to operate our business. In the past 5 years, as you've seen us, we've dedicated a lot of our extra resources to Australia, Brazil and Canada and the strategy has seen us put significant amounts of capital into these three countries. And we've benefited substantially as these economies have outpaced most others in the world and in fact their currencies have also outperformed. Therefore, we have had a double win, I guess. We now have exceptional businesses in these countries, which should allow us to capitalize on the organic growth opportunities over the next decade as the dynamics of the emerging middle class in these countries play out. We decided to pursue the strategy of participating in growth of economies such as China and India instead of participating directly in them through countries such as Australia, which stood again from selling products to Asia, but where we were more comfortable in owning and operating long life assets. As a result of that and consistent with our investment philosophy, we have accepted gains at a more measured pace like usual than if we had invested into the Asian countries, but without the issues that sometimes come along with those countries. As a result of these initiatives, approximately 50% of our capital is now deployed in Australia, Brazil and Canada and we are therefore benefiting from the positive conditions of these export oriented economies in particular when compared to the U. S. This does though also mean and I would make sure that people we should want to make sure people understand this that we are more directly exposed to economies of the Asian countries than we have been in past, both through the businesses we own and through the revenues we own in currencies of countries, which rely in part on China for their growth. And while acknowledging these short term fluctuations, which may occur in these markets, we believe this exposure has been and still is a prudent diversification for Brookfield and over the longer term will continue to be an excellent place for the capital we have. More recently in the past couple of years, we focused our efforts on restructurings primarily in the U. S. We've done this at a time when there has been significant distress in the United States and that reduced valuations of even some of the highest quality assets and this was a truly special period. And while there are an enormous number of opportunities today for us to capitalize on still, there will not be a period or we certainly hope there won't be a period like that for a long time. But during that period, we invested substantial amounts of capital at distressed prices to acquire a variety of U. S. Assets from shopping malls to multifamily apartments, office properties and wind projects. Our thesis was and continues to be that we're buying assets at large discounts to replacement cost. And we believe that the U. S. Large U. S. Economy will recover over the medium to longer term and that the U. S. Will continue to be one of the drivers of the global economy for a long period of time. Furthermore, and in addition to these acquisition based strategies underlying our broad themes, each of our businesses has opportunities for us to organically grow our operations and achieve our goals for return on capital. Our access to funds on a global scale allow us to put substantial amounts of capital work in these businesses at highly attractive returns. And just to give you a few examples, recent initiatives include, as Brian mentioned, a large office building we built our building in Perth for BHP Billiton. We're undertaking extensive expansion of our rail lines to accommodate iron ore clients in Western Australia on our rail network. We're building substantial residential and office condominiums in Brazil. We're expanding our power business with new build developments on hydro in Brazil and wind projects in the U. S. And Canada. Probably even more exciting, we continue to see a broad array of additional opportunities, which often don't meet the headlines because they're smaller in nature, but they're highly attractive to the base organic growth of the business. More recently, our focus has turned to Europe in the last year as corporations and governments who have lots of assets but need to reduce liabilities and require creative solutions for capital needs come about. We believe that European companies with both local and international portfolios of assets may benefit from some of our restructuring assistance and capital and we intend to focus a greater percentage of our extra time in this region over the next while. With that, operator, I'll turn it back to you for any questions that are on the line. Thank you. We will now begin the question The first question comes from Brendan Mayeron of Wells Fargo. Please go ahead. Thanks. Good morning. Bruce, I just wanted to ask a little bit about the recent common share sale and then that decision to increase the investment in GGP. In reading your shareholder letter, it sounded like that was more of a strategic decision than financial. Is that a fair characterization? I would say there was an opportunity for us to increase our position in this company that came along. Obviously, it was a short time after we initially closed on the transaction although we've been involved in the company for 2 years. Those opportunities don't come along very often and Fairholme wanted to take stock back and to get the deal done. That's what we had to do and we therefore we chose to do the transaction. I don't I think that we probably if you look at our numbers, we issued shares at less than their true value. Having said that, I think we bought equivalent value on the other side or close to it. But more importantly, I think it gave us a very significant position in what we think is an important business longer term. And we're going to be able to do a lot with that over the time. It won't be something that we do very often, but we felt it was the appropriate thing to do this time. And just moving from call it a little less than 30% between BAAM and its partners up to around 40%, I mean does that give BAAM increased influence or increased optionality with GGP? Or is there I guess, this is sort of the first step and maybe what could be an increasing investment in the company? We've always had if you look at our positions in different companies, they are generally in the range of 30% to 50%. And we just felt it was a great time. We think this company is going to be worth a lot more 10 years from now. So we'd rather we don't plan on selling it for a long period of time, if ever. And therefore, we thought it was the right thing to do was to increase our position today. We couldn't afford to do it 3 years ago when we entered into this, just given the capital markets and the big size that we had committed to on the transaction. And we could at this point in time get something done and therefore we decide to do it. And I guess the decision to or not to use the existing liquidity at the spam level, is that driven by kind of your some of your comments about good opportunities in Europe and just other opportunities that you're seeing out there and keeping a fair bit of dry powder that for things that may come along? Yes. I'd say the only decision was the second component of the transaction, which was the public equity issue we did. The first part was part of the transaction. We had to issue shares to take back shares, so there was no real decision on that. The second component was just the $500,000,000 and we decided if there are enormous number of opportunities that we see, we wanted to keep our liquidity high and very seldom to get your when we were doing it, we figured we may as well replenish the liquidity and fund it all and that's what we decide to do. So we don't have a habit of doing this too often, so we figured we may as well do it once. Yes, that was unusual. It was why it piqued my interest. Okay, thanks. And then just for Brian, just a little bit about the asset management business. First, you've got $8,000,000,000 of kind of undeployed capital. I think there's about $3,000,000,000 of that. That's with the real estate turnaround consortium. If you deployed the additional $5,000,000,000 how much would the base management fees which are $190,000,000 today go up? Yes, they go up by some, Brendan. A lot of the funds we earn fees during the investment period. And in some cases, those will go up a little bit once it's committed and sometimes they'll go down a bit. There are a couple of situations where fees are, I'll describe them as rolled up until the investments are actually made. That's been a bit more of a recent trend in some fund arrangements. So it would have a modest increase in it as it gets invested, but a reasonable amount of it is already reflected. Sure. Okay. So the gross profit Yes. So what we'd be really looking for in investing it is again, I guess earning the full fees, but also more importantly kicking in our entitlement to earning the performance based income such as the carried interest. Sure. And the $250,000,000 or so of kind of performance fees just between the recognized and the accrued for 20.10, was there anything unusual in there? Or is that a fairly reasonable run rate? Well, I think you could look to the amount of value we've already created in general growth as being a good component of that. Okay, fair enough. All right. Thank you. Next question comes from Mark Rothschild of Canaccord Genuity. Please go ahead. Hey, thanks. Bruce, you guys were extremely active this year with buying quite a few assets and a lot of it was moving around pieces from 1 bucket to another, in particular related to the property transaction. Do you look at this as something more unique what happened this past year or is this something that you think will continue to occur as your business evolves? Mark, I would say that we don't like to do it too often because it's not a productive exercise sometimes because you can never satisfy everyone in accomplishing it. But from time to time, assets are in the wrong place. And while it takes effort to get it done, we think that, for example, having all our homebuilding activities in North America in one entity would be a smart thing to do. And therefore, sometimes you just have to get it done. So I'd say it's an exception to the rule. And we won't it won't happen too often because there isn't too many things that if you look across our organization that are untidy like that. So it's not it won't happen that often. Although that's it's not to say that it won't happen in the future because we often will buy something and it's not appropriate to be in one of the public companies and then eventually it could find its way in there. So it may or may not occur in the future, but it's probably by exception in the rule. So for example, residential in Brazil mixed in with North America? It's a separate public company. So firstly, I don't think it would the multiples in Brazil are higher than in North America. So I don't think it would be opposite way if you're ever going to do it. But second, it's a separate public company already and I think it would make no sense to do that. Okay. But a year ago you were asked about going into the retail business and obviously there was a specific transaction going after. There have been reports or maybe rumors that Brookfield is looking at getting into the industrial business. Can you comment on that? Not really, Mark. I guess I would say the bottom line, we look at many, many different investment alternatives, industrial real estate, we've owned some of it in past. And it's something I guess we might look at in the future or that we do look at. But it's there's nothing specific that we're going to close on shortly. Okay. And lastly, you don't have a lot of your assets are hydroelectric power, but you do have some wind assets. Those assets that type of asset have definitely been in the news lately in Canada. Maybe just last month, your views have changed towards the wind power assets? I'll take that one, Mark. We did note with interest. The reality is that the regulatory environment, the ability to procure contracts is going to ebb and flow in different markets. I guess what I would say on that is that our efforts to develop new wind facilities are going to be still the same driven very much by having a long term contract in place to get us comfortable that we can achieve those types of returns in a very stable and low risk basis. And we've continued to be able to do that and we've done it in a few markets outside of Ontario as well. So I would say the basic philosophy is unchanged and we'll still drive forward on that basis. And Mark, you may be referring to Ontario when you're asking that question. Yes. And I just I guess my only comment would be is that our we're obviously a big producer of energy in the province. We have a great relationship with the Ontario government, with the Ontario Power Authority. And we've done extremely well with building plants with contracts on them with them. So I think we're very pleased with the market and with everything they've done for us. Great. Thanks a lot. Next question comes from Mario Saric, Scotia Capital. Please go ahead. Hi, good morning. Just with respect to the estimated value on the asset management franchise, is there any intention going forward, I guess, with respect to providing any incremental disclosure on potential net management margins? And how perhaps maybe take us through some of the valuation parameters included in the 4,000,000,000 dollars Sure. Yes, Mario, we will continue to try and provide more information on that. As you know, it's a little bit challenging when it comes down to allocation of expenses because at one level everything we do is asset management. It's just a question of whether it is those efforts are allocated towards a specific fund and to our capital in the fund or to a co investor. The basic inputs, if you wanted to really have a simple view of what of how to come out that $4,000,000,000 If you took us growing our existing 20 some odd $1,000,000,000 of capital commitments at, let's say, a 10% rate over the next number of years, you end up at around a $50,000,000,000 number. That is something that we think makes sense as an interim step in our business. If you applied 150 basis point gross margin to that, which we believe is an appropriate margin for that kind of business, and you put a 15 times multiple on it and PV that back, you'd come up at around $4,000,000,000 So that what I would we obviously have more detailed and sophisticated plans and with everything we're doing on the asset management side. But if you really wanted to put it down to a couple of simple metrics, those would be the metrics. Okay. That's great. And I guess, Bruce, just on the asset management side, CalPERS, I guess, came out earlier this week suggesting that it's looking to reduce its exposure to publicly traded real estate and instead focus on more fund level type investment. I guess in general based on discussions that you've had with any pension funds recently, can you provide any color as to whether this represents a trend in your view as far as changing pension fund allocations are concerned and what kind of opportunity that may present for BAM going forward? Thanks. And I'll try to answer the question. First off, I won't make any specific comments about CalPERS because I don't know specifically or I shouldn't make any comments on their specific portfolio. Just in general though, I would say our experience has been that institutions around the world continue to allocate more capital to both listed and unlisted real assets. And when I say real assets, that's both real estate infrastructure and other real asset categories. And I think our general belief is that that will continue to be the case and it will continue to ramp up. And what people are observing is that they need to earn a decent return and can't take the risk that they may get 0 or they may get 20%. And so they're cutting back other areas and they're pushing it into real assets. I don't we haven't seen too many people cutting back from liquid assets into private, which I think you referred to. But I'm sure some do and some may have been over weighted to 1 or the other. But in general, I'd say we're seeing across the board increase in allocations to that to those categories. Okay. And one last question. There was also, I guess, a transaction this week between CBRE and ING with respect to its real estate management operations in Europe as well as Asia as well as Public Securities Advisory business. Is this something that BAM would have taken a look at? And just maybe some thoughts on kind of your potential expansion going forward into Asia, given your commentary that you've done it indirectly thus far? So two things on ING, I won't make any specific comments on it. But we do look at virtually everything like that that comes along. And I guess by and large, we don't we have a very large asset management business and many people around the world. And often integrating another one into it is just confusion as to the amount of funds you have and the people that you have in an organization. Sometimes it's additive, sometimes it's not. And this is a large one that costs a lot of money and we're not usually we don't usually pay for those type of goodwill type businesses. So and that's not to say that someone else can't make a lot of money off of it, I suspect they may. But it's just not for us. On Asia, I guess our view so far has been to do it directly. We now have small offices in both India and in Hong Kong and in China. And we're starting slowly like we always do and we'll figure it out eventually. And there's no we don't see any great rush to do anything. We have lots of places to put capital and we'll do it slowly and prudently. Next question is from Alex Avery of CIBC. Please go ahead. Thank you. I just wanted to focus a little bit on the renewable power. If you look at your invested capital exposure, that's your highest area of invested capital. And a moment ago, you talked about the opportunities that you see to invest more capital in property and infrastructure. Can you just I guess just give us a little bit of color about what you think the market is like for hydroelectric assets maybe in the U. S. And Brazil? And how you might somehow restructure or liberate some capital from those areas? Sorry, when you say the market for them, meaning that someone might want to buy them from us or that we want to buy things from other people? Sorry. More likely that who might be interested in buying interests in some of those assets or co investing or if it's a market that's liquid relative to the Canadian or I guess U. S. Market for hydroelectric assets? Well, I guess I would say that our assets aren't for sale firstly, and we don't plan on selling them. So we don't really test the market with our assets when they're not for sale. I think Bill having said that, if we chose to offer them to someone, I think they would be worth a lot of money and they would trade at very high premiums just given what they are and given their significant presence in the markets they are that they're carbon neutral and that they are the lowest cost in the market. So they don't trade very often because they're so unique, but we don't plan on putting them for sale at the current time. So you're comfortable with having your largest exposure being to renewable power, I guess, for the time being? Yes. Okay. And then just turning to the general growth discussion in your letter to shareholders. Bruce, you mentioned a $13,000,000,000 portion of their, I guess, debt that is up for renegotiation or refinancing. Can you just, I guess, more generally talk about whether that is something that can be done in 6 months or is how active is that market and what do you think the opportunity might be there? I think their target is $5,000,000,000 in 20.11 to get redone. There is a very substantial market for mortgages today in the United States that's redeveloping, both on the CMBS side, which everyone had called dead a year ago and in the institutional market to either insurance companies or other places. So I don't see any mortgage that we need to get done, I think can get done. It's really just the capacity to work through the mortgages that we have. You just can't do them all at once and you don't want them all with the same maturity schedule. So you need to spread them out. But the mortgage market to your I think which is your question is the mortgage market in the States has recovered dramatically over the past while spreads are still a little high. But all in coupons are pretty good just because treasuries are still low. Okay. That's great. Thank you. You're welcome. Next question is from Michael Goldberg of Desjardins Securities. Please go ahead. Thank you. I have a few questions. First of all, notwithstanding the progress on many fronts that you've made over time, One item that hasn't increased now in about 3 years is your common share dividend. What would it take for you to increase the $0.13 dividend and what can we watch as an indicator of the potential to increase the dividend? Michael, it's Bruce. The only thing I would say is we actually we view that the cash flow that we generate in the corporation is the shareholders. And if the shareholders want it back, we should give it to them. But often, our shareholders tell us they don't want increased dividends. And therefore, we haven't increased it for a little while. Obviously, as you can see the health of the company, we could easily afford to increase the dividend. But when we talk to most shareholders, they would rather have us just reinvest it back into the business. And I think if you have other observations for us, please pass them on. And we'd love to hear them because we truly view this as just a shareholder decision. Okay. And I will speak to you about it. 2nd, where do you feel the best opportunities remain for expansion of your platforms? Is it organic or is it new platforms? And if it's new platforms, in what sectors are there still potential distress opportunities, for example, in commercial real estate? As usual, Michael, you have 6 questions in one, but I'll try to answer them. Firstly, I would say there are still our distressed opportunities out there. They're not like they were in 2,008, but capital is more available and for those who know how to deal with the stress, the opportunities are still there. It's probably no it was no easier in 2,008 even though the opportunities were more plentiful because everyone was scared. And therefore, I'd say there still are distressed opportunities out there. I think for us, we have a view of growing the business in that we love to organically grow the business and put money to work within our businesses and that's always easy money and it's much more it's highly positive to the results because usually the returns are higher for the risk you take when you organically expand your business. And that's just building an additional wing on an office building or building expanding something you have today or whatever that is within the business. And there are very substantial amounts of capital to deploy within the operations. But those alone won't feed the institutional client money that we have. And therefore, there will be opportunity we need to find opportunities to grow the business elsewhere. And I think that will come both through real estate and renewable power because the business is just smaller. It will mostly be organic growth. And I think there are opportunities in many different places, although we tend not to try to focus on any one spot because often it's not that spot that produces the great opportunity. Okay. And my last question is, how should we think about the possibility after you've bought Fairhomes interest in GGP that Piercing Square might also sell its stake and that either the consortium or BAM would buy? Well, couple of things, Michael. Firstly, we for the time being can only increase our interest to 45% of the company. So we can go another 6% or 6.5% or something like that up. So I guess it's possible that we could buy another 6.5% of the company. It's not to say that we will or won't do it, but it's just that's a factual statement. And I think Pershing has been a very he's been very positive on the company, he's been invested for a while and I think he intends to keep his shares. So I don't but I don't have any view on whether they will or won't sell their shares. Okay. Thanks a lot. Next question comes from Andrew Kuske of Credit Suisse. Please go ahead. Thank you. Good morning. I think my first question is for Brian and it's just if you could give us a breakdown of your core liquidity from a third party capital standpoint, which I think you're pretty clear in the release saying it's $8,200,000,000 of uninvested capital at this stage. And how you think about that and then also the BAM core liquidity itself for investment? Sure. Okay. Well, first of all, just starting off with the BAM core liquidity. So we reported about $4,300,000,000 at year end, about $2,600,000,000 of that is at the corporate level. And that would be split, let's say, fifty-fifty roughly between undrawn contractual credit facilities and financial assets and cash. And then the other $1,700,000,000 would be within the principal operating units. In terms of the 8.2 percent, the bulk of that resides within our new infrastructure funds, which are pretty recent vintage and they'd be, let's say, 10% or 15% invested at this stage. And then on the real estate side, we still have a couple $1,000,000,000 with our or more potentially with our global turnaround fund. Those would be the major components of it. Andrew, we've got some capital still within the special situations group as well. But that'd be where the bulk of it lies. Okay. That's very helpful. And then a bit broader question, probably for Bruce. You stated it in the supplemental information that you've got $4,000,000,000 of raisings going on at this point in time across multiple strategies, which you expect to close over the next 18 months. I think that was roughly the language. Do you see an increasing bias towards infrastructures and asset classes? If I looked at your invested capital of the overall business today, I mean, it's skewed to renewable power, it's skewed to commercial property and that infrastructure asset classes is still pretty light from a percentage of your overall invested capital, will that be growing over a period of time? Yes. I guess we've been in the real estate business for 20 years and in the power business for 30 years or more. So I would say those businesses that the capital we have in our balance sheet is built up over a long period of time. Infrastructure is if you separate renewable power from infrastructure, we've been in the business for 5 years in the state that we're in today. And therefore, I'd say that it has grown rapidly and I think the growth will be very strongly going forward. And that's really for two reasons. 1, governments and corporations continue to take things off their balance sheets to get their debt levels down. 2, the pension funds and institutional clients want to invest in real assets and these are perfect assets for them to have on their books and 3, there are not that many people and we happen to be one of them that can invest in infrastructure and operate them on a global basis or to the standards that institutional clients want to own and that governments and other owners want to have as their owning the asset that they're going to be the counterparty to. So I think there I guess our view is that there is very significant upside over the next 10 years to grow in the infrastructure space in the businesses that we're in and maybe a few others. And then just as an extension on that, of the funds you're currently marketing, are any of them infrastructure related? Or can you or can you not say at this stage? We just closed our global infrastructure fund. So that was the biggest effort we had to to get that closed. Our big push is to get that invested and then we'll probably market 1 after that. So the answer is nothing of large scale infrastructure related. The next question comes from Linda Ezergailis of TD Securities. Thank you. I have just a follow-up question with respect to your asset management valuation. The 150 basis point gross margin, to be clear, does that explicitly incorporate expectations of carried interest or performance fees? Or is that primary or some sort of conservative estimate of that? Or does it fully incorporate that? And what has been the experience so far in terms of gross margin ranges for you as well as your competitors? Sure. Okay. So that would include performance based income, carried interest and the like. In terms of our own experience, if you looked at it in the context of this year, we've done quite well on that front. But I think it's important to keep in mind that many of our funds are pretty recent vintage and the carried interest tend to build up in the later life of the funds, which is again one of the challenges for us in currently explaining what our current margins are. In terms of our peers, we think that the 150 basis points makes sense based on what we've observed with a number of our peers. And so we've done a fair bit of diligence on this in coming up with our business plans. Okay. And now for a different part of the equation, your $20,000,000,000 capital commitments growing at 10%. Would it be fair to assume that the expected duration of your closed funds or fully committed funds would be about 10 years? And would you expect there to be some rollover and kind of evergreen continued investment? Or to your point about, I think it was Bruce's point earlier that sometimes asset management businesses, when you buy them, have a lot of goodwill related to them. How hard will you have to be working to not just replenish, but grow from the baseline? Yes. We think we've got a very good platform and base to be building from for a number of reasons that we've chatted about, I think on this call and Investor Days and prior calls. I think a lot of your observations there are quite accurate. Typically a fund is going to have it will be a 10 year fund plus 3 1 year extensions let's say. But if you go through the normal life cycle, you're going to start returning some of that capital before then as investments are monetized. So in some case, especially on the listed entity side, those are true perpetual Evergreen funds, Brookfield Infrastructure Partners, for example. And we do have some perpetual unlisted funds as well. And I'd say there will be a natural life cycle for some of our asset classes where they will move from a fund of 1 nature into a fund with a different risk return profile and a different investor group that will keep the capital within our platforms for a very long period of time. So then would it be fair to say that you would expect kind of the duration of your those capital commitments to extend over time, But today, what would be the weighted average duration? Would it be 10 years if you incorporate some of the evergreen stuff or longer? I think you could easily say it was 10 years plus because of the existence of the evergreen. Some of this Linda is going to evolve over time. Certainly our restructuring funds are special situations funds. Those are going to have a lower average life cycle. But a number of our other funds and the listed entities are going to have a very long life cycle. But I'd say in terms of if I think what you're getting at is what is the replenishment rate required to grow at a 10% level? It's pretty manageable just because of the duration of a number of our funds. Great. Thank you. This concludes the time allotted for questions. So I'll turn the conference over to Mr. Bruce Flett. Thank you, operator, and thank you to everyone for joining us today. We appreciate your participation and we look forward to talking to you next quarter.