Brookfield Corporation (TSX:BN)

Investor Day 2013

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Sep 17, 2013

So I'd like to I'm Bruce Flatt, and I'd just like to thank everyone for coming today and welcome you to the Brookfield Investor Day. We know it's a lot of time out of people's schedules. So we appreciate it even more that you come and do this with us. We tried to simplify the presentations this year and we just have 3 of us are going to talk about the corporate overview of the company, which is Brian Lawson, Kim Redding and myself. And then we have 4 presentations on the operations. And we're going to try to focus just on the asset management business and each of the operations, we run a little bit about the business and where we're going and our list talk about our listed in our private funds, so in each of the different businesses. So that's more or less what we'll focus on. After each of the presentations, as we've done in past years, people will take questions if there are any from people and please feel free to ask any question. At the conclusion of mine, I won't take questions merely because I'm going to come back at the end and just summarize and take any other questions that do come up. We should be done in less than 3 hours, which should put us at 4 o'clock. We're not taking a break during. So anyone needs a break time during, you can just slip out during the presentations. We found in past that disrupted our rhythm. So, we'll just run straight through. And I guess the only thing I'd start before I get into the slides is I just reflect on the last 5 years in the business. And I was looking at this time of year often we compare the stock prices and different things and we're around where we were 5 years ago, which probably doesn't say a lot for a management team in a corporation. Having said that, that's been a long 5 years in the capital markets. And probably most importantly, I think and we think that the business that we have today is tremendously more valuable than it was 5 years ago. And there's various reasons for that. Some of it is because we're at an inflection point and we'll try to describe that as we go through the presentations in our asset management business and 5 years further along as we were before. As many of you know in Asset Management, track record on a long term basis is extremely important and the track record has gotten better over that 5 year period of time. And maybe most importantly, when you look at it relative to other competitors, the track record even looks better. So I think that's probably an extremely important thing for us within the business. The only thing I'd end on and then I'll get into the slides, I'd just say that that's not to say that business or our business is ever easy. In fact, it's extremely difficult as all of you know every day running the businesses you run. And so I just say that we keep charging away. We're never without our mistakes, but we continue to build this business over a very long period of time. I think there's a good ramp room looking forward. And that's what we're going to try to describe to you today. So our goal just starting off as most of you know, but I'll it's on this slide and I'll be very specific about it. It's to build a leading real asset manager in the world. And what we try to use is our global operations that we've built to invest clients to invest money for our clients at very good returns while protecting their capital. And I think those two things are extremely important. One of them in itself is not that is not as important, but the 2 of them together are extremely important. And after 20 years of doing what we've been doing, we are very global. And in fact, the business is about 100 offices, about 600 investment people around the world and about 24,000 operating employees. And we're very focused as to where we invest around the world, but we view it as a global platform and there aren't that many people that have the scale of business and the size of capital that we have and we view that as a tremendous competitive advantage. But on page 7 in the presentations, I guess bottom line is we view our business model as very simple. And the first thing we do is we take client capital and we try to invest it to earn a decent return for the risk we take. We use the 24,000 operating people to try to optimize the assets within each of the businesses and earn an extra return. And lastly and from time to time, we monetize assets within the portfolio. And it's as simple as that. And our objective in doing that is really just to earn a strong investment return for clients. And in return for that often and as you know they give us more money to invest for them in the future. And it's a continuous process compounding upon itself and that's very valuable to a franchise as it's being built. And alongside of that on the next slide, we've been spending a significant amount of time over the past 10 years in realigning the business and our 4 pillar multi fund strategy is essentially now in place, but continuing to mature and we'll talk about that today in each of the businesses. But our private funds and our listed entities are set up today such that we can access the capital markets in more ways than most institutions can. And we believe again that gives us a competitive advantage when we're operating within our business. And this is allowing us probably for the first time in a long time to have significant amounts of excess resources to be able to devote to places either to expand the business, so to continue to broaden out the asset management business we have or secondly to repurchase shares and shrink the denominator in the company. And we won't always do it, but when we see significant value within the share base, we'll continue to try to shrink the denominator down over time. We toy between back and forth between all the opportunities that we see out there and doing that. But I think for the first time in a while just because of the structure that we've now set up there will be excess capital going forward to be able to do it. And I guess we believe that we're positioned quite well. And I guess we try to crystallize that into 4 points for people when we describe what Brookfield is and why we think there's a good strategy going forward. Number 1 is there's if you look across the world at managers that can take capital from institutional and asset managers of real assets. There are few people with the track record, the global platform and the size that we have. Our fundraising capability and the relationships that we have have been getting better and we'll talk about that as we go through here, the presentations. And we've made significant progress on setting up our listed funds. And all that together, we think brings a pretty broad value proposition for shareholders. And this slide, I think, probably crystallizes the past in as good a fashion as you can do, which essentially shows what our listed funds have returned for investors since they've been in the market. And it shows the amalgam of all of the private opportunistic funds we've raised and our core and value add funds. And if you compare these to most other funds out there, there will be some that are better. And but by and large, we've done very well with institutional clients and others in the marketplace and that's a benefit for us. Turning now on page 12, just to looking at how we think about the acquisition world, I guess we think of things as in 2 broad patterns. And I guess we think of strategically where should we put capital and we try to be broad across the spectrum and look at themes of investing. And then we try to be very opportunistic from time to time within those broad themes. And over the past 5 years, we've had really 3 investment themes, which we followed. And those I think have served us well. Not everyone worked out perfectly, but generally they've worked out well. And the first one was the over leveraged developed markets America, Europe, Australia and some of the big developed markets had too much debt within it and corporations had gotten trouble in 2,008 and 2,009. And as many of you know, we capitalized on many situations, but 2 specific ones were GGP and Babcock and Brown just to give you an example of those acquisitions. Number 2, we spent a lot of time focusing on U. S. Housing and we put significant money into 2 OSB producers and also our residential business in North America. And those have been paying dividends and we think will continue to pay dividends over the next 3 to 5 years. And lastly, we focused a lot on natural gas and I'd say this one still has time to play out. I think everyone would agree that number the first two are in their 5th or 6th inning of playing out. But natural gas still has a story to play. But we've capitalized a lot on buying hydro plants and made a number of private equity investments related to the natural gas sector. And Sachin and Cyrus will talk about those as we go through here. Thinking about that more broadly for the next 3 to 5 years, I guess, on Page 16, We're now focused on 3 different themes, which we expect to continue to be dominant over the next 36 months. And those are Europe number 1. And I'd say that we don't believe that Europe is going to be a high growth economy in the future maybe never. But what that doesn't mean that for people like us there aren't tremendous opportunities. And we've put a lot of money to work with European companies and in European situations over the past 24 months and we think that's only started because there has to be a lot of deleveraging to still continue to go on in Europe. And as we state on the slide, the markets have calmed, but there still has to be an asset sale process and a deleveraging to occur. The second one is emerging markets. And there is no doubt if you looked at, and I'll just pick 3 specific countries, China, India and Brazil. 5 years ago, there was an enormous amount of money pouring into those countries and it did 2 things. It forced currencies up other than China where it's pegged, which brought on inflation in China as opposed to currency going up. And secondly, it took valuations in those markets up very significantly. And what's happened now is that a lot of money is flowing out of those countries. And that's done 2 things in reverse. Currencies are down very substantially in almost in every country. And secondly, the opportunities that we're starting to see and have been seeing are very significant. And those I guess that's what we like to see, which is to have a business where we have people, continuously invest in those countries, run the businesses we have and have capital available when there is capital fleeing markets. And so I think I guess we think the second area is the emerging market economies and putting money to work in those. And lastly, I'd say our theme would be commodities related investments. And as you know the same thing occurred within commodity companies 5 years ago where they couldn't do anything wrong and the amount of money pouring into commodity companies was very significant. Again that's reversed very substantially. And what that means for us is that there's a lot of investments around the commodity sector, whether it be oil and gas mining or other type of commodities in either infrastructure or power. They have a number of these companies and businesses have enormous amounts of infrastructure within them. And we can often help to separate those type of assets from those companies. And the combination of, I guess, what we believe and what we've always tried to do with the business is have very substantial amounts of capital, have the operating presence with our people and the relationships that we have to pursue opportunities when they come. And I guess we think today given the 600 people we have a very substantial pipeline of opportunities that we can put the many tens of 1,000,000,000 dollars to work that we need to put to work to expand our business. And we think the opportunities are there. So So before I turn it over to Kim Redding, who's going to talk specifically about real assets, I'd just say, we think we're well positioned at Brookfield for the future. And I'd crystallize it in 5 points. 1, strong access to capital with our fund platforms to the fundraising capabilities we have and we've built over the past 6 years, which I can tell you and many of you were here 6 or 7 years ago. It's not been easy, but we've made some great progress in that. 3, we can part of that due to the track record we have in the different funds, we do believe there's many significant opportunities to invest capital. And lastly, often the clients we get are because we have interests aligned with our clients and our investors, all throughout the system of our business. And we think that's extremely important for the franchise. So with that, I'll turn it over to Kim, who many of you may not have met. Kim is our Chief Investment Strategist. And he's going to talk about real assets and how they fit in. And I think probably most importantly today, there's a lot of questions about interest rates and real assets and how they respond to it, and he's going to specifically try to address that. Thanks, Bruce, and good afternoon. So institutional investors are increasing their allocation to real assets and we in a couple of weeks, we'll release a paper where we've looked more closely at that trend and we think that this will continue going forward. So otherwise, sorry, it goes upside down. There we go. Thank you. So we find ourselves in an environment where we've got yields that are very low. Interest rates are rising have come off their bottoms and there's concern about continuing increases in interest rates. Inflation potential and the concern for it in the future exist. Growth is pretty moderate around the world and subdued. And the liabilities of investors are increasing as their retirees get older and need more income. So investors are really seeking a new alternative. This is our belief that as investors move past the new normal, we expect real assets to become what we're calling the new essential. Not that real assets are new in institutional portfolios, but historically the allocations to real assets have been relatively modest. As an example, in at the end of 1999, the top 1,000 pension funds in North America together had 3.5% of their portfolios invested in real estate, one portion of real assets. Today that number is 7.5%, so you can see it's doubled. But we think it's got lots of room to grow even further given the particular environment that we find today. First real assets provide a very stable cash flow stream dependable much like their fixed income portfolios predictable income streams that can grow over time. Secondly, those yields on real assets are typically higher than fixed income and other more traditional investments. The income streams are a couple of 100 basis points perhaps higher than their bond portfolios. And thirdly, unlike fixed income in an expanding economic environment and a rising interest rate environment, real asset portfolios stand to increase both our cash flows and asset values over time. So they've got the equity upside. So it's a little bit giving the best of both worlds. You get the stability of a portfolio of income that's predictable and rising. And yet in growing economic times, unlike fixed income, the asset appreciation potential is there as well as income growth. So this has led to a pretty compelling return pattern of real assets over time. This chart shows 10 years of absolute and relative returns of real assets compared to both stocks and bonds. The two blue bars represent bonds and equities. And you see all 4 of the subclasses of real assets Timberlands, property, infrastructure and ag have outperformed over a 10 year period of time. The only period in which they really haven't outperformed bonds is the last 5 years. And if you think back this is the 5 year this week is the 5 year anniversary of the rescue of AIG. So we've been in the global financial crisis where bonds have performed exceptionally well. So in almost all environments, real assets perform well relative to both bonds and equities. Real assets also have low volatility, which is a good characteristic in the portfolio. So here we've looked at the various asset classes and their Sharpe ratios. It's not just the return that it generates, but what kind of risk are you taking to generate that return. So the Sharpe ratio the higher the Sharpe ratio, the better return per unit of risk. And again, all 4 of the subclasses of real assets, Timberlands Property Infrastructure and Ag have higher Sharpe ratios in both bonds and equities. In terms of diversification, this chart shows the correlation to other asset classes and you see real assets have very low and sometimes negative correlations to the bond and equity portfolios of institutional investors. And finally, as an inflation hedge, if you look at the various asset classes and run a correlation to CPI, a measure of inflation. The 2 largest real asset classes property and infrastructure have a positive correlation to CPI where bonds and equities have either negative or no correlation at all. So, real assets do provide a hedge in an institutional portfolio to protect against future inflation. This I think is a very interesting slide. Oftentimes we're asked the question and Bruce alluded to how will real assets perform in a rising interest rate environment? And we think they will perform well. Initially, at the transition point sometimes there's a little bit of a lag. But this chart shows cap rates over time, so roughly the last 14 years. And the blue line is the average cap rate of publicly traded real estate companies in North America. Now let me just remind you, it's the average of all property types and includes all qualities. So at the current time, it's approximately a 6% cap rate. Higher quality, better located properties would trade at much lower cap rates than that perhaps 4% to 5%. But it's a good representation of cap rates across time. And the red and the gray lines represent the 10 year treasury yields and the yield that was in the investment grade corporate markets. So you see that spread between cap rates and interest rates today is at its widest point. So this chart starts at the beginning of 2000. At the time, the 10 year treasury was about 7.5% and the spread was approximately 2.50 basis points. Today, we have a 10 year treasury that's trading between 2.75% and 3% let's call it and the spread is 3.50 basis points. So this spread this widespread, we think when rates rise will help to absorb that turn and transition and increase in interest rates and give time for real assets for the income stream to increase and the asset values to increase over time. So we think there's a buffer built into the cap rates today because they've lagged behind the fall in interest rates. So we believe real assets are uniquely positioned today in our deal for institutional portfolios to generate attractive returns across different market cycles and will become the new essential component of institutional portfolios moving forward. Some of the other benefits real assets are the place to be. Revenue streams are impacted positively as business increases. So if we get rising interest rates due to recovering economy, typically that flows through to increasing rents, increasing asset values. One time one thing often overlooked is the value of the liabilities in a real asset company. If you've got long term fixed rate liabilities and rates rise, you're actually generating value as the value of that low coupon debt increases over time. And in an inflationary environment with the economy growing rents grow faster than expenses in part because expenses are a smaller part of the income stream. So you get the impact on the revenue side in a much greater way. And then as we talked about earlier, cap rates did not decrease as much as interest rates. And so as we get the churn that buffer built in by the spread will help to offset any negative impacts of rising interest rates. And so with that, I'm going to turn it over to questions, but I'd ask that there are people around the room who have microphones. This is being webcast. So if you would wait till you have a microphone to ask a question that you might have, then people will be able to hear it. I guess there's one question right there. Andrew Kaspey, Credit Suisse. Just give us some color and context on where the pension fund consultants are today on an allocation basis into real asset classes and maybe get a little bit granular on real estate versus infrastructure and in timberlands if that's possible? And then where you think that goes 3 to 5 years from now? Yeah. Well, I think it's across the board depending on size of the institutional investor and the consultants. And some areas of the world like the Canadian pension market have a much higher allocation to real assets. And so it's roughly 8% to 9% is the allocation that if you look at it globally in terms of the consultant allocation. But you see much higher allocations in some cases as high as 20%, 25%. We think there's room. And when you run Efficient Frontiers injecting real estate into the analysis, you can actually support 30% to 60% allocation of real assets. And historically, they have not been that high in part because of the investable universe. Now we've got an investable universe that's growing. We think it can support much greater allocations to real assets going forward. So we think over the next couple of decades, you could see allocations as high as 30% to 50% in certain portfolios. Okay. We'll see no other questions. I'll turn it over to Brian. Good afternoon. So I'm going to cover 3 things in my remarks here. So first of all, I just want to talk about the GP, the fee generating part of the business. And I think Bruce used the term inflection point. I think we've just to highlight the stage that we've gotten to in terms of actually posting the kinds of results that support what we've been trying to build, albeit still at a preliminary stage in terms of the results over the past while. Talk a bit about what we've been doing in terms of how we have the business organized through the multi fund strategy, what that means in terms of visibility in our balance sheet and the type of flexibility and liquidity that provides us with. And then of course this being Investor Day to give you some of our share some of our thoughts on share values and potential. So, first of all, just to set the stage, we do think of the business and I'll talk about it during this part of the presentation And it's 2 components, one being the general partner as an asset manager with around $80,000,000,000 of capital in our managed funds and roughly $1,000,000,000 of in terms of our annualized fee base. I'll talk a bit more about what that means. 2nd part of course is the capital that we have off of our balance sheet roughly $28,000,000,000 that's invested not just into those managed entities alongside our clients, but also on occasion us as principal and that generates slightly in excess of $2,000,000,000 on an of FFO on an LTM basis. For the last just over the last 6 months, we've increased our fee bearing capital by more than 30%, roughly a third and across the board, but really two principal things. 1 was the launch of Brookfield Property Partners and the second was you've seen us raise a tremendous amount of capital into our private funds. And that obviously bodes extremely well for the future. And with that, our fee related earnings, fee related earnings being management fees, IDRs, transaction advisory fees not carried interest have doubled on an LTM basis since year and are even higher if you look at it on an annualized basis at the end of the last quarter for 2013. So that's taking the capital we have in place and the associated contractual arrangements and the fees that we are entitled to or have the potential to earn from that capital. And so the fee related earnings net of direct expenses has increased substantially. And also what you've seen is our margins have approached that 50% level that we talked about over the past few years as an initial target. I mentioned that does not include carried interest that we earn in our private funds. We've now accumulated roughly $750,000,000 of carried interest, a little bit shy of that after deducting some of the associated direct expenses. And we're in the stage of harvesting and crystallizing that carry through some of the transactions you've seen us close over the past little while and what we achieved hope to achieve over the next period of time. So all of that gives us tremendous momentum as an asset manager. We've raised $14,000,000,000 of private fund capital over the past 12 months into our private funds. We now have our listed issuer strategy fully implemented and we have a number of competitive advantages moving forward. I wanted to touch on a few of those compelling attributes that are listed on this page, particularly as it relates not just to the listed issuers, but in particular to the private funds and our private fund clients. And the first four really go to reinforce what Bruce was talking about. And I think what you'll see throughout the rest of the presentations from my colleagues is that we have the ability to invest across a very wide range of opportunities and with our operating platforms gives us tremendous conviction in being able to put capital to work for us and for our clients at very attractive returns. And the last two really speak to some things that are very important to us in terms of alignment of interest and the strong corporate governance across the organization that again in terms of building that trust with our clients that we are a very good steward of their capital goes a long way in that regard. And again focusing on the private fund side of it, we've built a dedicated fundraising group. There's roughly, I'll call them 20 client facing professionals in the group and there's probably another 40 or 50 people supporting all of our client activities. And given the breadth and the range of capital that we're and clients that we're now working with, this is a very critical part of the business. It's been very successful over the past period of time and we think is a strong advantage for us moving forward in our ability to continue to raise private fund capital. And with that, one of the things that's been very notable over just the past little while is the increase in the diversification of our client base. We now have roughly 200 investors in the base. That's up say from 40 in 2,008, 30% of them across multiple funds. But a big part of this is the component of our capital that is from, I'll say, that are represented by smaller allocations has grown from a pretty small sliver in 2,008 to quite a meaningful chunk both in terms of a percentage, but also just magnitude of capital in 2013. And this tends to be higher margin and great repeat business. We're building fantastic relationships with a number of institutions that have very compelling reasons to with us and we hope to have them with us for many, many years to come. So moving forward, obviously, our goal is to substantially increase the amount of fee bearing capital over the next 5 years, really across the board. And then we've just factored into similar assumptions we would have talked about last year and we've obviously exceeded them over the past period of time. But it translates into about a 10% annual growth rate in terms of the amount of capital. But that has the result of more than tripling our fee related earnings. And in part that's the growth of the base management fees from the listed issuers as well as the private funds, but also the IDRs coming into play as well. So here you can see how they roll over the period of the next five years. And also what that does is it does increase the potential for us to earn carried interest. And what we have on the slide here is for 2013 LTM that is the increase in the carry that's accumulated to date. The middle column is what we are entitled to on an annualized basis based on the fee capital fee bearing capital that we have in place, assuming we achieve our target returns and then how we would see that growing out to 2018 based on that compounding I referenced on the last slide. And this leads to substantial increases in the value of the GP portion of our business, roughly a 20% growth rate. And to keep it simple, we apply a 20 times multiple to the fee related earnings, 10 times multiple to the carry interest. And then there is a buildup of accumulated carry as well. But it's pretty attractive growth and that's obviously why we are focused on building this part of the business. So turning to the listed issuer strategy and I've just I'll say characterize the 4 a bit of an update on the 4 platforms here and there's a couple of points really to emphasize. So first of all infrastructure, which I'll say has been in the building this out for the longest period of time is really pretty well positioned exactly what we hope to achieve in terms of having a very well capitalized, well trading listed issuer in Brookfield Infrastructure Partners and also having the ability to raise substantial amounts of private fund capital as well. And its ownership level is probably around where is probably in the sweet spot from a Brookfield perspective as well at 28%. We've often talked about 25 percent to 30%. Power, great listed entity out there in Brookfield Renewable Energy Partners, great access to private fund capital. The ownership level is higher than it needs to be. So I guess that's an area that we could potentially see working our way down either through secondary distributions as we've done from time to time and that brings capital liquidity on our balance sheet, but also through issuance down the road as well. Property, Brookfield Property Partners, we just launched and we'll talk more about that. You've seen us be very successful in raising private funds in that regard with the strategic real estate partners. And obviously the ownership interest is very high relative to where we see it being over time. This strategy, of course, also gives us tremendous access to capital. In terms of the listed issuers, it's perpetual capital. So it's perfect for the kind of assets that we love to own for extended periods of time. We also have great access to the public capital markets and greater execution in that regard. On the private funds, we get access to institutional capital and also we have capital in the form of where it's investable over a committed period, say, 3 years, where we have the ability to identify the acquisition and then go back and draw the capital. So it's really attractive in that regard. What is also meant and this is this slide here is a condensed version of our deconsolidated balance sheet. And so we've got the invested capital, this is on slide 52, of 24,000,000,000 dollars invested from Brookfield's balance sheet into those various categories less around $7,000,000,000 of corporate leverage in the form of long term corporate debt and perpetual preferred shares. And then under this is on an IFRS basis. So the general partner really gets valued at nothing. But what we've done here is taken that $24,000,000,000 of invested capital and put it in 2 categories listed and unlisted. And I just want to touch on that because this is something that's been, I'll say, quite a development over the past short while. That $20,700,000,000 If you look at it based on market prices and appraised values, our base case value for that invested capital is about $28,000,000,000 and that represents 85% of our invested capital is in the form of listed securities. In other words, very high visibility. This is a very simple balance sheet to understand. And these listed issuers the listed holdings are really most of it is in the 3 listed issuers, Brookfield Property Partners, Renewable Energy Partners and BIP. And then the other, if you look into that and we have the ability and do disclose this in our supplemental information, it's really a handful of public companies such as Brookfield Residential Properties, Norbord, Western Forest Products, the preferred shares in Brookfield Property Partners. So again, some of that should be pretty easy for people to get their minds around. And then if you think about the unlisted capital, there's about $4,000,000,000 there. It really breaks down into a couple of buckets here. In terms of appraised value, roughly a third, a third, a third commercial properties that carried on our balance sheet appraisals and reappraised quarterly. Same thing with sustainable resources. And then our private equity investments, those that aren't listed, we prepare appraisal based financial statements to provide those who are investors our private investors on a quarterly basis and they're audited annually. So those are easy to get your minds around. And then in terms of the other businesses, a couple of $1,000,000,000 of that is the power contracts. And then we have our construction property services businesses in there as well. And then there's a bit of non recourse financing. So we think that makes the Brookfield balance sheet from a corporate perspective a lot easier to get your minds around. So really it just breaks down into that GP and the LP. The other thing about it and I referenced this earlier and we talked about this last year as well is if you think about what a call it a target hold or a required hold and this is just based on our thinking around strategy. But if you assumed it was a 25% of the listed issuers and let's just say 50% of the other public entities that frees up about $14,000,000,000 of capital that we have available over time for other purposes. And when we look at that together from those values that I've we've put up here and you look at that at the recent share price, we're still trading at a 20% discount. So you can still get the franchise at a nice discount. And we think those base values represent a pretty conservative approach. And we think that there is a lot of potential upside to those values. And I'll point to really 3 things that in our mind bear that out. One would be a more rapid expansion of the fee bearing capital. We talked about 10% growth rate. Obviously, if we're successful in exceeding that, the values grow significantly. We do think in this environment with economic growth and our ability to improve returns through operations, we can enhance the value in the through our invested capital and also the ability to redeploy that surplus capital we talked about. So just quickly, if you thought about different scenarios for the general partner and this is just to give you some idea of I'll call it the leverage in the business model. We did our base case on 10% growth and 50% margin. If we expanded our margins to 60%, which should be very achievable over time as the franchise continues to grow, particularly given the nature of a couple of those fee streams. And then if we exceed that growth rate and also get a more attractive margin, then we get substantial increases in the value of the general partner on a look through basis per Brookfield share up to $40 a share. And as I mentioned, the invested capital, we think we can that that has a lot more growth potential than perhaps it's given credit for. And these are just 5 of the key thoughts we have in that regard across the various platforms. But also the ability and Bruce referenced this upfront to reallocate our capital and access that liquidity that will continue to be generated on our balance sheet to either expand the business to grow the asset management side of the business in particular, but also if we are seeing the stock trade at a meaningful discount to pretty tangible and identifiable values then we can buy it back which we've done some of over the past little while. So maybe just to round out the story and just put some numbers out there on the LP side of it. And this is really pretty straightforward. All we're doing is taking the existing invested capital and compounding it up at 10%, 12.5%, 15%, 17.5%. We've generally targeted 12% to 15%. And we've generally tended to exceed that in the past. So we're hopeful that we can exceed that in the future. But this just, I'll say rounds out the analysis so that we can put that together with the general partner values. And that's what this slide shows is the potential 2018 values based on those assumptions. And you'll see that they arrive at some pretty attractive returns for Brookfield shareholders ranging from 14% to 22%. So with that, I wanted to conclude my remarks and open it up to any questions or comments. Yes, Michael. Thanks, Tracy. Brian, last night, Biff told us that they're increasing their objective for distribution growth from 3% to 7% to 5% to 9% annually. What does that translate into in terms of increased value of their fee tail at the BAM level? I'm not going to give you a specific quantified answer because I actually don't know it off hand. But I'll say there's really 2 components to that. And 1 obviously as the distributions as the FFO increases and the distributions increase, not only should that support a stronger unit price, which should support an increase in our base management fees, but secondly, we are into the stage where we are in incentive distributions. And so we participate in 25% of the increases in distribution. So it's quite meaningful to Brookfield, particularly when you put that in the context of a $8,000,000,000 capital base. Andrew, yes. Andrew Kuske, Credit Suisse. I guess it's a 3 part question. And the first part is, do you believe there's a holding company discount sort of drifting into the BAM shares in part because you have such big interest in the public LPs and the reference prices that people can calculate. So it sort of takes us back to where we were 10 years ago with BAM. And then, calculate. So it sort of takes us back to where we were 10 years ago with BAM. And then I guess the second part is, when we've heard this from all the speakers so far on the share buybacks, does that drive your share buyback decisions? Because we've heard that more today than we have in the previous years. And then the third part of it is, if you buy back actively, how big of an interest should the Partners Group have within the stocks? If you look at the management team today being around 20% -ish, how much should that go up? Or are you accepting it to go up? Right. Okay. So on the first two, so starting off with the holding company discount and that's obviously a possibility. I guess it depends on how the people look at the company in totality. And I guess what would mitigate from that would be the existence of a general partner that you simply can't find anywhere else. And I think that's a big part of it. And we always will have the ability with the franchise to be able to put capital to work, we think, at very attractive returns. And I think a lot of that should hopefully mitigate that issue. And I'd say going the other way, I think having a simple and transparent balance sheet, I should give people a lot of conviction about the quality of the balance sheet. And I think that will be helpful. What it means for stock buybacks, I think that is going to be part driven by where we see the discount relative to other investment opportunities and the ability to grow the business by putting capital to work. And as that liquidity generates on our balance sheet, we'll really be lining the 2 up and making those decisions as we go forward. As Rick Garde your third question, I think it'll will just kind of roll out as it occurs in terms of obviously buyback stock that might increase. But again that's based on personal decisions as well. Yes. There's a gentleman over there on the firewall. Thanks for taking the question. I've got 2 questions. The first is your $14,000,000,000 of surplus, should we think of that as what Berkshire Hathaway would call float, perhaps better than float in the sense you don't have to take insurance underwriting risk? And that's maybe I'll ask the second question afterwards. Okay. Sorry. So on the first one, I'm not sure I'd call it straight float in the sense that it is our invested capital. And so we have to look at those returns as being a return direct return on capital. But there certainly gives us a tremendous amount of financial strength and liquidity and flexibility going forward. But you would expect to ultimately get a return on that surplus? It's not just absolutely. Absolutely. It's not just a moat if you will? No. I mean, we get good return on that capital. And but it does again give us the ability to reconsider that down the road as well. The second question, thanks for taking it, is the last page of the so called potential share value. Right. It's a very helpful page. What is the interest rate sensitivity to those values, discount rates? Or maybe even bigger picture way of asking the question is, let's assume we're at 5% long rates. What does that do to value? How does one think about that from the very big picture? Okay. So that 5% interest rate is actually a great place to be for Brookville and real assets. And it's obviously more consistent with what you might have seen over the past period of time. And we're assuming that a 5% interest rate is because what we've got is stronger nominal GDP growth and a bit of a term premium in there. And that is the benefit of the real assets. That's really what Kim was talking about in his remarks in that sure, interest rates will go up. Perhaps that's created a slightly higher discount rate that you would use in present value in your cash flows, but your cash flow streams have also gone up as well. So instead of say building at 1% or 2%, they're going back to the types of growth rates that you would have seen in an environment that supported a 5% interest rate. So we think that real assets provides tremendous protection against increases in interest rates, particularly when measured over a longer period of time. Can we alternate to somebody else and come back to you? Thanks. And then maybe I'll take 1 or 2 more. How are we doing for time? Yeah. Okay. Just quickly, what in your view would be the drivers of that increase in margins of 50% to 60% at the GP level? What are the possible drivers? And then what are the possible scenarios that are headwinds to that? Sure. So couple of things. We've invested pretty heavily in our call it infrastructure to be able to provide these types of services to our clients. And I'll say we probably, I'll call it, overinvested pre invested relative to the scale of capital that we had in place. So some of that's just natural growing into. And we think we've got tremendous leverage to that as well in the sense that we can grow the fee base and the capital at a faster clip than the I shouldn't call it G and A, but the associated operating costs would grow at. 2nd is some of the fees are very high margin. You think about it as an incentive distribution return of the increasing FFO and distributions from the listed issuances. Those are very full margin. So we think there's lots of latitude to increase margins through 60% for that matter. Did you sorry on the did you still have one more? No, thank you. I just to clarify, I understand loud and clear what you're saying that higher rates means higher growth. But from the perspective of valuing, BAM, what is the relationship between higher rates and growth required to offset the higher discount rate, if you will. In other words, let's say if interest rates go up 100 basis points, do you need 1% of GDP growth to keep the values the same? That's what I'm Yes. That's probably fair. In fact, we earn a little bit of a in fact, that's even probably positive to us because of the existence of fixed rate debt on the balance sheet. So we probably actually get a little bit of a multiple a bit of a premium to that. Okay. So, thank you. I'll now hand it over to Rick. Good afternoon, everyone. Last year when we met, we shared our plans for the forthcoming year for Brookfield's Property Group. And at that time, we laid out 2 main objectives for the year. The first was the listing of Brookfield's flagship real estate entity, Brookfield Property Partners or BPY. And was the completion of the fundraising of our Global Real Estate Opportunity Fund, Brookfield Strategic Real Estate Partners or BESREP. Accomplishing these two goals would complete our reorganization giving us the ability to deploy capital more efficiently and productively like our sister companies. And I'm pleased to say as I start our presentation today that we've been able to accomplish these two goals over the last several months. Over the course of the next 15 minutes or so in addition to outlining our objectives for the upcoming year, our presentation will provide an overview of Brookfield's Property Group, our investment holdings and performance, the investment landscape in which we are operating as well as a brief overview of some of our recent initiatives. And I before I get started, I'd like to just kind of break from format today and just make a brief introduction of my partner in the Real Estate Group, Brian Kingston, who joined us after a 5 year stint in Australia sitting over in the corner there. So Brian is the President and Chief Investment Officer of the Real Estate Group responsible for our growth going forward, which is a big part of what our agenda is for the next coming year or so. So I wanted to introduce you to Brian. For those of you who have had a chance to visit Australia, you might know Brian. And for those of you who haven't, I'm sure you'll get to know him over the course of the next year or so. So starting out, I'd say Brookfield's property group is somewhat unique. Unique is an often used word, but I think in the case of our property group, it's probably pretty fitting. With $105,000,000,000 of assets under management and 300,000,000 square feet of cash flowing assets, primarily high quality office, retail, apartment and industrial properties, we're certainly one of the world's largest and leading global real estate managers. With a track record that shows a 16% compounded levered IRR since 1989, we have also been one of the industry's most consistent and leading performers. Our holdings are diverse both by asset type and geography and are concentrated principally in the world's most dynamic resilient and established property markets. Our holdings include 80,000,000,000 dollars of assets in the United States, dollars 8,000,000,000 in Canada, dollars 9,000,000 in Australia and 4 in Europe where we have a growing presence and growing focus. We're also focused on the most promising emerging markets such as Brazil where we've been a very long time investor and currently have interests in around $4,000,000,000 of property assets. We've been spending time in India and China as well, markets where we're very much in the R and D phase and expect at some point sort of slowly to make some investments in those markets also. Now when meeting with investors, we're often asked what differentiates us and drives our performance. And when thinking about that question, I'd say a few things come to mind. Those of you who have met with us in the past any of us I'm sure you've heard us say repeatedly how Brookfield as an organization has a healthy respect for the cyclical nature of real estate and capital markets. And that of course is true. Adding value to our investments through operating initiatives is also of course important. But one of the first things that we do when we make an investment is to work to derisk it through proactive management and risk mitigation strategies, helping us identify opportunities where and when to invest, when to pull back and batten down the hatches, and how to drive performance and derisk our investment as Brookfield's experienced workforce and operating platforms including 16,000 people involved in our various operating initiatives and platforms. In total, we have currently 164 office properties, a little over 170 high quality malls. We have a growing presence in the multifamily sector, which I'll talk a little bit about in the future. We have 20,000 apartments at this point, growing an industrial business with 2 21 properties and about 7,600 hotels. Now similar to the infrastructure and renewable energy groups, Brookfield's property investments are held through our recently listed flagship public entity BPY or through one of our several private real estate fund offerings all of which are managed by the Brookfield Property Group. Within Brookfield Property Partners, we have $14,000,000,000 of fee bearing capital. And I'd say that Brookfield Property Partners owns basically assets in 1 of 3 ways: directly on balance sheet, we also own interest in Brookfield's operating affiliates and also the cornerstone LP investor in Brookfield sponsored funds where BPY holds anywhere between a 25% or 50% interest in those funds. Within our private real estate fund offerings, we have 13 active funds, 5 with an active investment periods and $15,000,000,000 of fee bearing capital. Our property group has been active with consistent growth throughout market cycles. In the last 24 years, we've seen our assets under management grow at a 13% cumulative annual growth rate from $6,000,000,000 in 1989 to over $105,000,000,000 of asset investments today. We've had many milestones as this chart shows along the way including the 2 new ones since we met last year as I mentioned at the beginning of the Property Group presentation. On a look back BPY has invested $17,000,000,000 of equity in its in the last 24 years and it's experienced very solid investment returns. Within our private funds business overall, we've raised $18,000,000,000 in 13 funds since 2004. We've invested $13,000,000,000 of that equity and have achieved or are targeting to achieve 17% gross IRR from these activities. We've invested $6,000,000,000 in core plus value add strategies generating a 12% IRR and $7,000,000,000 in opportunistic strategies since 2006, achieving a 25% gross IRR. Between the existing dry powder of $4,400,000,000 and our targeted remaining fundraisings fundraising on the active funds that we're out raising capital on today, we have $7,100,000,000 of capacity for new deals within our private real estate funds platform. Our active funds strategies are varied including core plus, a value add multifamily initiative, mezzanine debt funds as well as the Global Opportunity Fund that I mentioned earlier. Although we still have some work to do, we view 2013 as a transformative year for Brookfield's Property Group. The initial launch of BPY and the successful fundraising of our opportunity fund should lead significant future growth and fee bearing capital coming from our real estate platform. Base management fees on an annualized basis have approached around $200,000,000 again if annualized in 2013, which represents about a 26 percent cumulative annual growth rate since 2008. The success in raising capital for BSREP underscores the stature within the industry of Brookfield's real estate platform. The fund closed at $4,400,000,000 which was $900,000,000 ahead of our target when we first launched it 1.5 years ago, supported by a sponsoring investment of $1,300,000,000 by BPY, we raised an additional $3,100,000,000 from 65 investors, many of which were repeat Brookfield and Brookfield Real Estate Investors. BESREP was the 2nd largest fund raised this year and was the 4th largest raised in the real estate industry since 2007. Now all transactions that we pursue in the opportunistic space targeting 20% returns will be done through BSREP. The successful deployment of capital will help to contribute to our future growth. And I'd say just speaking for a minute about BPY and our view on BPY, this chart attempts to capture explain our excitement for its future through internal organic growth opportunities and the successful deployment of recycled and new capital, we feel there is meaningful growth ahead. And if you just sort of start with a $26 per share IFRS value, we've identified about $7 per share growth through working our owned assets in accordance with their business plans either through occupancy improvements or capturing mark to market lease spreads by new leasing. But all of that adds, as I said, dollars 7 per share. Executing on our development plans, converting idle land into cash flowing properties should yield another $3 per share. And recycling capital from mature or non strategic assets should add another $2 per share. Factoring in a scale acquisition, sort of aspirational and other investments coming off recurring equity issues should yield another $6 a share over time. The total of these things are about $44 a share and again just sort of indicative of why we're excited about the future of BPY. Now if you look for a minute at where BPY is trading at about a 6.5% cap rate and assume that that's a high cap rate relative to where this quality assets are trading in the industry. Excuse me, it took another 50 basis points off the cap rate. That would add very meaningful value to BPY as well. Not that we expect cap rates to go down, but I think our assumption is that the 6.5% cap rate given the relative quality of the assets is a bit high. So in summary, I'd say 2013 has been a transformative year and a good year for the Property Group, a successful year for private fundraising. At this point, we've raised about $6,400,000,000 versus a $7,800,000,000 target. Our fundraising included a single purpose transaction vehicle of $1,100,000,000 to approach an investment in Downtown L. A. Office assets. 2013 has also been a successful year on the investing front for us. We have invested or committed about $3,200,000,000 of capital so far including $1,500,000,000 of the $4,400,000,000 within BSREP. One of the highlights for the year has been 3 acquisitions that we've made within the industrial property sector. Through the acquisition of Verde, Gaisley and IDI, we now have an industrial platform, which includes 221 properties with a gross value of $2,600,000,000 comprising 62,000,000 square feet. So we're one of the becoming one of the world's larger players in the industrial sector. It's also been a good year for capital recycling. Obviously, as many who preceded me today have mentioned, it's a good time for institutional investors who are looking to deploy capital into hard assets. We have sold so far this year $1,400,000,000 of assets that are either non strategic or have matured or out of older funds that have matured and have targeted another $1,600,000,000 of sales for the balance of the year, so $3,000,000,000 total of gross properties. So just a minute on the investment landscape and what we're seeing out there. In I'll just start with Canada and Australia. They're pretty similar markets. Both have a commodities based element to them. Both have very sound banks and financial systems. And frankly, we haven't seen a whole lot of opportunities. We have seen some opportunities to do some development. But beyond that, there's very little distress or opportunities for opportunistic investment. Brazil obviously a developing market fueled by growth in the middle class. There are points in time in the cycle where we have found it interesting to invest in inflation and foreign capital fleeing home. And those that's and inflation and foreign capital fleeing home and those that typically creates windows of opportunity for us. So we're spending more time in Brazil at the moment. The 2 markets that I think we're most excited about are United States and Europe. The U. S. Where we've been very active over the last couple of years, we're seeing fundamentals continuing to improve. The improvement is sort of spotty. Obviously, not a lot of distress, but we are given that a number of assets were capitalized about a decade ago and are at the end of their loans. A lot of entities still need recapitalization. And although the financial markets are there and banks are lending again, they don't lend to everyone. And we've seen lots of opportunities in the United States and we expect to continue to be active in the U. S. As well. Europe is probably the market where we've been most excited. We've been spending a lot of time there over the last several years. As Bruce and I think Kim mentioned, we do expect to see slow growth in Europe. But really there's lots of opportunities we think for recapitalization of entities there. And just I think the pace of our discussions, the level of our discussions have been picking up there. So we expect to be doing much more in Europe. So just ending the report on the Property Group, I'd outlined our objectives for the coming year. And principally, the main thing for us is to manage our funds and our assets to maximize value for all shareholders and to ensure strong investment performance to drive our returns on equity incentive distributions and performance fees. Within BPY, we still have some work to do. It only initially launched. Frankly, we don't think it's been trading that great, not unsurprisingly. But some of the things that we need to do is enhance our shareholder base and analyst coverage, seek a transformative transaction or transactions to really launch BPY and get it going and reduce over time the significance of our reliance on public company investments, which is currently about 80%. Within our Private Funds Group, our goals are to continue to monetize stabilized investments within mature funds and to continue to deploy the dry powder that we have within our fund vehicles. So with that as background, I'd be pleased to answer any questions that anybody has. Sam? Thanks. In this rising rate environment and with accelerating economic growth in the U. S, what asset classes are you most excited about? Well, we've been, I'd say, spending a lot of time within the industrial office and multifamily sectors. And frankly, we haven't seen a lot of opportunities that have been interesting for us within the retail sector, but more within the others. We don't really set out at the beginning of the year any desired allocations of capital. Rather we're chasing opportunities as we find them or they arise. So I think over the course of the next year or 2, we probably will do transactions in all three of those sectors. Andrew Kuske, Credit Suisse. Rick, just give us a sense on what you think about the size of the transformative transaction and maybe with reference to the BIP case studies. If we look at BIP and when they did the Babcock deal, BIP was roughly about $1,000,000,000 market cap and I believe that was about the first tranche of it was $1,000,000,000 The total market cap at that point was $2,000,000,000 You've got a $12,000,000,000 market cap obviously small float. So how do you think about transformative transaction just in that context? I think the kinds of I answer that in the context of the kinds of things that we've been looking at. It sort of range in anywhere from $1,000,000,000 to $5,000,000,000 of equity. And I think at some point in time when the right opportunity comes along, those are the kind of transactions that we might do that would be meaningful enough given the capital base. Any other questions? No? Okay. Thank you all. Good afternoon, everyone. My name is Sam Pollock and I work in the Infrastructure Group. I'm pleased to report that the Infrastructure business continues to enhance its reputation as one of the leading infrastructure managers in the world. Today, I'm going to talk a bit about some of our recent accomplishments, give you a bit of an update on how Portfolio Infrastructure Partners, our flagship public vehicle is doing, go through the asset management performance from a fee perspective and just some of the priorities for the year ahead. As I mentioned, we are recognized particularly amongst the private institutions who invest in our private funds as one of the leading managers in the world for infrastructure. The reasons for that are probably fourfold. First of all, we've got a business that has tremendous scale and diversity. We operate not only in North and South America, but in Europe and Australasia. We've got exposure to many asset classes including transportation, utilities, energy and sustainable resources. In addition to that, we've got a great track record of performance. And frankly, our ability to raise capital has been fantastic over the last couple of years. And so obviously people like to invest with managers that have that record of attracting other people's capital. Our investor group today has the opportunity to invest in various vehicles. We have lots of flexibility to offer them publicly listed vehicles to invest in such as DIP and Acadian Timber. We also have some global flagship private infrastructure and timberland vehicles as well. We offer a few select regional investment strategies. But our focus for the future as has been for the last number of years has been on our global flagship strategies. We think that having the flexibility to invest in many markets and go where the returns are is a better way to approach the asset class as opposed to being focused in one particular area or sector where valuations might get a little overheated. One of the things that our investors also like is the fact that we've got great alignment with them. As you can see, Brookfield is an anchor investment in all these strategies, which is consistent with our general approach across all the platforms. One of the things we generally do is we often just focus on the assets. But from an asset management perspective, the real value of our platform is in our people. So I thought I would touch a bit on how we're organized and just describe that a bit to you. Today, the infrastructure business is run by 2 senior managing partners as well as 9 managing partners. We operate the business really as a matrix organization. We have a group that's largely based in North America that are the Chief Investment Officer Groups of a Chief Investment Officer for transportation, utilities, energy and sustainable resources. And then we have a number of regional heads that run what I would describe as hubs where they're largely responsible for business development and asset management activities. But basically these 2 groups of teams work together to execute transactions and make sure that we have best of breed investment underwriting and follow-up operations oriented approach to asset management. One of the most important considerations for our investors is the performance of our funds. We've listed some of the strategies that we undertake from a public perspective. Our performance over the last 5 years has been very strong. On the infrastructure side, we tend to target returns in the 12% to 15% range. We've managed to outperform that, particularly with infrastructure partners. In our timberland strategies, our target returns are in the 10% to 12% range. We've been slightly less of that on the private side. That's primarily due to the vintage of our funds. But in comparison to funds of that era, we have generally outperformed them all. One of the things that also goes to the success of our platform is the fact and I think Andrew might have mentioned a little bit earlier in his question, Brookfield Infrastructure Partners is a business that we started back in 2,008. When we launched it back at that time, we barely had a market cap of $500,000,000 Since that time, we've been able to grow the business, obviously profitable by generating great unit returns, but the scale of the business has also grown to almost $8,000,000,000 market cap. We've listed out a number of our recent accomplishments in the business. I really want to focus on 2 in particular. The first one is our execution of recycling capital. This past year, we sold about $4,700,000,000 of assets. Typically, we talk about all the great investments we've done in a year. But as an asset manager, we think it's just important to be a good seller as it is a good buyer. And from a realization perspective, one of the big assets we sold this year was Longview Timber. It was an asset that we sold for $2,700,000,000 And we think we sold at great value. It's probably the highest price on a per acre basis as it's been seen in the Pacific Northwest almost ever, but definitely in the last 5 to 10 years. In addition to that, we sold 5 interests in several infrastructure assets. Our average return on those investments was about just shy of $2,000,000,000 of proceeds with a 25% IRR, again tremendous value for our investors. The second thing I wanted to touch on was the debt financings. We continued our strategy of refinancing debt in this low interest rate environment and tried to push out our maturities. Two great examples of what we were able to do. We bought a business last year in the U. K. A regulated distribution business called Anaxys. We merged it with our own business in the same sector. The business we bought was actually a recapitalization opportunity. So we bought it for tremendous value. We put some new equity into the combined business And then we took that debt that we had financed with the banks with £600,000,000 when we put a 3 year bond to bridge takeout, we were able to refinance that debt within 6 months at a rate of just over 4% with an average maturity of 13 years. So it's just a fantastic opportunity for us to push out maturities at very low interest rates. In addition, in our District Energy business, we bought a system in Toronto last year called EnWave. It was relatively undercapitalized with about $80,000,000 of debt. So we had lots of opportunity to put in investment grade debt into the business. We ended up financing it with $215,000,000 of debt. We pushed out maturities to 25 years and the interest rate on that is sub 5%. Again positions that asset for great success for a long period of time. Now I'll touch on some of the more fun stuff, the acquisitions. We did 4 large investments in the last 12 months that I wanted to touch on. The first one is our rail expansion project. This was a $600,000,000 investment that we made probably over an 18 month period in our rail operations in Australia. We assisted 5 customers in bringing on new mines and expansions. From our perspective, the joy here was these were returns that were exceptionally high. Our probably average equity IRR in these investments was over 25%. The additional cash flow to Brookfield Infrastructure Partners from the $600,000,000 is about $150,000,000 annually. It's just a great investment. We also made a sizable investment with our partners, our Birders Infrastructure to buy toll roads in Brazil. We bought a business that has about 3,200 kilometers of toll roads. It's been about a year since we made that investment. It's performed exceptionally well. Revenues are up 10% year on year basis. And we think this is a business we'll be able to grow as the government continues to privatize additional roads in that country. I already talked about our U. K. Regulation distribution business. That was a business that was a tuck in acquisition for us. And again, the combined business is performing exceptionally well. And on the District Energy side, I just want to touch on this quickly. This was a business that we had not been invested in previously. Last year, we bought a system in Toronto. We followed up by buying 2 more systems more recently in Houston and New Orleans. Today, we have about $620,000,000 invested in the sector. It's a sector we like a lot because there's tremendous opportunities to grow it organically. There's about 1,000 systems in Canada and U. S. Combined, mostly owned by municipalities, universities and a few utility companies. And this is the type of business that for us we see tremendous value because it's relatively unknown and not aggressively sought after by others. We think we can buy for good value and the underlying contractual framework of the business suits us well. It's all inflation linked contracts, good counterparties and long term contracts. I'm just going to touch briefly on how we see the infrastructure sector today from an investment perspective. I think one of the common views we hear is that the infrastructure sector is getting a bit crowded with a lot of new entrants coming in to compete against us. We still see tremendous value in the sector. And despite the fact that there are new entrants, I'd say most of those new entrants and a lot of them are pension funds are focused in investing in different ways than we do. And I know Bruce talked earlier about our approach to investing where we try to take a contrarian approach or look for sectors that are capital constrained. And in the infrastructure sector, we see that in several areas. Two areas in particular where we see it today, one is in the mining sector, the other one is in the shipping sector. Both were areas where there was lots of capital, lots of excess capacity build up. And the companies that were the strategic investors in those sectors tended to own all their infrastructure assets themselves and they tended not to bring in others to own infrastructure. Today, as they need to become more capital disciplined and in fact because they're trading at such low prices, they find it very attractive to sell off this infrastructure to people like ourselves. But the necessity to be a buyer of those types of assets is you need to understand how they think and prepare to take a partnership approach to constructing an offtake contract with them, so that they feel that they're partners in the business with you. In addition to that, we see lots of opportunities in emerging markets. We talked a little bit about Brazil, but Japan is a market where a number of participants use what was relatively easy capital in that country to go abroad and make investments. And today with capital being more constrained in Japan as the currency has devalued, they're now looking to sell off assets. And we spend a lot of time in that market trying to make relationships and seeing if there's opportunities to buy assets from them much like we did with the European construction companies over the last couple of years. And lastly, the whole trend towards government privatization of assets continues. We see lots of opportunities in Australia, Canada and South America to buy assets from governments looking to generate cash flow. And I guess I should the last point in the slide is probably the most important. With what we've been able to do this year on the fundraising side, we actually have almost $7,000,000,000 of capital to deploy in the sector. So I'm just going to touch briefly on Brookfield Infrastructure Partners. This is our flagship public vehicle we talked about earlier. And I apologize for those in the crowd who were there last night. We had an Investor Day for BIP. And so some of you will have heard these slides already. But for the rest of you hopefully you find it interesting. The value proposition for Brookfield Infrastructure Partners is the fact that you have a business with very low risk that generates an attractive yield for investors of approximately 5% with very strong steady growth that we think is achievable given the business we have in place. Just starting with the security distribution, we have a very low payout ratio about 55%, a rock solid capital structure that's BBB plus rated by S and P. And we've got high quality cash flows that underpin the business that are about 90% regulator contracted, 70% indexed to inflation and 60% that have no volume risk. In addition to that, the business itself has lots of growth from an organic perspective and from new investments. I'll touch on that in a second. For investors, and a number of them have invested in Brookfield Infrastructure and been very supportive for the last couple of years, they've been rewarded with very good growth. We've been able to grow over the last 4 years our FFO by about 34% on a cumulative average growth basis. And this has led to growth in our distributions of about 13%. The growth of the business has really been as a result of a number of things that we've done. Obviously, we had a great acquisition a number of years ago where we took over Prime Infrastructure. Last year, we had a number of great investments. We invested about $1,400,000,000 into new opportunities. We undertook the rail expansion, which delivered a lot of accretive returns. And every single year, we deploy a significant amount of capital back into our utilities rate base that's very predictable and a capital backlog that we can demonstrate to people is going to exist on a sustainable basis. This slide here really is what we spent most of last night talking about, which was explaining the growth trajectory of the business. We think it's very attractive to have a very predictable low risk business that you can provide someone this 5% return and continue to grow it on a 10% annual basis. And how we do that, as I mentioned, 3% to 4% of that growth comes from just inflation indexation in our contracts in place in the company. Within our business, we have about 35% of the EBITDA that is exposed to GDP. So this is where we have networks, whether it be toll roads or ports, where we have lots of capacity to take on new customers. And with GDP growth, we tend to have just higher growth rates in each single year. And so about 35% of our business is exposed to that that drives another 1% to 2% growth. And then every single year, we retain cash flow in the business that we redeployed back into the company. And in the case of Brook Infrastructure Partners, it's about 20% of our cash flow or just over $100,000,000 and that drives a further 2% to 3%. And that tends to be capital that we deploy in our utilities rate base. And then finally, we generate another 2 plus percent growth from new investments that we make every single year and new opportunities. And 2% generally is if we assume we make a $500,000,000 investment. So to the extent that we can deploy more capital like $1,000,000,000 such as we've been doing in the last couple of years then that growth rate can be higher. So just turning back to our Asset Management business. We've got great momentum going into 2014. In the 1st 9 months of this year, we have raised almost $6,000,000,000 of capital for our various strategies. And again, just I think demonstrating the value proposition that we bring to our institutional clients. I can't talk a lot about our fundraising activities, particularly for funds that haven't closed, but we did close 2 funds this year, both of them in the timber space. 1 was a global timber fund, which is our 5th fund. We raised $1,000,000,000 for that strategy, dollars 750,000,000 of which was third party capital and now it's about 25% larger than what we set out to do. We also raised a $280,000,000 Brazil Timber Fund. That's our 2nd fund in that strategy. And again that was probably 20% to 30% higher than what we set out the raise. So our strategies are being very popular with our investors and we're very confident on the infrastructure side that we'll do even better than that. What this all means from the perspective of our revenues is that we've just got tremendous growth in what we've been able to achieve. Over the last 5 years, we've grown our fees from about $50,000,000 to $200,000,000 a growth rate about 45%. These fees are extremely sticky. About 80% of our fees today are from perpetual base fees from companies like BIP and Acadian Timber as well as very long dated closed end funds such as our infrastructure funds that are over 12 years in length. What probably isn't shown here is the opportunity if we continue to deploy capital well and achieve our return targets, we're going to have fantastic and meaningful increases to these fees from incentive distributions and from performance fees. So this is just in conclusion. I guess the main priorities for us is really continue to do what we've been doing for the last couple of years. It's worked well and we don't want to make too many changes. I think one of the things we think we can add to our business is a flagship public sustainable resources vehicle. It's something we've been thinking about and we'll see if we can come up with an opportunity that will give us the scale to launch that. In addition to that, as an asset manager, one of the most important things for us to do is to continue to add to our investment footprint and put new teams in markets where we see opportunities. So we continue to add to our teams and add to the talent and that's really important from a business perspective. We'll continue to raise capital in the coming year and hopefully close the fund in the not too distant future. And probably the most important thing is spend our time and energies to deploying the significant amount of dry powder that we currently have, which today sits around $7,000,000,000 Thank you. I'm happy to take any questions. Robert Zekhauser, shareholder. Sam, I've been reading that the coal mining business isn't too good and production is going down. And I wondered if you could give us some insight or comments on what's happening with the planning for the expansion of the Dally Rambla coal terminal? Sure. The question was in relation to the expansion at Dudgeon Point, which is adjacent to the existing facility we have in Australia. The coal markets, as you mentioned, are relatively depressed and mining companies have slowed down their capital spend. And we've seen that even in the Ballon Basin, which is generally one of the most prolific coal resources in the world, the capital budgets have pulled back. What it's meant for our facility is that we've had to also slow down our plans to develop it. We continue to work with the poor authority to do the necessary environmental permitting so that we're ready to go when markets return. But I'd say today things are progressing quite slowly. Frederic Bastien with Raymond James. Sam you mentioned that pension funds are investing in different ways than you do. Can you expand on that? Sure. I probably touched a bit on this last night as well. The big difference with our approach and I'd say pension funds is the pension fund community is very much focused on achieving allocations within a certain time frame. So they've got a certain amount of capital ready to be deployed in a year. They want to make sure they get it deployed. And they also have very a lot of limitations on incurring broken deal costs. And so what the worst thing for them would be to spend a lot of money and not have a shot at actually making an investment. So they actually like the certainty of auctions where they know that a company is going to transact. Our strategy actually is a lot different. We try to avoid auctions because we think that it creates an environment where you tend to overpay and obviously it can become much more of a cost of capital shoot out. So our time and energy is actually spent on transactions that might take a year, 2 years or even 3 years before they happen. So we identify Bruce often comes with us on many of these outreach programs and we Bruce often comes with us on many of these outreach programs and we try and develop relationships, so that when they're thinking of doing something they either come to us first or at that time we'll present an idea to them to hopefully get some thinking and they just start working with us. And we find the best value opportunities are the ones where we create the transaction or we create a dynamic where we're working as partners towards a goal. So I think that's the big difference to the way we do it and the way pension funds approach transactions. Thanks. It's Cherilyn Radbourne from TD Securities. Sam, I wonder if you could just talk a little bit more around the opportunities to acquire infrastructure assets from mining companies. And I guess particular issue that I'd be interested if you'd address it is just historically the port and the rail assets in particular have been viewed very strategically by some of the larger companies. And so I just wonder if you think there's enough pressure out there now that they're willing to cede the control to you that you normally like to have and the contractual underpinnings to mitigate the risk that you usually like to have? Well, you summed up the issues pretty well there Cherilyn. It's not easy. The natural inclination for usually people who are in operations who exaggerate the risks that come with allowing someone else to operate an asset. We've been very successful over the years in particular renewable power side where we bought inside defense power plants. And really infrastructure rail port is no different than operating a hydro facility. I mean you have to have certain standards you have to live by and that you have to be prepared to invest the capital to maintain the equipment. These are all things you can contractually set out. The big issue for us with these companies is establishing trust. And I think we generally because of the scale of the business, the fact that we've been around for a long period of time and the fact that we're reputable, we start off in a good place. But it is a challenge. It's not a slam dunk. Andrew Kuske, Credit Suisse. Sam, just what drives the outreach program? And I guess there's a dichotomy of you take a view that you believe a company will become distressed because of being over levered and maybe poor investment decisions on their part? Or is it really just taking a look at there's assets you like and have characteristics that you think are very interesting that you would like to own over a period of time? Well, you generally need both characteristics. You have to like the asset that you're talking to someone about and you have to find someone that you think may be motivated. And often when you start meeting people, it's not that they're at that point in time looking for capital or need capital, But you just recognize it's in a sector that consumes lots of capital and as a result maybe someone who doesn't need to own their infrastructure as well as their core business. So really we've got a very broad team located around the world. And each one of those groups is tasked with coming up with a list of people that we think would be good partners or people where we think we could buy for value. And so we just we actually probably knock on 10 doors for maybe one that responds and tries to talk to us about something. Next Tracy? Michael Goldberg, Desjardins. A couple of questions. Do you still have assets that you consider non core? What are they? And can you elaborate on what you mean by establishing a flagship public sustainable resources vehicle? Sure. So Mike with your on your first question, we've just completed an extensive 12 month to 18 month program of selling off some assets. I think for the time being, we have done what we set out to do. We always look at our assets every single year and decide whether or not we think that someone pays more value or values at a higher rate than what we think it's worth or we think we have maxed out the asset to its potential. So we always do that every single year. That's part of our business planning process. But I'd say today, we don't have any intentions of upselling anything else, but that could change in a year's time. With respect to the sustainable resources business, we've for us today that includes Timberlands and Agri lands. We think that this is an asset class that has increasing interest particularly for our private investors. And we think the public won't be far behind in being attracted to the combination of those 2. And they're obviously sectors that we have lots of capabilities in. So that's what we describe as sustainable resources. So would that be along the lines of when you say a public vehicle, would that be along the lines of another BIP, BEP or BPY? Yes. It's a little early to say what the actual structure would be. We think that structure works extremely well and so that's probably where we'd start. But this is still very much in the incubator stage. And so, Ruud, I think the first thing we need to do is find a scale transaction that would provide the impetus for creating this. One last question if there's anyone has another question. If not, that's great. I will now turn it over to Sachin Shah who's going to talk about Power. Thanks, Sam, and good afternoon. I'm Sachin Shah. I'm with the Renewable Power Group. I'm here with Richard Legeau, who heads up our group. We're obviously both available to answer questions. Today, I'm going to walk you through our strategy going forward, really our track record that we've had for approximately 15 years in this business growing it from a very small base to one of the largest global platforms in the world. Our investment performance over those last 15 years, what we've been able to accomplish and obviously what we intend to strive to accomplish going forward. And then really spend a bit of time on the market in front of us, our growth prospects, where we think we can deploy capital and what all of that means from an asset manager perspective and the amount of capital that we can both deploy and the fees that we can raise obviously as a part of that. Today, we have $20,000,000,000 of assets under management in the business. We have operations that span Canada, the U. S. And Brazil. There's 1200 people on the ground who manage these assets every day. And on all accounts, we'd be one of the largest global renewable power managers. Clearly, a large differentiator for us has been that our focus has largely been on hydroelectric assets over the last 15 years. And our strategy like the other companies you heard is really predicated on a global listed issuer with perpetual equity that has access to the capital markets that's Brookfield Renewable Energy Partners and then private equity capital that sits alongside us to be able to deploy. Brookfield Renewable Energy Partners has a $7,000,000,000 market cap today and it would be by market cap the largest renewable power company in the world. As I mentioned, our business is 84% hydro and just under 6,000 megawatts of installed capacity. Our strategy, which really has not changed in the last 15 years, is to generate 12% to 15% total returns on invested capital. It's built off of 3 primary areas of focus. 1 is continue to find opportunities in hydro and wind to deploy capital where we can leverage our operating platform and bring expertise on growing those streams of cash flows over a very long period of time. Our access to capital and our publicly listed issuer allows us to have tremendous strength in terms of the types of transactions we can do. We can obviously do single asset transactions, large portfolios, but we can now access the capital markets and look at more capital markets types transactions and even look at other public companies. We've had a development pipeline in the business that we've built over the years that we continue to deploy capital into and it's a pretty important part of our organic growth strategy going forward. Hydro assets, the reason we like them, it allows us to earn very strong margins through the cycle. This is a business that generates 70% margins and earns very positive strong cash flows irrespective of the economic cycle. And as economies start to improve, as rates start to rise because growth improves, our expectation is we'll be able to enhance the margins in these business and then continue to compound cash flow growth over a very long period of time. Lastly, we've always maintained a strong focus on an investment grade balance sheet sizing our non recourse debt to investment grade parameters, having 1st mortgages in all the properties or all the power plants that we invest in and maintaining very strong liquidity levels today and I'll speak about it in a little bit. We have access to a capital pool of over $3,000,000,000 to deploy into the opportunities that we see in front of us. I'll start with our track record though. Although the listed issuer that we have was launched in 2011, we really started investing in this space towards the end of the 1990s. In 1999, we launched a Canadian listed entity called Great Lakes Hydro Income Fund, which invested primarily in our Canadian opportunities and we bought assets along the way in Brazil and the United States directly on our balance sheet on BAM's balance sheet. If you were a shareholder in that fund, you received 14 years of rising distributions. We never cut a distribution. We never decreased the distributions. We were able to grow our margins over that period consistently. And we grew from 3 assets to today having over 2 10 assets spread across 3 countries. In addition, your total return during that period would have been approximately 16%. So shareholders have done fairly well. It's our job now to carry that forward for the next decade and we can talk a little bit about the investable universe we see and the investment attributes that we see in front of us that will allow us to carry that track record on. As I mentioned, the ownership structure historically was through a listed entity in Canada and Direct Holdings. You can see our track record in that regard 16% total returns for our Canadian listed vehicle, BREP, which we launched at the end of 2011 has delivered 15% total return to shareholders in the just under 2 years that it's been operating. We've been able to grow our distributions by 7% annually in that business. And our direct holdings obviously did quite well for BAM shareholders and were really the impetus for us to be able to create this global listed vehicle. In terms of fees, in just under 2 years of really investing in a managed structure and under an asset management model, we've been able to triple our fees. That's the fees that we earn in both the public listed issuer, but also the private equity capital that we manage that's dedicated to renewable strategies. Today, we have $72,000,000 of base fees. Some of our other entities BIP, BPY, if you're familiar with them, we all have investment distribution hurdles, IDRs as we call them. We haven't yet surpassed any of them. So we have strong momentum in front of us as our cash flows grow, as distributions grow to not only increase base management fees, but to start to bring IDRs into the business and grow the level of fee bearing capital alongside that. So why what do we like about Renewables and why do we believe this is a very compelling place for us to put our both our own equity and put our partners' equity into. If you think about the U. S. And most of the developed world, we've been living off of a legacy of aging infrastructure in particular on electricity that's allowed us to have very affordable electrical costs for largely the last 50 years. In many of the markets we operate if you take NE Pool and PJM, the average age of coal facilities in those markets is 47 or just under 50 years old. You hear it constantly that the electrical grid, the transmission sector needs significant investment to be able to accommodate new wind and new sources of electricity that will be connected over the coming decade. Diversification of fuel risk is the other broad theme that we're seeing in the sector. Today, 40 of the U. S. Electricity market is serviced by coal and another 30% is serviced by gas. That's approximately 70% that's tied up into 2 commodities. And although we would acknowledge that shale gas is real, it's going to be abundant and it's going to provide low cost fuel, if you're a system operator, it's very difficult to displace much of that coal with 1 commodity and in particular, one commodity that's already pretty heavily used. And so renewables, although they provide a very good source of non carbon generating electricity, primarily why we see them being important part of the supply stack is that they provide diversity to system operators. They allow the system operators to understand who understand that the world in front of them has nuclear, coal, oil, gas and some renewables and you have a large sector of that coming out over the next decade, it allows them to build diversity into the supply stack and not be beholden to one particular commodity. Because if you build your entire system around 1 commodity and you're wrong, the catastrophic implications in terms of costs and reliability would decimate your economy. We think the 2 best renewables to be in, clearly, hydro has been our preferred investment or asset class over the last decade. We think hydro and wind are the 2 best to be in today, mostly because they actually provide a bulk level of power that you can provide meaningfully to the grid. They have low costs, no fuel costs obviously. But they don't require hydro certainly requires no subsidies. And wind over time the technology has gotten better. The level of subsidies have decreased. And more and more wind is actually an asset class that competes from a cost perspective relative to the other technologies. In addition, the other compelling part about renewables is that there's an increasing awareness globally of obviously carbon emissions and the impact to society more broadly. Today every EU country has renewable targets. 37 states and 9 provinces have renewable power standards or targets. And all of that policy momentum is leading to continued investment in the sector and is allowing us to look at the sector with a growth view and a view that more capital will flow into this as we get further on in the decade. If you think about the investable universe today, 1400 gigawatts of global installed capacity exists in renewables and that's across hydro, wind, geothermal and solar. To put that number in perspective, that's about 1.5 times the size of the entire U. S. Electrical sector, which is installed today globally. The big countries obviously the U. S, China, Canada, Brazil, much of the European market, even if you took China out of the equation as we're not looking there today to invest in renewables, your number would still exceed the entire installed capacity of the United States. In addition, dollars 200,000,000,000 of new investment is flowing into this sector annually. So we think the universe of investable opportunities for us on hydro and wind and over time some of the other asset classes will continue to grow. And it's a good place over the next decade where we feel we will be able to buy for deep value and have enough investment opportunities to deploy a significant amount of capital. So what does the market look like in terms of the places that we intend to invest in the near term? In North America, we are seeing we've been in the midst I'd say of 3 to 4 years of a historically low commodity price environment. What we're really excited about North America is that you've had 5 years of a deep recessionary backdrop. You've had shale gas. People have become conditioned to a view that energy will be cheap here for a very long time. And we don't disagree. There's an abundance of gas in the ground. But whatever your view of future energy prices is most people would acknowledge that at $40 a megawatt hour for power nothing new is getting built in the system and no new investments going to occur, which will incent the replacement of coal that's coming offline eventually. In our view, this is a great time to be investing because we're able to buy renewables at the bottom of the cycle and we're able to buy them in a manner where we can earn reasonable cash yields while we wait for both the economy to recover, gas prices to normalize and obviously power prices to grow at a level that will incent new investment. Brazil is another market. We've been in Brazil for as an organization, we've been in Brazil for over 50 years on the power side. We started to build our portfolio of small hydros in 2,003. Today, we're the largest owner of small hydros in Brazil. We have 400 people on the ground there. Brazil is a market where today, I think Bruce mentioned early on there's a significant amount of capital that poured into Brazil 5 years ago inflated values and made it very difficult for us to grow our business in a way where we could be competitive on investment opportunities. Much of our growth in the last 5 years came from our own internal development pipeline because values have been going up as capital flowed in. What we've seen and very markedly in the last 6 months is that significant capital is now pulling out of the country. There's less competition. The currency has declined and people have fears about inflation. Our take on it is this is a country that's had 30 years of 4% to 5% demand growth on electricity. To put Brazil in perspective, today the average Brazilian uses 1 eighth of the electricity of the average American and it's got 200,000,000 people there and a growing middle class. This is a market with 100,000 megawatts of installed capacity versus the U. S. With 1,000,000 megawatts of installed capacity. It's a great place from a long term fundamental perspective. In particular, if you're trying to grow productivity and you're trying to incent economic growth, the place that you start from a fundamental perspective is infrastructure. We provide critical infrastructure on the electricity side and we think that our investments there long term will be very valuable to increasing productivity, but will be very valuable from a rising price environment perspective. And just lastly on Brazil. So one phenomenon we have seen play out over the last year is that with supply bottlenecks, with energy bottlenecks, energy pricing has gone up there by almost 1.5 to 2 times. If I was just standing here last year, pricing in that marketplace today is 1.5 to 2 times higher in a year over year basis simply because we've seen supply shortages and implementation of new thermal fired facilities, which have really risen the cost structure in that marketplace. So we think it's a great place to be. And we think as people leave the country and the currency declines in value, investing capital there becomes cheaper and gives us a better return profile. Today, we have no renewable investments in Europe. It's a market that we'd love to be for obvious reasons. We talk about it a lot in terms of the distress. One of the benefits of being part of the broader BAM group is if we were running a standalone power business and thinking about moving out to Europe, we'd have to invest in office, we'd have to invest in people, we'd have to invest in relationships. I think one of the really great attributes of Brookfield and our broad platforms is that we have an office in Europe. We have people on the ground. We can leverage off of the other investment teams in infrastructure and properties. And we have relationships that we can bring to bear to help us as we understand a particular geography or investment landscape. Clearly, the obvious themes in Europe are distress and capital constraints. We think it's a market that's really well suited for us because they've had a wide acceptance of renewables for over a decade now. And we think that if you look 10 years from now, we'd love to be in a position in Europe where we've got a business that looks and feels a lot like our North American business, a large operating platform, the ability to buy single assets and tuck them in, abilities to buy large portfolios and do capital markets transactions. We'll obviously go slow. We want to be careful. But we think that the time today and for the next few years as capital continues to get more scarce will be pretty important over the next 10 years of us building out a strong platform there. So what do we bring to all of this in addition to strong operations as a manager? Clearly, everybody talks about M and A. We think we have a very strong M and A expertise. Our ability to go through transactions, our ability to review transactions, but our discipline to transact only at returns that we would find acceptable and ultimately also walk away from deals, I think sets us apart from others. Sam pointed out that pension funds who are on a program to allocate often have an embedded pressure to put money to work. I think one of the great things about us is that we can be patient and we can bring a very patient long term view to investing. This year alone, we've reviewed over $20,000,000,000 of transactions globally, much of that in our core markets and we've executed on 2. We would view that as a very strong year. We wish we could execute on more, but ultimately returns are paramount and we recognize that we're investing not only our own capital, but capital for our partners and have a long term track record that we're trying to achieve. Strong balance sheet and liquidity, those are the 2, I'd say, areas where we spend a lot of time and that speaks to discipline as well. Investment grade financings, non recourse mortgages, non cross collateralized. The way we finance our business, it gives us the liquidity and the financial flexibility to transact on opportunities when we find returns are compelling and in particular when we find the capital is scarce. And as I mentioned earlier, today we have approximately $3,000,000,000 if you combine our private equity capital and our liquidity in our public listed issuer, dollars 3,000,000,000 to use to deploy into opportunities globally in the markets that we're targeting. And our investment returns consistent with the strategy earlier on are 12% to 15% returns. On the development side, we have an 1800 megawatt development pipeline. Although we've grown from 3 plants to over 2 100 in 15 years and much of that growth has come from M and A, we do pride ourselves in being able to deploy investment into development type returns. We've built approximately 25 facilities in the last 15 years. We target 15% to 20% returns on that activity. And we think it's a great way of generating self sourced high return opportunities that we can manage and that we can that can build long term cash flows. A good example of that today would be we are building a 45 Megawatt Hydro project in British Columbia. It's going to cost just over $200,000,000 to build. It has a 40 year contract with the BC government. And we put 40 year financing in place to match the PPAs there at an all in interest rate of 4.5%. Those types of opportunities when we can execute on them are really compelling to shareholders and really allow us to earn 20% plus type returns and in particular are most valuable when too much capital is chasing opportunities. We think that if we look out over the next 5 years, pipeline that we've built will give us the option to deploy approximately $500,000,000 over the next 5 years. It's about $100,000,000 a year into these types of opportunities. And if I was to summarize these last two pages in terms of M and A, the growth environment in front of us, the markets that we're targeting and development, we think that it's realistic to be able to deploy $500,000,000 to $700,000,000 in M and A opportunities in the next few years looking forward and $100,000,000 annually into greenfield development. And based on the returns that we target 12% to 15% on M and A 15% to 20% in greenfield, we feel kind of comfortable that the next 5 years for us we'll be able to deliver on total returns of 12% to 15%, deploying a meaningful amount of capital. And if you just did the math for fun on that, if you're able to deploy $700,000,000 to $800,000,000 per year over the next 5 years, that's about $3,000,000,000 to $4,000,000,000 of capital that we think we can deploy in this sector. And it would effectively double the size of the business that we have today. And we're already the largest in the world in terms of a global renewable platform. So maybe just to describe the listed issuer for a second Brookfield Renewable Energy Partners. We have today a 5.4% distribution yield, a very stable cash flow profile, 92% protected by contracts. We have a BBB rating by S and P. We pride ourselves in our investment grade balance sheet low levels of debt. And we generate approximately $575,000,000 of FFO in that business annually. We pay out 65% as a payout ratio. And I think one of the things that we are trying to do today and we've been trying for the last few years is position that business not just for the growth that we talked about, but for very strong organic growth. We've been pretty successful in the last 12 to 24 months in acquiring in this very low commodity environment assets that we think will provide very strong upside in the future. And what I mean by that is we've been able to buy hydros in North America today underwriting them for 10 to 20 year price curves that start at $40 and grow at inflation. So over 20 years average close to $50 a megawatt hour. And regardless of what your view of future rise, We're setting up this business not just for M and A growth and deployment of capital, but very strong organic cash flow growth. Today, we have 2 terawatt hours of power that's subject to that type of cash flow growth. And to put that in perspective, it's a 20 terawatt hour business. So 10% of our volume right now has been acquired at the bottom of the cycle and every $10 of prior price increases will lead to $20,000,000 of FFO growth in this business. If I put some math around that in terms of where we think we can do organically with the business in terms not just in addition to maintaining strong margins, we think that with our development pipeline deploying $100,000,000 per year, we can do that without accessing any public equity market capital or using private institutional capital, but we can do that simply with cash flow that we retain behind by only paying out 65% of our FFO. If we can deploy that at 12% to 15% returns, then Brookfield Renewable Energy Partners cash flows on an FFO basis should grow by 2% to 3% annually. If we take the 2 terawatt hours that I just described that we've been able to acquire in this price environment in the U. S. And in particular in parts of the U. S, we can every $10 as I said the like $20,000,000 and that's a 3.5% increase just for a 10% increase in power price. And then finally, a 14 year track record of growing our margins and beating inflation on our cost structure, which we think in a business, you can't always control everything, but the one thing you can control is costs. And I think we pride ourselves on being able to beat inflation on our costs over the last 14 years very consistently. Okay. Go from here. Clearly, the investment program in terms of putting money to work, we think the big three themes are can we invest in North America at the bottom of the cycle and hopefully this will lead this period longer for a little while longer before we see a recovery. And if we can keep allocating capital in the U. S. And in Canada in this price environment, we think we'll position our business very strongly going forward. Brazil is a great place. We have a competitive position. We're the largest owners of small hydro. We think that it's a great time to invest in particular as capitalistic. And then obviously, Europe is a longer term strategy. And if we can build our business out there for the next decade, have something that resembles what we have in North America that would be outstanding. Internally, we want to continue to find strong pricing signals and contract down our price exposures through PPAs. Raising capital, we don't want to be beholden to capital obviously as they've continued to be volatile. So pulling capital assets, we've identified about $400,000,000 to $600,000,000 of properties in the near term that we can pull out of this business. And I think as we recycle capital, put money to work and ultimately re contract assets or opportunities to raise debt levels while maintaining our investment grade ratings. And obviously liquidity in our credit ratings are paramount to making sure all that's successful long term. Any one question? Yes. Bert Powell, BMO. Europe, can you build that? Or is that really you've got to buy a platform there to get critical mass right out of the gate? I think a little bit of both. I think you start small. You can find business there with people on the ground development expertise, operating expertise. You can build from there. It's no different than what we had in North America. We had I joined in 2002. So a few years after we started with 3 facilities, we had 40 people doing this. Today, we have 1200. So I think you start small, you build the internal expertise. I think we have a huge advantage in that we already have the expertise here and we can take people from here and put them over there and actually have a head start relative to somebody's interest. So we don't need a big splashy transaction and a platform on day 1. We can find a small business and then grow from there. Obviously, if we can put significant capital to work it turns that would be ideal. Are there opportunities to do that? Are there large scale platforms that you see I think we've seen opportunities that are a little bit more on the medium sized, size scale opportunities, if you look into larger asset pools. It's the utilities, it's governments. Some of the construction companies in Europe have large assets. Many of them have announced divestiture programs their own capital raising reasons obviously. But like anybody, if you own a lot of stuff, you kick the can as long as you can. And what we've seen is there's some ratings or there's some need for new capital. There's some need for new invent, but they'll take their time. And our job in the next few years to find those opportunities, create relationships with those people and what catalyst for a transaction be it partner that's preferred and somebody who can work productively with the sellers of those assets. Andrew? Andrew Kuske here with Credit Suisse. How do you think of 3 to 5 years from now wind versus hydro grow, a very small wind portfolio, but that could grow rapidly. Related to that question is, how do you think about the returns of various assets? If you think hydro, hydro, 20 years plus are properly maintained, wind seems to be about 20 to 25. Just your thoughts about the Sure. And absolutely, let's start with asset mix. 5 years ago, we had business. Today, we have 1,000 in wind. So small relative to our hydro business, but it's not small on an absolute basis. We're a large producer of wind or a large owner of wind assets. I think last of the classes that we'll look to in the future are solar biomass. We've looked at geothermal. Let me start with solar. We have a development project in our pipeline today or in our portfolio today. This is one that we brought our acquisition of a public company last year. It's in Puerto Rico. It's a product we didn't ascribe any value to it when we underwrote it. And so it's a bit of a free option for us. It's an opportunity for us to learn internally. I think when it comes to new technologies, like to be is to build the internal expertise. We did that with wind. We like to run operations and maintenance in house. We like to have the internal expertise. We like to know what we're underwriting. And we want to make sure that if we're going to underwrite returns that we feel that there's a path there for both us to produce at the level of Newrow and for our ability to maintain those assets and the real assets over a long period of time. So it's the last that we're going to learn. We think it will be a part of our supply going forward in the future. I wouldn't say in a bit in the next couple of years. But 5 years out, that could be a pretty important area where we say where we start capital, in particular as panel costs come down, balance sheet as some of the manufacturers get stronger. And then hopefully, the buy for value maybe is a second or third old stuff that's been fully built and built and potentially bring some distress. Wind will continue to be built out in our business. We see wind as a great asset class if you underwrite it properly. It is 20 to 25 years of on life. That being said, if you build in areas where there's strong scarcity value, secure land and land underneath it with the view to rebuilding after 20 to 25 years, we feel it's a place where you can have optionality on the back end to rebuild a great site where you already own the road or election systems, the substation. You own much of the infrastructure that comes with it and you're the preferred incumbent owner and operator that has the rebuild right in front of you. So we think of Wynn beyond sort of the one cycle of cash flows and we don't pay for that second cycle. We do it as free upside to it. It. But wind, you have to be careful. And I think being careful has served us well. A lot of people have been hit with lower wind speeds and pricing maybe that wasn't contracted, get away from those two things. Andy, just right there. Just tell us over the 14 years where you've had a compounded or compounded return of 6%. Can you tell us what power prices just broadly have done over that period of time, so we can get a sense how much have been priced in the marketplace versus value that you brought? Hi. So I'll break it down into 3 periods. If you take part of the 2,000, you saw a mild recessionary environment that gas sector was blowing up. The capital markets were not doing well. Gas was $2 in the early part of the decade. And there was this the asset was going to be cheap for how our prices were going to stay low. And then you had a bit of deregulation that was going on many of the Northeast markets. That was really where we started to invest in the sector in a meaningful way. And we did that. We built out our New York business. We built out our New England business. We bought assets from the Ontario government. We started to build in Brazil. And that really went on until about 2006. And 2006 a lot of capital started to flow into the sector. The rest went up to $8 to $9 in MMBtu. The world was getting very hot in leasing opportunities. If you look at our history, we dialed back our investments and really started to focus on integrating our operations, building out our development pipeline where we could control the return on the risks that we were taking. And we did that for about 3 years. We started to build and we built significantly more in Brazil. And we picked the capital where at least we knew the returns we were taking and the risk adjusted returns we were taking. Then you had the global credit crisis. And we're in the stage today where there is an embedded view again that power will be cheap forever. Capital is scarce. We're off one of the deepest recessions we've had in 50 years. And it's the reason why we actually are the most deployed in this sector because we think that it has a lot of the same themes, maybe even better from an investment perspective that we saw in the early part of the decade, where we deployed significant amounts of capital and made significant returns for shareholders from our hold period back then. So that's why we like this environment. And like I said, if it persists for a few more years, we may be able to meaningfully grow this business. I think that's it. Thank you. I'll pass it over to Cyrus. Good afternoon. Today, I'll give you an overview of our Private Equity Group Investment Strategy, performance and investment themes. Brookfield's Private Equity Business is on making value investments on an opportunistic we have a strong strategy of private equity investments in industries we understand and distressed investments with an objective of the underlying investment. We have a long history of finding great investments in all the market environment, so we aren't dependent on distressed environments and nor do we need stable capital markets to execute our strategy. And a key differentiator of our business is we have deep operating skills within our group on any situation. Our Private Equity Group has almost $8,000,000 of assets under management, of which $8,500,000,000 is through funds and just $4,000,000,000 is directly owned investments. Overtime, a greater proportion of assets will be through funds. And as we sell down our interest in our direct investments, we cycle that capital into our share of commitments for future funds. So this will help us to increase our assets under management and also help to increase fuels returns on its invested capital. Our first two funds are and we've invested about half of Brookfield Capital Partners III, our most recent fund. Our senior investment team is experienced and most of us have worked together for 10 years at least. Dedicated team has grown over time, which brings us to raise and manage significantly more capital in the future. We now have dedicated private equities in Canada, the U. S, Brazil, London and soon to be Australia. Since the launch of a bunch of Fund 1 years ago, we've invested $2,000,000,000 of capital through funds. These investments have returned 3 times for our investors. And on an overall basis, we're seeing all our investments for 12 years, we've generated an IRR of 27% to 28% net fees to our limited partners. This is a very significant performance compared to the S and P index over the timeframe and bodes very well for our future fundraising activities. And I would add to that that we now have dependent confirmation that our funds have been top quartile among American Private Equity Funds of similar risk. We expect to predict the performance of unrealized investments continue improving as operating enhancements are implemented in the business market position for our companies continues to improve. Investment approach has been consistent for a long period of time. Our overall objective is to invest at a discount to Intrinsio. We do this in a number of ways, primarily by understanding the cash flow generation potential of the businesses we're acquiring, should they be managed appropriately. When pursuing distressed investments, we look for mispriced securities. And when making private equity investments, we look for businesses that are undermanaged. Distressed securities once we saw a normalized balance sheet tend to trade stronger values. And businesses with assets that are under managed become very attractive to strategic acquirers once they're fixed. Finally, we have highly focused downside protection in all our investment activities. And as a result, our portfolios generally have a level of volatility than many others. We may miss out on very high returns with this approach, but we should seldom have horrible out of our entire capital investment is wiped out. In sourcing transactions, we've proven our ability over a long period of time to create proprietary ideas, which turn into great investments. It comes with experience, scale and reputation. During the last 12 months or so, the Private Equity considered about 50 transaction investment opportunities. 3 of these became investments, some of them will close and close shortly. Our knowledge of the site benefits from Field's global businesses and perspective, which few other private equity groups would have access to. We focus on certain industry sectors where we've developed expertise over many, many, many years. And today, portfolio comprises about 20 20 company, which generate $9,000,000,000 in aggregate revenue with 14 employees. We have successfully implemented business in all of our companies and each one of our companies today is a low cost producer in its industry, has a very strong market position in this particular niche. And repositioning efforts continue to be reflected in our operating company's results as you can see on this slide. The fees generated in our private equity business are growing at base management fees of $32,000,000 annually and cumulative performance fees in excess of $300,000,000 over the last 5 years. These fees should continue growing in the future as we raise larger funds. Over the last year, we focused on 4 opportunistic investment themes. Most distressed sellers with strained balance sheets have enabled us to assemble the 2nd coalbed methane natural gas company in Canada with reserves of 750,000,000,000 cubic feet. 2nd, corporations often selling performing non core divisions, which enabled us to acquire cold storage and logistics business at what we believe to be about 50% of replacement costs. And we see potential for an industry roll up in this sector. 3rd, we continue to look for opportunities in the mining sector, which remain significantly out of phase. Early in the summer, we made a senior secured loan of $100,000,000 to North American Palladium. Expect to double our NAV on this investment for a 4 year period. And finally, from time to time as industries fall out of favor, we find opportunities to increase existing engines at values. And during the last 12 months, we privatized 2 oil and gas companies that were trading very poorly in the capital markets. While we remain active in our investment activities, we've taken advantage of recovering housing and capital markets to monetize investments and lock in great returns. We monetized several investments this year as markets through a combination of secondary ops participating in share buybacks and company sales to strategic acquirers. And I just wanted to highlight 2 of these to you. Longview fiber, which I have in the past, But to remind you, this is a $1,000,000 kraft paper mill that was underperforming when we acquired it essentially for its working capital value. And in fact, we reduced the number of product SKUs in this company from 200 to just 70. This enabled us to shut down 4 out of 9 paper machines and run the machines at very high operating rates. Longview's EBITDA increased $40,000,000 to $160,000,000 and attracted interest from industry participants. This year, we sold the business to Capstone Paper Imaging for just over $1,000,000,000 All in all, we earned 10 times our investment. And I just want to acknowledge the incredible efforts of Hugh Sutcliffe. He's one of our very senior operating executives who did a terrific job on this turnaround. Sometimes, our investments are much more challenging than we anticipated and they don't go as smoothly as we had hoped. So Ainsworth's Lumber is such an example. We acquired Ainsworth restructuring action in 2,006 during what we believe a soft patch in housing. We had conviction about the asset quality, but we clearly misread the severity and extent of the ensuing credit and housing collapse. Ainsworth's revenue dropped from a peak of about $800,000,000 to $300,000,000 at the bottom of the and its EBITDA dropped from $250,000,000 to $5,000,000 So what did we do? We took several steps to loosen the business, including shutting competitive mills, enhancing product development, focusing on high margin products. Haynesworth's remaining mills ran at very high operating levels and rates and generated enough EBITDA through the down to service the company. Ainsworth then acquired a 50% interest in an 800,000,000 board foot mill from its bank's joint venture partner and it bought it at less than 20% of replacement. We acquired additional equity and debt in the company throughout the downturn at fantastic values. And as the housing market has gains versus trailing EBITDA has grown to $190,000,000 and is now restarting its $800,000,000 to $100,000,000 but mill. These achievements gave us the ability to attract from Nashville based Louisiana Pacific Corp. At a value that's acceptable to us and should be highly accretive to their business. Haynesworth's shareholders will receive a valuation in cash, half the consideration in stock of LP. And Brookfield through its Capital Partners for about 9% of Louisiana Pacific going forward. Based on today's trading value of Vallevalvanes, we've earned an overall IRR of $18 on this investment. We have the opportunity to enhance this return through our continuing position in Louisiana Pacific. We believe the current markets provide an interesting opportunity to the business. The U. S. Economy continues to improve. Equity markets and debt markets are strong. Will assist us to continue exiting investments and to finance our businesses on very attractive terms. In this environment, I prefer corporate carve outs to take privates. Continuing housing correction is a backdrop for us to pursue underperforming building products companies. And while debt tends to be abundant and relatively inexpensive, certain issuers will certainly struggle as interest costs move up. We continue to look for mining companies with delayed development projects, which have limited access to capital given commodity prices. Exceptional natural gas prices have pressured natural gas producers as well as merchant power generation businesses, which cannot generate cash flow in the current As you have heard, our Private Equity Group is well positioned to continue growing our business and enhancing fee growth for Brookfield and as our private equity group does not have a public listed issuer right to the Q and A. Cheryl in Raggedy Securities. It sounds like you see an opportunity to grow your private equity platform both through geographic expansion and larger funds. So I just wondered if you could address how much of the $14,000,000,000 of excess capital that Brian will refer to go into that expansion? I have to arm wrestle all of these guys to see who can get some of it. But look I think what we try to do is scale the business up based on the opportunities and our ability to execute that certain value of transactions and platform in the future. So our view is our private equity businesses are smaller small business, but our returns have been excellent. Our reputation is excellent. And we think fundraising in the future should be much more significant scale going forward. As to a target, how much of the capital come from Brookfield, maybe a third, something of that nature just to let our limited partners know we have significant skin in the game and to help us grow the business. As big the future funds will be, we'll have to see, but we certainly expect it to be much, much larger than our current business. Cyrus, just on the Minings, Metals, Natural Gas, how competitive is it in that environment for you? I can't imagine given that space that's really competitive, but I'm wrong. And wondering is that where you're looking at buy businesses? Or is this really a balance sheet investment in those kinds of assets? So it's 2 great questions. It's always competitive. There's always someone else out there in a situation. There are very few instances I can recall where nobody else, she else showed up. And there are other like minded investors like ourselves who like these out of favor opportunities. Having said that, we have a lot of expertise in mining, a lot of history in mining, a lot of expertise in natural gas and power generation platform. So I think we have as good a shot at these as any other investor in the world. And your second question was? Right. Right. What are we doing? Our view, if we're going to control something, we'll buy the equity and have equity exposure and we'll control it. In that instance, we need to buy very, very cheaply in order to turn the sorts of 20% plus returns we're targeting. Sometimes we can make a loan to a company, do little to no work and earn a fantastic return and that's fine with us too. Andrew Kuske, Credit This is Cyrus. I think about the opportunities in Europe. And I asked the question on part because if you think about the banks and the recapitalization efforts of the banks, there's still a way to go. So there's a lot of capital raising from the banks themselves, but there's also different loan books. And so largely corporate lending market should evolve into more capital market kind of activity for up there. So how do you see your opportunity from Brookfield's perspective in it? So it's going to be similar to what we've been doing here over the last few years in the North America. And we're targeting out of favor industries, companies that have operational problems. That's really what we're looking at. Today, we're spending a lot of time on building products in Europe. We have history in that sector in North America, in identical sectors we've been in and some of them slightly different. But that would be a natural evolution for us. What are you looking for in oil and gas? You deal with the greatest negative free cash flow of the business on average. And do you share a macro view at the top? In other words, the previous Zener talked about the trough of the electricity cycle. Obviously, higher gas prices would do wonders for that, but they would obviously do wonders for the CBM business as well. So just curious, is it an overall game plan that you share? Or can you have a separate macro view than your partners? We certainly share the same view. And we're actually long term variable at natural gas for Verizon's short term reasons and longer term reasons, structural reasons. But in the Indian, what we are buying very high quality natural gas assets. Our operating costs are subdue dollar MCS. So we are buying amongst the very lowest cost, highest quality reserves that are out there. And even at very bottom of the market, we are generating a little bit ish, not a lot, but a little bit. So that's really our strategy, very long life reserve play out the optionality. And if I could just add, a lot of people ask us about the natural gas curve going on and they're fixated on it. But what I remind that curve is made up of very few contracts. If you go out 1 year, the total value of the contract is $3,000,000,000 The second year is $7,000,000,000 The 3rd year is less than $1,000,000,000 So there is no forward curve. Thank you very much. So it's now 25 minutes. So I don't have any questions at the end, but we do have 25 minutes. We said we'd end by 4 weeks to take any time. People can leave if we've exhausted all the time. But I'd be happy to take questions on any of the things. Maybe the only comment that I'd make just out of all the presentations is that a lot of time and with all investments like we make, people I think and for good reasons, don't get me wrong, for good reasons, and duly focus on the going in cap rate that exists today to someone. And our business is really about on an internal rate of return basis compounding over a long period of time, can we put money to work at 12% to 15% to 15%. And if we can and we get lucky a few times you're going to earn a little more than that and so it lasts. But if we're near that, our business does really well. The LPs will reduce well. Our private fund people will be very happy. And generally, it's not about whether interest rates go up 100 basis points or they go down 100 basis points. And probably there's one thing that we are really worried about that Interest rates go to 9%, 10%, 12% on the long end. And if you believe that, then there will be a reduction in our business as well as other businesses in the world. We as a group don't believe that. What we do believe is that interest should have been and would have been 5% to 6% on the long and long end. It's in various similar rates across the world. They've not been that because there was a global there's a global they've been unduly low and they're finally coming back. In fact, 125 basis points on the long end in the last little while is very good. Common because it means all nothing to our business, whether it's 100 basis points more or less that you finance at. What's good for in fact open capital market availability for us and less so for others where we want to put money to work. And our global business is extremely important because we like to invest that money to work in those places. And you can't do that if you're in one place. If all you do is invest money in New York City, when everyone's in New York City, the opportunities just aren't available to invest on a value basis. Basically what I guess I would say and not in light of the fact that there will be disruptions along the way as fixed income investments get hurt with interest rates going up. The tightness that we make don't necessarily get harmed that much. And just I would make that comment on just because a few of the questions were related to that and some of Kim's slides talked about that. But with that, I take any questions if there are any from the crowd. Bruce, Brookfield now has close to $200,000,000,000 of management and you seem to be accelerating in the area. How much over the next years do you think you could take in and reasonably invest? And could you grow to $300,000,000,000 or 4 100,000,000,000 under management without reducing your rates of return? So Brian so much? They're always right. I can't just add slides. But like I think our the returns in there show a 5 year managed assets going from $80,000,000,000 to 150 $1,000,000,000 or circa that number, which is adding $60,000,000,000 or $70,000,000,000 of it's doable and we can achieve it with Platav. And in fact, I think we can have many people within the organization. We can scale up a business and it will take more people and more time and more effort. But the we have an enormous premise shareholders are paying for an enormous fixed cost of this business that we've been investing in for the past 10 years or more. And the returns will come as that buildup comes. But no doubt, we have to be careful because there are situations where you can raise too much money and it causes you to do things which aren't appropriate. And you put money to reasons other than return. And I guess the only thing we've tried to do throughout the and this goes all the way from all of our members of management who invest enormous amount of their capital in the company all the way down to the fund we have, we have a significant investment on behalf of the Brookfield shareholders. What that does is it's more than just a simple alignment of interest. It makes us out the funds. And whereas you could raise you didn't have to cap a fund and you could have raised more money maybe. What it does is we need to think about can we need to work and can we get it to work properly. And I think it helps the whole organization be very aligned. And I promise that we won't make sure we will along the way in various places, but hopefully so I think we can. The direct answer is we can scale it up and we will scale up at an appropriate pace without taking undue risk. Bruce, two questions. Number 1 is, is CAM takes on the nature of looking like an asset manager and is more investment fees and less about FFO and O and on sale, are you comfortable and confident that that arbitrage in terms of how the market will perceive cash flows and your earnings is going to give positive value to your shareholders over a period of time. I'm just thinking there's a lot more volatility in terms of how people sometimes think they think about infrastructure companies. So I'd love your thoughts on that. And then the second question is, if you have an extraordinarily volatile market and you where you have minority interest in all your vehicles, How do you prevent a Bill Ackman or somebody else from coming in a crash environment where at $30 a share and he convinces everybody let's liquidate the $34 a share. And he gets people to do that and all of a sudden you're out of business in terms of running VIP. So the first question is on asset managers and how will Brookfield Asset Management trade and trade environment going forward? And I don't think we can promise anything. What we'll tell you is this is an incredible business. It should be able to compound at further one takes should be able to count at excess over time. Whether that will translate into stock market value at various points in time, I can't guarantee it. What I think we can say is that 10 years from now we will be able to get back. And if we do it right, we will earn a very solid turn for the industry in the company. And at points in time during that 10 years, this will be recognized and I've seen the stock. I'm quite sure. I don't think it will be volatile. And you probably know about more about how assets trade than I do in the market. What I can tell you is what we have are purposely propelled or very long life vehicles and hence the losses off of them are almost better than the asset underlying asset values. So the volatility should be less than what otherwise have in an infrastructure asset, because you're getting a fee off the top if you want to call it or a side. Whether that This is the second question. I'm going to come to that one. So whether that can be translated into stock value at one point in time, I don't know. But we can explain it properly. Any advice on explaining the business after you've seen 100 and 36 slides today would be helpful, because we try to explain the business and we try to simplify it all the time and people are changing the slides and I understand why and why. But it's only because we're trying to explain the business a little better. On your second point, we could have made a very simple change over the years to the business and simplified it and done things which would have probably short term that meant more for the shareholders and would have armed the values longer term or secondly put where we take to being in a situation where someone has control over our destiny. And we didn't make those decisions and we have central control of the company today. And all of the units that we have being the limited partnerships that trade fulfilled asset management all over those entities. So no one can do what you just did unless we choose to. And the fact that trades at its 6% undervaluation and we believe that's the best thing for the business and everyone's treated equally, we might decide to do that. But it is in our power. We believe in almost every situation. And we try not to ever get into a situation where we ever put ourselves at that risk. And so I don't think there are almost any situations. We dealt with one of those and were able to be in a situation we were happy with if at all. We try not to. And I don't think it will occur, but you never foretell the future. And we'll maintain voting. To the extent we create those entities and have created them, we have voting control over them. To the extent we buy into a business and the bargain was at the start that we only own 25% or 40% or 40% of it, that will be and that was part of the park and that's fair with it. But to the extent we create them that would be a we would never put ourselves in that situation. Bruce, Brian's presentation contains a lot of numbers that relate to what you've called net asset value and intrinsic value in the past. Recently, I guess, some issues in being able to provide those numbers. Can you talk about the regulatory or other pushback that you're on providing this score on a regular basis? I'm going to try this and to answer it. And if I don't do very well Brian Lawson is going by. Correct. I guess what I would say is over time what we've tried to do is very transparent with our investors and treat them like they're our partners. We've tried to give information out, which we as shareholders ourselves would want if we were in Europe. Sometimes that information is difficult in a public company to provide to lenders because the securities commissions deem it to be not something that other investors should receive. Whether we have that or not regulations or securities regulations and you live within them. So we now provide whatever information where we can't. And I'd say Michael, we'd rather give all the information we used to give. It's just not it's not possible. And even though if I was here privately or any of you privately, that's probably share. We just can't do it. Not on my behalf. They know Brian Lawson's name, but they don't know mine. Brian, would you answer that differently or say anything to add something? Yes. The only thing I'd add to that Michael is as we went and moved into the IFRS world, I guess initially we thought that IFRS was going to be this I'll call it almost like a silk where so much value would be on our balance sheet and in our IFRS book value per share. And we quickly learned that that was not the case. And so we started a few I'll say fairly simple rudimentary adjustments to try and get people transparency and visibility on what the values were. As the next 1, 2 or 3 years rolled out and we moved from that initial transition value toward coming onto our books at values other than a fair value, we ended up going from let's say 2 or 3 fairly simple adjustments to we're adding 7 things here and taking 3 things away there and there. And just kind of the whole simplicity thing, I'd say frankly, we've got a little bit more convoluted and complicated to provide those numbers. And as we even walk through explanations with people, we were just thinking, you know what, this is getting really complicated. And so I think my view is one of the things that with the evolution of the corporate structure is it really is simpler to think about it in the context of the listed entities. Now you still need to understand what those entities are really worth. And Sam and Rick, I'll give you some of their thoughts on that here today. It's not just about what they trade at. Anyway, we just think it is a lot and presumably that's only that's the value itself. That was a lot of the thinking of thinking as well. Andy? You mentioned rates going to the long end on the long end 9%, 10% as a potential disruptor to the model. As you think over the next 10, 15 years in building this global real asset management platform, Is there anything or I should say is there? What else keeps you up at night? What else do you think about in terms of not just macro risks, but management risks and risks that could be deserves to this platform that BAM has built? So I sleep every night because there are so many things I can't keep them all track of them. I'd say 2 other things that are difficult in the business and this is not rocket science and it's not specific to our business. I think it's almost evident in every single business. Number 1 is people. We have a great group of people, but as we can expand the biggest question is keeping the culture of the organization in place and hiring and building the people along in the business. So that's number 1. And number 2 is and it's related, but as we grow the business, being in new places is important. And we don't have to be every thought. We have a small business in India today. We have people there. We have 20 investment people. The business will be much more than 10 years now from today. And that comes with inherent risks in how you invest all of the rules that go along with it and hiring people. So I'd say new countries is if you're in a global asset management business is probably the second thing that we worry about a lot, because it just has many other risks. Now it's not something we've before. We used to be a small Canadian company. We're now in 30 countries and we've done it. So we have the experience, but it's probably the most difficult thing in the business. Power plants that the power group buys, When you buy a hydro plant, we bought 2, they're identical to buy. They may be a little shorter or fatter, wider river or shorter river or flow maybe 60% or 70% of what they produce cash you underwrite them on a 10 to 15 year basis. You know what the power price is, whether it's locked in or locked in or we get rent that's coming to you for the car. And they're pretty simple to buy. Whether you buy 1 in Colombia, Brazil or China, there's inherent risks. And I'd say that's probably the second thing we worry a lot as an organization and management about. Thanks for taking the question. When you think about your targets that you've put out in terms of growth rates and assets under management and values and perhaps even further than that. Will real estate always be the large contributor to the business that it is or in order to sustain the growth? This is similar to previous gentleman's question. Do you need to substantially bulk up some of your other business when you think beyond just a few years 5 years by Rudder? So the good news is, Clark, who's ahead of our he's left. I'm going to answer that question very specifically, but not if I answered it this way. I would hazard to bet and I none of this. It's all just the future. Our infrastructure business has the potential to be larger than the state business is going to 10 today. And that's given just the scale of what's going on in the world and the infrastructure that has to come off of corporate. So more specifically government balance sheet. And there are a few players that A, have tax with institutional capital and B, know how to put the money to work. And we're one of them. And there's no we're not the only one, but we're one of them where we have an advantage over a lot of others that want to get in the infrastructure area. So I think it's possible that infrastructure could be bigger. Real estate and it's not that real estate won't grow and we won't be putting money to work. It's just it's a very good business today. And in fact there's a lot of people who invest in real estate in the world. We're not the only one. And there's some good ones out there. And we just happen to have a unique pulling industrial roots in infrastructure. And we saw our business and it converted over into infrastructure. Secondly, and to Cyrus' point, which I think you're referring to on our private equity business, we spent a lot of time building our real estate business. We then went to power. We then went to infrastructure. The next business for us to build, have all the inherent advantages is our equity business. We just haven't had a focus on it in the past and we will scale that business up in the next number of years. I think we can do it probably with less capital in it today, because most of the capital in the business today is to Shneur was asked earlier most of the capital in the business money and it will be built out through our sort of capital partners fund. Can you clarify your thoughts on Australia right now? You sound bullish. You've got good assets. You look like you're looking to invest there. But the uncertainty around the commodities and the emerging markets seems pretty high. Yeah. In the short, there's no doubt emerging markets are having their difficulties. And if we were an investor for 1 to 2 years, you probably wouldn't put money in those countries. You're not going to see balances within a short period of time in any of the commodity sovereign emerging countries. Despite that, Australia is one of the greatest countries in the world. It has an unbelievable resource base. It's English speaking. It has a great rule of law. And the infrastructure structure are vast. And then the real estate opportunities are vast. And this year before, very few people get on a plane and fly 24 hours to go there. So the competition is less. So there's the locals, but they don't have access to the global money that we have. And there's a few locals that do, but not that many. And therefore, the opportunities are significant. I'd make the same comment to the other emerging markets, but specifically Brazil, but also India and China. There's no doubt money is coming getting out countries. And if you have a short term view, you probably shouldn't be investing in them. But they're setting the base. These all of these economies are going to be unbelievable places to invest for the next 20 years, if you pick and you do your diligence. So I wouldn't it's not short we don't take short term view. We invest more or less money based on short term views. But these in term, when we talk about it, we're talking about a medium to long term view, because in what we do, it's great if you get in right at the bottom, but it really doesn't matter that much in the fullness of time. And more often, it's being able to take advantage of the opportunity and getting your money to work and getting into the opportunity, that will be picking the exact point in time when you put your money to work. Hi. When you're talking about real estate in Europe going into Europe, can you be specific about what parts and parts of Europe you're interested in developing real estate? And secondly, can you comment on what excites you about the development your role in developing Rita Downtown New York? So on Europe, thank you for clarifying that, because Europe is a very big place. We have a business in what would have been referred to Eastern Europe before and don't really know that much. So I'd say we're not really spinner. It doesn't refer to Russia or any of its affiliates that used to be part of Russia because we just haven't done business there before and for the time being. So it generally refers to the U. K, Northern Europe and parts of Southern Europe where we think there are recapitalization opportunities either because the country is in trouble or there's companies related to that situation that aren't in that having those issues. As it relates to all of our specific estate, I'd say it's generally Western Europe, Germany, France, possibly we have a big business in the U. K. And that relates to both acquisitions and development. With respect to Downes, we've been there a long time with Downes. We think the next 2 years, 2 years will be is the final, I'll call it renaissance on Town. Residential fleet in Lower Manhattan is becoming very significant. That's pushing a lot of the young telecom and other media companies into lower Manhattan. And we're just in the midst of redeveloping the World Financial Center, I'll call Brookfield Place, which couldn't be done until the end of the expiry of their lease, which is I think at the end of this month actually, which was a Merrill Lynch lease that they've been paying full rent to then. So we're just in the midst of redeveloping in that center. And I think 5 to 7 years from now, it will be a totally different story in Lower Manhattan. So we're excited about it longer term. Bruce, you've raised $4,000,000,000 in private funds in the last year. You want to be purposeful into the capital. Should we expect to see a little bit of a lull in the private fundraising side after such an active period? Or is are you going to continue as we slide like another kind of March per year above this? The funds are lumpy and we happen to have 2 closings within a short period of time. So I suspect 2014 will probably be less than 2013. But inevitably, we're all in capital for various strategies we have within the business. So, continue to see We should in the future as the business gets broader and we're raising more capital, it should become a consistent strategy and the good part of that is every day talking 300 institutions on the private about things we can do with and for them. And having a constant product put in front of them talk to them is an advantage to an origin and builds a brand in a franchise as opposed to somebody that does the market. It's the private equity fund and they have one fund in 2013 and they go back in 2017. What our overall brand allows is much more repetitive work and institution and that allows us to build brand recognition. Thanks. It is 4 o'clock. No putting their hand up. As a management team, we really appreciate you taking the time this. We know it's a lot of time. 2nd, I would just end by saying that if there is anything that you can provide us in useful feedback, we would love it. The type of presentation, the slides materials are we appreciate. And at 4 o'clock or right now, I think if anyone can stay there's drinks upstairs for an hour to mingle with them that are here and others and we'd be pleased to have you. So thank you.

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