Earnings Call: Q2 2013

Aug 9, 2013

Hello. This is the Chorus Call conference operator. Welcome to the Brookfield Asset Management 2013 Second Quarter Results Conference Call and Webcast. As a reminder, all participants are in a listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. At this time, I'd like to turn the conference over to Amar Dotar, Investor Relations for Brookfield Asset Management. Please go ahead, Mr. Dotar. Thank you, Joe. Good morning, ladies and gentlemen. Thank you for joining us for our Q2 webcast and conference call. On the call with me today are Bruce Flatt, our Chief Executive Officer and Brian Lawson, our Chief Financial Officer. Brian will start this morning discussing the highlights of our financial and operating results. Bruce will then discuss our views on the current investment and market environment as well as a number of our major growth initiatives in the quarter. At the end of our formal comments, we will turn the call over to Joe to open up the call for questions. Order to accommodate all who want to ask questions, can we please ask that you refrain from asking multiple questions at one time to provide an opportunity for others in the queue. We will be happy to respond to additional questions later in the conference call as time permits at the end of the session or afterwards if you prefer. I would at this time remind you that in responding to questions and in taking about and talking about our new initiatives and our financial and operating performance, we may make forward looking statements. These statements are subject to known and unknown risks and future results may differ materially. For further information for investors, I would encourage you to review our annual information form or annual report, both of which are available on our website. Thank you. And I'd like to turn the call over to Brian. Great. Thank you, Amar and good morning. We reported strong financial results for the 2nd quarter. Funds from operations increased 3 fold to $464,000,000 and our consolidated net income more than doubled to $802,000,000 Starting with our FFO, the $300,000,000 increase over the Q2 of 2012 is due in equal parts to improved operating results and to disposition gains, roughly $150,000,000 each. The improved operating results reflect a return to normal generation levels in our power operations after unusually low water levels last year as well as better pricing and the contribution from recently acquired and commissioned facilities. The impact of the ongoing U. S. Housing recovery on the housing related investments in our private equity business, most notably our panel board businesses was another major contributor. And finally an increased level of base management fees and incentive distributions from our asset management activities. Operational highlights include the following. In our asset management activities, fee bearing capital increased to $78,000,000,000 up from $74,000,000,000 at the beginning of the quarter $60,000,000,000 at the beginning of the year. This led to an increase in our annualized fee base to nearly $1,000,000,000 This fee base consists of 2 major components. 1st, our annualized base management fees and incentive distributions, which now stand at nearly $560,000,000 This is based on existing fund capital and the distributions from our listed issuers. And this represents a $55,000,000 increase from the Q1, reflecting increased capital committed to our private funds. And it also includes the target carried interest from our private funds, which now stands at approximately $375,000,000 This number represents how much carry should accrue each year based on the carried interest we have in our private funds and their target returns. It is obviously subject to actual performance, but is intended to give you an idea of how much we stand to earn from these arrangements over time. Accumulated carry to date at quarter end stood at $765,000,000 That's based on actual fund performance to date. This represents an increase of $41,000,000 during the quarter and we realized carry of $16,000,000 Remember that carry typically gets realized towards the end of a fund and we do not book it until it is fully crystallized. We recorded base fees and IDRs for the quarter of $126,000,000 and our operating margin after attributable cost was 44%. In our property operations, our office portfolio has increased experienced a 1% increase in net rents from existing properties. We also benefited from the completion of Brookfield Place Perth and a number of acquisitions. We leased 2,000,000 square feet at 8% positive leasing spreads, increasing our overall in place rents by 2% and reducing lease maturities prior to 2018 by 3 20 basis points. Average in place rents remain 15% below market giving room for potential upside. And notwithstanding the favorable leasing activity, overall occupancy is at 90.4%, which is meaningfully below potential. Part of this is because we have been selling fully leased stabilized buildings and reinvesting in under leased buildings with more upside potential. Our primary U. S. Retail portfolio held through GGP experienced a 17% increase in core FFO. New leasing generated positive rental spreads of 11%. Tenant sales were 560 $1,000,000 on a trailing 12 month basis and that's up 5.1 percent. And the lease mall occupancy was 95.9 percent and that's up 160 basis points over this time last year. Turning to our power operations. Generation increased by more than 50% compared to the 2012 quarter. Roughly half of the increase was due to a return to normal hydrology levels, which added $43,000,000 of FFO following significantly below average levels in the Q2 of 2012. Recently acquired and completed facilities added the other half of the generation and that contributed $16,000,000 of FFO after reflecting assumed debt and interest. Improved pricing added $17,000,000 of FFO. This was partially offset by lower foreign currency exchange rates. At quarter end, we contracted 73 percent of our generation mostly on a long term basis. This percentage will decrease somewhat during 2014 2015 due to the expiry of short term contracts on the Smoky Mountain facilities we acquired recently as well as one of our operations in Brazil. However, the existing price is consistent with existing market prices, which we believe gives us considerable upside potential over time. In our infrastructure portfolios, Brookfield Infrastructure's FFO increased by more than 60% to $180,000,000 This reflects the completion of our Australian rail expansion project, which reached full take or pay volumes earlier this year the expansion of our U. K. Distribution operations and other acquisitions and improved pricing and harvest levels in our timber operations. We continued our program of recycling capital within Brookfield Infrastructure with the sale of its remaining timber operations and the New Zealand distribution business. And accordingly, Brookfield Infrastructure is extremely well positioned to pursue a number of opportunities with its liquidity as well as the dry powder in our private infrastructure funds. Our private equity portfolios continue to benefit from investments tied to the U. S. Housing sector. Our panelboard businesses experienced strong earnings growth supported by pricing that was 50% higher than the 2012 quarter. This led to growth in FFO from $43,000,000 to $106,000,000 excluding gains. The stronger markets also led to the sale of 1 of our larger investments Longview Fiber for a 10 times multiple on the initial capital invested and a projected 3rd quarter gain of approximately $250,000,000 Our residential operations were mixed. The North American business continues to experience increasing sales and backlog, which positions us for a strong second half of the year consistent with the typical seasonality of the business. Our Brazilian business on the other hand experienced lower closings in the quarter and some increased cost pressures. Some of this is due to a natural retrenchment following a period of extensive growth, but we believe the business and the country are well positioned for the longer term. In summary, we are quite pleased with the performance across the business and in the returns that it is generating for us and for our clients. We are particularly excited about the strong momentum in our fundraising activities, which Bruce will speak to in a moment. This has significantly increased our target base as I mentioned earlier in the remarks. Lastly, before handing the call over to Bruce, I am pleased to announce that the directors approved the regular $0.15 dividend payable at the end of November. Thank you. Bruce? Good morning, everyone. My first comment is will be your comments will be on global flows of capital, which as far as we can see continue to increase at a small strong pace into real assets. This is occurring in each of our private fund strategies, our listed flagship partnership entities and our public securities mandates. With recent realizations on sales of assets and fund closings, the cash we have available for investment has increased substantially and this includes approximately $5,000,000,000 of liquidity at our parent level and major affiliates and $10,000,000,000 of commitments for various funds, which are drawable for investment. In this regard, we raised approximately $14,000,000,000 of new investments new fund and commitments in the recent fundraising initiatives and that included our final close of our Brookfield Strategic Real Estate Partners Fund with a final size of just under $4,500,000,000 In other private fundraisings, which are not yet complete, we closed commitments of over $8,000,000,000 and we expect all of the funds we have in the market to likely be fully subscribed and close have final closes this year. Our public securities funds, which own listed public market real estate and infrastructure securities have also been attracting substantial inflows as a result of very good performance records. Our family of U. S. And European mutual funds for infrastructure and real estate has had significant net inflows of capital, in particular, our listed infrastructure securities mandates where we were one of the first global managers to establish dedicated funds for this asset class. From an investment perspective, we're being offered a variety of investment attractive opportunities to acquire assets and assist companies with capital needs, particularly as companies refocus their core on their core strategies and governments continue to diversify their capital sources to deliver critical infrastructure and services. Turning to the market environment. I guess our general view is that the grassroots improvements in the North American economies and particularly in the United States continue to take hold as a sustained recovery in U. S. Housing markets brings on increased consumer confidence. Central banks are clearly signaling they're going to rein in stimulus focused on monetary policies. But given the relatively measured recoveries that we see in North America and Europe, we expect generally a slow growth low inflation, low interest rate environment to persist into 2015. From what we're seeing in our businesses today, at the operations level, I guess we have a number of comments on each of the businesses. But generally, we see U. S. Housing continuing to recover at a sustained pace. Retail sales in our malls are strong. Office leasing is one place where it's slow, but it's recovering. Natural gas prices are leveling out at higher levels than the extreme lows we saw last year, but are still not back to numbers that we think are long term sustainable numbers. Europe has stabilized, but will be a long grind. Australia is clearly slower, but still good. And the other emerging markets, while affected by commodity prices and volatility, we believe will continue to integrate into the world with their economies. And I guess our view is that volatility and mix signals from each of those markets continue to offer us opportunities, which I'll talk about in a moment. Our last 5 years were focused generally on investments related to 3 things over leverage developed markets, the housing collapse and natural gas. The U. S. Deleveraging and housing stories have largely played out and continue to play out and the natural gas story is evolving and many of our funds have benefited from these general themes that we operate with as an organization. We think 3 themes are going to be dominant over the next 36 months as they have for the past 12 and those are and continue to be Europe where we've had a significant focus recently. The unwind of emerging markets investments as many people are exiting those countries with capital and that presents opportunities. And thirdly, the volatility in commodities investing around infrastructure related to that. Each of our businesses generally follows the same philosophy of putting capital to work with great businesses, but we try to be patient to do so when this capital is not as readily available from conventional sources. The emerging markets China, India, Brazil specifically and commodity companies could not have had more robust access to capital when we look back 36 months ago. And therefore, we didn't put a lot of capital into these opportunities. But with as with many markets, the shift in capital flows has been very dramatic. And as a result, this should present us with opportunities to invest around these companies and sectors and assist a number of people over the next 36 months, Which leads me to the last comment that I was going to make and that's basically some brief comments on real assets and interest rates and how we believe that real assets will perform over the next number of years. Investors have asked us a number of these questions and mostly because they've been worried about the effect of rising interest rates on fixed income investments and vis a vis and after that how that affects real assets. And the bottom line I guess in our view is that we believe they should investors should be concerned about interest rates and their effect because they have no way to go but up over the longer term. And you may recall that we own no long term bonds on our balance sheet as an indication of this conviction. Furthermore, in addition to that, we've been for the last 4 years, we've been locking in as many long term financings as we possibly could and we've been we've also now hedged almost 50% of our financings across our companies that come due even in the next 5 years. But I separate that from interest rates from real assets, because contrary to being negative about real assets, we in fact believe that real assets are one of the great investments to own in this environment. And while often confused with fixed income investments, they are very, very different. Our shareholder letter expands on these points in more detail and we welcome you to refer to that document. But the main reasons in short for our confidence in real assets are 4 fold. 1st, most real asset income flows adjust upward with positive business conditions, inflation for both attributes. And that's probably the most important point. Secondly, interest rates for borrowing today are still at historic lows even though they've increased a little bit over the last 2 months. And fixed interest rate loans tied to real assets enhance equity returns as revenues increase over the longer term. 3rd, real assets in real assets generally expenses tend to grow more slowly than the revenues and therefore the operating margins will expand over time. And lastly and this is the one that a lot of people are focused on. I guess 4th I'd say that the cash flows earned on real assets are significantly greater than government treasury securities. In addition, as interest rates declined over the last 3 years and largely in anticipation of future interest rate increases, People believe that cap rates should not go down as much and therefore they did not go down as much as the treasury decreases or increases in value or decreases in rates over the last number of years. As a result of that, the spreads between the 2 continue to be at historic highs. And as a consequence, there's significant room to absorb increases in treasury rates without a commensurate deterioration in capitalization rates. And there's no doubt they will go up. But by far, we believe that the positive business conditions will adjust the revenues more than what you'll lose in the capitalization rate deterioration. We've always believed that we can invest capital into real assets on a 12% or better equity investment return. We've been able to do this for many decades and believe that this interest rate environment ahead of us does not threaten our ability to do that now or in the future. And therefore, we think these are still a great area to be invested in. With those comments, operator, I would turn it back to you and ask if there's any questions from anyone on the line. Thank you. We will now begin the question and answer session. First question comes from Cherilyn Radbourne of TD Securities. Please go ahead. Thanks very much and good morning. I wanted to ask you about the annualized target carried interest metric that you introduced this quarter. And I wonder if you could just elaborate a little bit more on how we should think about that metric in relation to your future cash flow and or the accretion of your NAV over time? Sure, Cherilyn. Hi, it's Brian. So that so I think we've been relatively clear on how that's calculated. But just for the benefit of folks on the call, it's basically if you take the capital invested in our private funds and you apply or carry in those funds against the target return net of base fees then that is what generates the annualized carry. And that is theoretically what should accumulate in terms of carry over the life of the fund assuming we hit our target returns. Now in terms of thinking about that number, there are a couple of points. One is as I mentioned in the remarks, the returns tend to be a little bit back end and that's the J curve effect as it's referred to. But basically, while funds are being deployed and costs, you tend to see the actual results upfront in any fund tend to get a little bit pushed towards the back end. But again, the idea is to give you some idea of what the potential is there. And over time, it should tend to levelize out a bit as funds become more mature and you end up with a more stable a more diversified portfolio in terms of their vintages. So the way to think about it, in my view, is that should give you an idea of as the business continues to mature, what the earnings potential should be in terms of carry. And we talked a bit about that at our Investor Day and what the margins ought to be on that. I think it is important to look back at how much carry we have accumulated to date and we report on that each quarter and that would be based on assuming we wound up all the funds today and took the actual performance to date, how much carry would we actually have accruing to us. And then of course, the other thing that track and this is the number that we would expect to grow assuming we hit the performance is the amount that we actually realize in any quarter. And those will help again just give you a greater sense of the earnings potential of the business. Okay. And in terms of the average investment period that you're assuming in calculating that metric, it seemed to me if anything somewhat long. So I just wondered if you could comment on whether it's consistent with your experience or what's typical for the industry? Yes. In terms of The 0.85 for core and the 0.75 for private equity. Sure. Well that's yes, I don't know if it's necessarily what we were assuming that's really to reflect that it takes you a bit of time to invest the funds upfront and takes you a bit of time and then you're monetizing them as you get closer to the maturity date. And most of our funds are around a 10 year time. So that's assuming about a 7 or 8 year hold. And for some of our investments that is we will be shorter than that. But some of them we do tend to hold things for a relatively long period of time within the context of the fund life. Okay. Thanks. That's my 2. Thanks. The next question is from Bert Powell of BMO Capital Markets. Please go ahead. Sorry, it's Andrew Kuske of Credit Suisse. Please go ahead. Thank you. Good morning. I guess just a broader question Bruce on how you see your common equity allocation by business segment over the next say 5 or 10 years? Where do you anticipate the greatest growth over those time frames? I would I guess I'd make the comment that you never know where opportunities are going to come. But we have a broad business in for operating businesses in many different countries where we put the capital and it tends to our investment areas where the money goes tend to go where capital flows are going away from. And I guess the comment I'd maybe say is that over the last 3 years a lot of more money went to the United States because of what went on after 2,008, 2009 and it went to infrastructure and real estate. I'd say all of our businesses will get capital, but I think we'll the United States is recovering and therefore you're not going to see any major distressed opportunities in the United States. And so just generally it goes to where capital is unavailable and where opportunities our money can be helpful to other organizations. And I think that will be across the board and across the businesses. But I can't actually predict other than just those few comments. Okay. And then I guess related to that and just the sort of contrary investment view that you guys have at times over duration. What are your thoughts just on currency exposures? And are you seeing better value in places like South America where there's been pretty substantial devaluation? And then as you said earlier in your prepared comments, Europe looks to be a bit of a grind for a period of time. Does that beget a lot of opportunity for you even if you just look at things on a currency basis over the next say 5, 10 years? Yes. In Global Investing to make to be specific about the comment Andrew, Global Investing has to be about 2 things the asset class you purchase and secondly the currency where you buy because either you have to hedge out the risk on that currency or you're exposed to it and it's either positive or negative. So we think a lot about that. Specific to the three things, I guess our view is number 1 Europe will have will continue to have a number of opportunities in it. It's going to be a slow grind. It's not going to have robust growth for a long period of time. But depending on value, there will be some excellent there will be more excellent opportunities like some of the ones we've been able to capitalize on recently. 2nd, I'd say we're seeing a significant number of commodity related companies who had very robust access to capital 3 to 5 years ago. And now they need partners for infrastructure. And that's both our power business which traditionally has always bought from industrial and commodity companies and in our infrastructure business. And I think we can we have established ourselves as a good partner of entities like that and we think there will be and there should be lots of opportunities to assist those type of industrialcommodity companies take half of or all of infrastructure assets off the balance sheet. And frankly, they can just take the money and reinvest it at a better return in their core operations. And then 3rd, to be specific about the currencies that have gone down, there's no doubt the emerging market currencies have been hit and capital a lot of that's from capital flows coming out of the country. And that creates opportunities for people like us that go to those countries and stay for long periods of time. And we generally continue with the investments we have and we will increase our capital in those markets as opportunities come up. So we're quite excited about those opportunities. Firstly because the values are down as money exits the country and secondly because you're investing in a better currency rate. So we're quite positive about that. Okay. That's very helpful. Thank you. You're welcome. The next question is from Bert Powell with BMO Capital Markets. Please go ahead. We're sure this time. You're on. Okay. Thanks. Question just on the fundraising the $14,000,000,000 capital of funds, how much of that is already in the $78,000,000,000 of fee bearing capital that's reported this quarter? That would be pretty much all in there. Okay. So there's nothing that's coming afterwards other than I think Bruce mentioned another $8,000,000,000 or so that at some point will close? There's Yes. There's let's say about $1,000,000,000 or $2,000,000 that may have closed post June 30, but it's pretty much all in there, Bert. Okay. Thanks. And Bruce, just thinking about your comments around volatility in commodities, are assets associated with this business, Is the price are you getting better pricing today? I would have to think that to the extent that you have counterparty risk with commodity associated entities that has to be 1 weighing on price and probably 2, probably some of your competition is backing away bidding on those assets. But I'd be interested in any color you could offer on that front. Here's what I'd say is that we have a bid for every infrastructure asset in the world. And we generally try to price them and we know what we pay for every asset that is associated with various investment companies and commodity companies, investor companies around the world. And when money is very robust, corporations don't sell their assets because they have lots of access to capital. And in addition, there are many other people that will buy them at a higher price than what we'll pay. When capital is less available to those entities and others aren't investing, people will accept the price that we have on those assets. And generally, we just wait to the point in time when people will be realistic about pricing or our pricing is actually good for them. And our sales pitch is that we can be a great long term partner to industrial companies because we have the operating skills that we have and significant capital available to put beside them. And we can become an excellent partner longer term. And sometimes that falls on peers that aren't receptive. But in times like this, many companies are much more receptive to it if they have less access to capital. And I think we can just become a great partner for them. And when they do the math, they can put the money to work at much higher productivity. But to your last point about risk, we need to ensure we're always looking at counterparty risk of the investments. And what we look we always look through the investment to make sure that if we have to take over something or get involved in a different way that we're comfortable with the asset behind. And that I guess is the importance of us being in these businesses for a long period of time. Okay. And just lastly, I know it's not a democracy, but if you were holding a vote about giving the supplemental out 3 hours before the call, I'd vote for it again. Okay. Duly noted. The next question is from Michael Goldberg with Desjardins Securities. Please go ahead. Thank you. Good morning. By my estimate, your NAV per share is down about $2 year to date. I know this is due to the BPY spin off in the Q1 and mainly FX in the Q2. My question though is whether going forward growth in your NAV per share, which is run at about 10% to 12% annually for more than a decade continues at around that rate because you can still make good value investments where it slows as an increasing portion of growth in your intrinsic value comes from growth in the value of your asset management franchise. And if an increasing portion of your intrinsic value comes from the value of the asset management franchise, What do you have to do or what can you do to better demonstrate the validity of the value of that franchise? Okay. So Michael, that's a lot in that question. So I'll take a first stab at it, see if I follow it and then Bruce may chime in. So the first part is can you continue to grow your NAV at historic rates as more of your intrinsic value is coming from your asset management franchise? Yes. So and I would say the answer to that is absolutely yes. We still have as a target 12% plus growth. And so thinking through that, we do see continued strong growth in the asset management side. We talked a bit about some of the components of that earlier today. And with everything we see in the momentum on the fundraising side, expanding margins, getting new products in place and having that carry kick in that to us seems to be still a very strong area of good growth. And on the and we still see ourselves earning the 12% return plus on the capital that we're putting to work and in some cases doing better with certain strategies. So I would say the answer the short answer to the question is yes. Okay. And the second part was if an increasing portion of your intrinsic value comes from the value of your asset management franchise, what do you have to do and what can you do to better demonstrate the validity of the value of that franchise? Sure. So I think a lot of that comes down to well, first of all, one of the things we try to do today with this release and which we did at the Investor Day last year was to talk a bit more about the various components and in particular the fact that there's a big chunk of the business that is not getting reflected in the numbers. 1 of that is the carried interest. We've talked more about that. And the second is on the incentive distributions, which I think as you can appreciate, they started off small, but then they grow and they grow exponentially. And over time those will become a very meaningful contributor of cash flow to that business and they're very stable and reliable and consistent. So those are two areas that are not reflected in the numbers today. And I think they will become much more evident over time. And I think as people can really see that in a more tangible way. And that's really our job is to try and convey that information to people and ensure that everything that's all the momentum and all the success that's occurring in the business gets properly reflected in the numbers and understood by investors. So I think we're making good progress in that regard. Okay. Now my understanding is BPY's commitment to the new real estate fund isn't funded. But as the fund makes acquisitions and BPY funds that commitment, should we expect that BAM is likely to participate? So where we stand today is that BPY does have financial there is a bridge debt facility in there between BAM and BPY that will be replaced very shortly with more traditional banking facilities. So BPY does have good access to its own cash resources and we'll be harvesting its own assets as well to provide the necessary liquidity to fund its share of the capital that gets deployed through the opportunity fund. And if there are larger initiatives that come along and that makes sense, just like in any part of our business, BAAM could participate. But really, we look to the listed issuers, 1st to the private fund and second to the listed issuers and being the primary of capital. Okay. And lastly, you previously excluded the fair value decrement of Brookfield in Copurazoaiz, I'm probably not pronouncing that right, because you said there'd been no long term impairment in that value, but now you are including it. Is this to say that you now believe that there has been an impairment? And I know it's a small piece of BAM, but can you give us a little update on this situation? No. I wouldn't read anything into that Michael in terms of our change and how we did it. I think we're just most of the figures in that column reflect the stock market prices. And if you've noticed throughout the supplemental, we try to provide more visibility as to the where the listed all the various listed entities fit into our invested capital. So we're really just being I'll say consistent with it. But no, our view on the long term value of that business has not changed and we think it so I wouldn't read anything into that. Thanks so much. The next question is from Alex Avery with CIBC. Please go ahead. Thank you. Bruce, in your letter to shareholders and your introductory comments, you talked about, I guess, the opportunities over the last few years being predominantly in overlevered developed countries and perhaps the next real opportunity is being more in the developing parts of the world. Highlighting China, India and Brazil, obviously, you've been heavily in Brazil for a long time. Are we to read that you're thinking that there's now more prospect for BAM to directly invest in India and China? So firstly, thanks for that Alex. I'd say first that when we talk about different countries and capital flows going in and out, we think of it in 2 different ways. And I'd refer to our strategy in Europe over the last 4 years. And the strategy in Europe has been to get to know a lot of organizations in Europe in a better way, so that we can assist them with their capital requirements. And what's come out of that is some opportunities in Europe where we've closed on 3 or 4 large transactions, but we've closed on many more than that with European companies of assets they owned elsewhere. So I'd say the first thing is, our local businesses in those countries are extremely important to our global franchise, not only to find opportunities in those countries, but to also source opportunities for us from companies in those countries who are looking to sell things. And that's I guess point number 1. Point number 2, we've been in Brazil a long time and have significant investments there and we'll continue to invest. In India, we've been there for 5 years. We've not put a lot of capital in, but we've learned a lot over 5 years and we will continue to put increasingly more money into the country as we feel comfortable with the investment environment and currencies being down and money exiting the country will mean that we probably will more money there than we have in past. And in China specifically, we have 2 or 3 investments in the country and I think there could be opportunities over time to invest there. But we'll have to see. And you've got a lot of capital in Brazil at this point. Recently General Growth sold its interest in Alliance. Now how does that reconcile with your view on Brazil being an interesting place to add more capital? Is it just that you have enough there already? Or was that not an asset that was specifically of interest to you? I'd just say 2 things. We're in the business of earning good returns on capital and from time to time trimming the portfolio. And we probably I think we sold $5,000,000,000 or $7,000,000,000 of assets in the 1st 6 months of this year. So we're always buying assets and we're often selling assets. That one specifically was in another in a public company. It's the only asset in Brazil and we were comfortable the management team doing what they did. So it really has nothing to do with Brazil as an investment area. It just fits the strategy at that time in that asset or fund. And so often we're buying and selling things at the same time for various different reasons. Okay. And then, I guess, just trying to reconcile the developing versus developed and your comments about Europe. It sounds like perhaps you're seeing Europe as sort of in the sweet spot right now with a window here where you can continue to put some capital to work, but it probably doesn't last for several more years? No. I think it lasts a long time. We don't see any robust recovery of Europe in the next years. So we think there's there will be increasing numbers of opportunities coming in Europe just because people finally the period of high volatility is over. The banks are getting recapitalized and what that means is that transactions will occur. And so we do think there'll be opportunities for many years. Okay. That's great. Thank you. The next question comes from Mark Rothschild of Canaccord Genuity. Please go ahead. Hi. Thanks. Good morning. Bruce, you spoke about you mentioned in the letter and you spoke about that if interest rates go up generally there's a corresponding positive impact on real estate or real asset values due to economic growth. But could it be that interest rates go up or long term interest rates go up over the next year rather due to a pullback of stimulus as opposed to economic growth in some parts of the world? And if that would happen, would you still be as bullish on asset value over the next year or 2? There is one scenario, which I guess is traditionally called stagflation which you get no economic recovery and interest rates go up and that's not good for any business that's out there including probably our business. The only thing I'd tell you is there's nothing that we see with the economic situation that would tell us that that's occurring. And furthermore, I think the treasury departments of almost every country in the world have indicated they're going to keep interest rates low until economic recovery starts to take hold. So I guess the one scenario is there's a total blowout of interest rates because of people are worried about debt situations of countries. And we just haven't seen that yet, but that's the one scenario I guess that could occur and we don't think it will, but it's possible. Okay. And Sorry, Mark, if one of the things you're suggesting was is there call it 7,500 whatever 50 whatever basis points that's in there in the rates today due solely to what the Fed for example is up to as opposed to the economic growth implications for increasing rates. The other comment that Bruce made earlier is there has been the cap rate compression hasn't matched the decline in the risk free rates either. And so therefore there is a buffer in place that would absorb something like that. Great. And just following up on this point, share prices and unit prices for many REITs have taken quite a hit in particular in Canada. With your more bullish view, are you seeing more opportunities in the public markets perhaps for growth? We always look at the public markets and the private markets. The fact is it's much easier for us to buy things from people that need capital as opposed to compete in the public markets generally. Having said that from time to time we do and it just depends on the opportunity. Okay. Thanks a lot. There's a follow-up question from Michael Goldberg of Desjardins Securities. Please go ahead. Thank you. Given disposition since the end of June in the group, what amount of realization gains will be recognized in FFO over the remainder of 2013? So Michael, the one that we've given, I'll say some indication of is respect to Longview, the manufacturing business there. And we indicated that should be around $250,000,000 in the 3rd quarter. We haven't provided any guidance on the other ones. Well, you're on the phone now. It's public. Do you want to take the opportunity? Nope. Okay. Thank you. This concludes the time allotted for questions. I'll turn the conference over to Mr. Jotaro. Thank you very much for joining us today. We look forward to updating you next quarter. Thank you.