Brookfield Corporation (TSX:BN)

Investor Day 2012

← View all transcripts

Oct 11, 2012

Good afternoon. And it is 12:30, which is when I think we said we would start. Anyway, we're going to start. And I would just welcome everyone here today and thank you for attending our annual Investor Day. We're going to have a number of presentations during the afternoon. We've set to be done by 4 At 4 there's cocktails upstairs that anyone can let last 4 hours through our presentations. You're obviously free to leave at any time. You get bored of us, but we'll keep talking nonetheless. And I guess we tried to make the presentations as brief but informative as possible. Every year we try to take into account what people think about the presentation. So I'd offer that anyone that has ideas for us for next year after this presentation, if you e mail them to one of us, we'd love to take them into account. So with that, I guess, today, we're just going to do a few things. I'll give you an overview of what Brookfield is. Brian's going to talk what that what everything pulls together into, what we call the 10 year plan and where we're going. We're going to talk about our 4 different businesses, with Property Infrastructure, Power and Private Equity. And then at the end, I'll just take questions if there are any left from the presentations. After each of the speakers, other than me because I don't want to take away from the other presentations. But after each of the speakers, we'll take 10 minutes of questions if there are any. Otherwise, we'll just go on and at the end I'll sum up and take any questions then. So we have varied degree of people in here. We'll try to be brief on what Brookfield is because we assume most people have a general understanding of the company. But I guess we've taken spent the last 10 years turning Brookfield from an investment management organization into an asset manager. We have 4 business areas, which are property, power infrastructure and private equity. It includes approximately 100 around the world, 500 investment people and close to 25,000 operating employees. Our goal, which actually used to sound low in the environment of the investment business is and it still is the same goal, but it seems either high or relatively the right number for an investment business to say. But our goals are in 12% to 15% compound on what I'd say are relatively risk free assets that can earn decent returns. And Brian will talk about the values of the business as we sit today. Over the last 10 years, what that's done is essentially we've built the businesses into what we call one of the largest real asset managers, which today is about $150,000,000,000 of total assets through the whole system when you accumulate them up. But it includes 27 private funds, which we've raised committed capital of $27,000,000,000 I can't believe the arithmetic is $27,000,000 $27,000,000 And we have 3 listed funds, which we'll talk about a little bit afterwards with a market cap of $26,000,000,000 And we are global as most of you know. And the only point I'd make on this slide is our belief as value investors is that if you are if you have a competitive advantage, you can often find opportunities that others can't access. And by being global, what it means for us is that we can take the allocation of capital, which otherwise we're going to put into opportunities. And we can put it in areas which in places where there is a lack of capital. And that usually allows us to find opportunities, which can give us outsized returns compared to the risk where there's excess capital. And I'd make the example is, we've purchased almost nothing in Canada over the past 5 years, largely because the Canadian economy has been extremely positive and there's been no distress. In the 2008, 2009 period, we bought a lot of assets in the United States and that was because it was distressed. And I suspect over and in the last year, we bought a lot of assets from European companies because they needed to transfer assets off their balance sheet. So it gives us we think a tremendous competitive advantage and allows us to continue to be value investors as opposed to sticking to one market, where often it becomes overvalued. Our business model is pretty simple even though it's global and has pretty extensive operations around the world. I guess we've simplified into really four basic points. 1, we source equity from clients and from our own balance sheet. 2, we try to use the global reach we have to identify best in class assets as I just described. We put financing on them on a very risk low risk basis. And today, we're trying to extend as much term as we possibly can on financings. And it's incredible what the spreads on financings are today to asset returns. And we're financing in the 2.5% to 4% range. And I don't think any of us ever imagined doing that before on these type of assets. And lastly, we try to take with our operating people, we try to take the businesses that we have and enhance the operations to be able to deliver returns that are better than otherwise in the business. And I guess we try to differentiate our strategy versus others and everyone has their own strategy with respect to a company, but we try to differentiate ourselves as cutting a class out of what we call real assets. And that was a term not really known 5 or 10 years ago, But we include real estate infrastructure and other types of real tangible type assets into that. And if you cut across all of our businesses and try to make it very simple as to what we own, essentially we own 80,000,000 square feet of office properties through the business for various clients and our own balance sheets and entities. And these are among firstly, I think it's the largest office portfolio in the world. More importantly, it's one of the highest quality. And these are tremendously valuable assets within the franchise. Within the various entities both funds and public companies, there's about 165,000,000 square feet of retail space. We have 170 hydroelectric power plants, which I think is the largest hydroelectric business in the world. And it gives us a competitive advantage with knowledge to be able to pick up assets from people when they're selling them. And we've continued to do that for the past 15 years. We started a wind business. Wind was very overvalued 5 years ago. We bought very little in the crisis over the last while. We bought a number of wind facilities and built some and we continue to build that business. We have a port business, which includes the largest metallurgical coal facility in the world in Northeastern Australia and it's an incredible asset, which ships coal out of to China, Korea, India and Japan. And in our infrastructure business, we own ports, rail, toll roads and transmission lines and all of those businesses are essentially cash flowing real return type businesses, which we try to enhance the values over time. And lastly, we have about 3,000,000 acres of timberlands, which have been a great asset for investors despite what went on in U. S. Housing. And there should be good times going forward for these type of assets. So all in all, I guess the conclusion of that is essentially we believe that real assets are in tremendous demand. That's largely because they offer very favorable long term risk adjusted returns. They generate good cash. They have much lower volatility than most things out there. And should we ever head into inflation over time, there are inflation hedging attributes in many of these type of assets. So we think they're tremendous assets in this environment. And I guess the conclusion on all of that is that we think that there is a transformation of capital in the global markets going on. And we based this theory on all of the clients that we talk to around the world, which includes most institutional and sovereign funds in the world, which we either have a relationship with or we would like to have a relationship with. And so we have a tremendous amount of discussions with these institutional clients and that leads us to believe that there is this transformation going on right now. And I guess our theory is that in the 70s 80s, it was a and most of you know this, it's not but just to remind you, it was a fixed income era. And most pension sovereign funds accounts were 90% fixed income and 10% equities. And these are directional numbers. Obviously, there's differences in many different plans. In the 1990s, equities started to take over and equities went up to close to 30% allocations and funds and fixed income started to go lower. In 2000, the what was called alternatives started to emerge. Most of that was private equity investing in the United States into the major private equity funds. But real estate started to get significant allocations and here we know it being 5%. Today, what you're seeing in plans is what we're seeing in plans is that infrastructure assets are now coming close to 5% allocations in global funds. Real estate is at 10. Alternatives are at 10 and the pie is getting eaten into fixed income and equities. And most importantly for our business and for this transformation, I guess, and no one really knows what this number will be, but our expectation is that into the 2020s. We put that far enough out so that we didn't have to be pinned down to it for a while. Into the 2020s, we expect 30% to 50% allocations for real assets. There are plans today that are in excess of 50%. Some of these are the most leading institutional investors in the world. And those investors generally by and large have outperformed other pension plans with allocations at lower amounts. That's what's been taking hold. So we think that infrastructure and other real assets will capture 30% and real estate could go to 20%. Obviously, each plan will be different. But directionally, we think there's a major capital shift going on in that. And if we flip back in the 70s, the second component of all this is that the in the 70s there was $5,000,000,000,000 of assets in plants. In the 2000s it had grown to $30,000,000,000,000 Today we estimate and again this is tough to exactly find, but we estimate there's $45,000,000,000,000 in sovereign and other plans in the world. And we think that's going to $70,000,000,000,000 dollars in the 2020s, which means that there's close to $15,000,000,000,000 of new money, which will flow to real assets, which is from 2 situations. 1, there's an exponential increase of numbers going into plan as they grow bigger. It's called compounding, as you well know. And secondly, there are the allocations are increasing to real assets. So we think there's a very significant amount of money going into those will go into these type of assets. So the real question is, why are they doing that? And it's extremely simple. These are low volatility assets, which don't take a lot of change within the plans. They're not locking in low yields with long bonds or similar type instruments. And you can earn outsized returns on a relatively low risk basis. And we estimate that real asset yields in general earn 7% to 15%, depending on the risk and the type of asset you're buying and where you're buying it. And that compares very favorably to what you can earn today in a bond a long bond. And equity yields will change from year to year, but it's probable that 8% may be a number over the longer term. Secondly, there's and most importantly, interest rates are in essence and we said 0 in this calculation. It's different than that. But you can earn very the spreads that you can earn on these type of assets compared to treasury yields today are almost unprecedented in the investing of the last 50 years. I guess they are unprecedented. So the spreads are very significant and that's sort of why that's going on. What normally happens when that occurs in our observation is that when you find outsized returns in asset classes, money crowds the space and therefore you can't get those returns for very long and it usually gets yourself in trouble. There's a confluence of events occurring. And the second event is, is global governments are very have a lot of debt on their balance sheets and they need to get assets off the balance sheet to pay that debt down. So what's happening at the same time is we believe that there's a huge amount of assets that are going to come free. Sam may mention in his presentation on infrastructure that we just bought from the City of Toronto, the district heating and cooling system in downtown Toronto. And so that's an asset going off a balance sheet of a city into private hands. And so we think there's an enormous number of assets that will come available as we go through that. And I guess for us, we think that we spent the last 7 or 8 years building the organization to be able to take care of this transformation. And I'd say we didn't understand that interest rates were going to go this low. We didn't understand that the debt levels of governments were going to go that high. But we did know that directionally that this transformation was occurring. And so we've spent that time in addition to making all the investments that we make, building an organization that we have flagship entities from a public perspective, which includes 3 Brookfield Infrastructure Partners, Renewable Energy and our Property Partners entity that will shortly be spun off in a privately owned private equity business and then flagship private funds, which bring our sovereign and institutional clients to invest beside those entities. And we think this gives us a tremendous advantage in the capital markets to be able to raise cash and capital to be able to take advantage of value opportunities for all the constituents. Most importantly, and I'd say this has been become more relevant to some comments related to GDP recently. We have a philosophy within the business that we own equity beside all of our clients and all of our shareholders. And as you know, many of us in management own a significant interest in Brookfield. Every fund and every whether it's publicly traded or private, we have a very significant investment from Brookfield Asset Management balance sheet within that fund. And because of that, it's just a philosophy within the organization. We think our we've been able to withstand the markets over the past 5 years and before that and earn good returns for our investors. And the one thing that we do know that's extremely important is that none of these investment entities that we have work unless we can earn proper returns for all of the investors that are with us in those entities. And as you can see with our listed funds and our private funds, our returns and these are averages of funds, but we've had a very successful track record over the past since we started all of these funds. And that accrues to the fact that other people want to invest with us. And we're very cognizant of the returns within those entities and making sure that they earn proper returns, which leads us to this slide and then I'll just say a couple of other things and then turn it over to Brian. I guess our we think all of this will allow us to take our fee bearing capital to about $100,000,000,000 in total AUM to approximately $200,000,000,000 And it breaks out on the slide, which you can look at later and I won't describe. But we think there's a lot of room for growth within the business with the franchise that we have today. Probably within a 10 year period to go greater than this is difficult, although it's possible. And you never know what the future brings you. But we think this is with the machine we have. We think we can take care of this. So I guess I'd end on just these slides by saying that we don't have any great crystal balls about the economic front. Often we get asked about economic situation. We really don't try to be macroeconomic investors. What we do know is that we think that the business is set up with the flexibility of capital, with an amount of excess cash to be able to respond to opportunities that should allow us to earn good returns for all our investors despite what goes on in the marketplace in the economic environment. And we're actually relatively positive about the environment on the economic front today, but I think we can respond as we go along. So I'm going to turn it over to Brian in one second. Those were all of my slides. I just thought maybe before doing that, I would just address because these most of you are here as BAM Investors. I just addressed general growth properties, which has been more in the paper than many of our other investments and I figured it would come up later. So I thought I'd just say a couple of comments. And the best news I guess I'd say for Brookfield Investors is that we on behalf of investors and clients we put about $3,500,000,000 net after other spin offs into general growth which based on different metrics is worth between $7,000,000,000 $10,000,000,000 today. So by any estimation, this is one of the most successful investments ever made in real estate over time. And it's not just the percentage return or IRR, it's the total dollar return that's been made in the investment. So it's been great. I'd say that the GGP investors have also all of them have made a lot of money over the period that we've been involved after we brought it out of bankruptcy. For those who aren't familiar with the situation as we sit today, I guess there's just a couple minutes of context, which some of you may know this, but I'll just go into it. I guess we brought GGP out of bankruptcy in 2010, which was committed to us in 2009. At the time, it was brought out by 3 investors that included ourselves and Pershing Square. We entered into a number of agreements at the time, which allowed us to do a number of things with respect to our voting, with respect to our shares. We've been scrupulous with those and with the dealings of the Board since then. And we have the rights which we can vote we can go up to 45% of the shares of the company. We currently control 41 or so percent of the shares. And we can vote those shares in any shareholder meeting on any transaction brought before the shareholders. So I guess those are 2 important things. At the time of emergence, we owned about 29%, Pershing Square owned 8% and of the equity in GGP. And now we own about 41%, because we put up $1,700,000,000 of cash to do it, as many of you know and asked us about at the time when we did it. And we did that off our balance sheet. And Pershing Square owns about 7% because he sold shares since then. Over the last year, Pershing has been pursuing a sale at GGP to Simon Properties. And I guess it's been our view that it's tremendously premature to do that. I would say that this this is a personal comment. Very seldom do you find companies like this that are amazed have amazing franchises that can compound wealth over a long period of time. And we as investors believe that you if you keep compounding wealth over time, you can make a lot of money. And that's not to say you shouldn't sell things. In fact, you should always consider selling things. It's just we think it's very premature to do that. Pershing Square's position has been that we should sell the company today and we actually respect that. We have a difference of opinion on investing strategy and we had hoped he would respect ours with respect to that, but we are where we are. I guess the only thing that I wanted to address specifically with respect to that this really relates to Brookfield as opposed to GGP. A number of I'd say gratuitous comments were made towards Brookfield and our strategy. And while I don't intend to address any of them, I guess I would just say a few things. The agreements we have are were negotiated by us at the time of our investment in GGP. We paid very substantial amounts of money at a time when money was not available. And we have those rights and I don't think anyone would change their rights if they had those agreements in the same situation as us. I think we've been an excellent partner at GGP. We've tried to help the company in any way we possibly can. We assisted in the spin off of Rouss, which I think was instrumental to refocusing the company. And we've done a number of things. And over the time we've been involved, the increase in value for all shareholders is over $10,000,000,000 So I think it that says a lot and stands for itself. I guess we've been setting up or getting ready to spin off BPY similar to our other entities and which is called Brookfield Property Partners and I guess that's similarly you said as BPY. And we think this will be a tremendously successful Brookfield Infrastructure Partners, which Sam I know will include in his presentation, Brookfield Infrastructure Partners, which Sam I know will include in his presentation, it started off with approximately a $900,000,000 market cap. It's $7,200,000,000 today. More importantly, it's earned a 35% return approximately for the investors. And maybe more importantly, we own 30% of that company and continue to own Our renewable energy partnership was launched in 1999. It had a market cap of $500,000,000 More recently, we merged our own wholly owned assets into it. And the market cap today is 7,600,000,000 dollars The compound return over 14 years has been over 15% for a very low risk business. And today we own approximately 68% of the company. So we have a very meaningful investment in that. The structure of BPY is identical to those two entities. And in fact it's very similar, but not the same as the master limited partnerships, which have been successful in the United States such as Kinder Morgan. Lastly, in dealing specifically with GGP and whether anything related to BPY affects, GGP, I guess I'd just say that the spin off of BPY, we believe if people actually go and understand the prospectus, it's almost irrelevant to a GDP shareholder. Whatever rights accord to BAM today will be owned by BPY and BAM later And BAM is in control of both entities for the management of BAM. 2nd, BPY is 93% owned or will be owned by Brookfield Asset Management afterwards and 7% by the shareholders of GGP. And we over time through issuances of stock that may go down, but probably one of the most important things is what I mentioned earlier about our philosophy of investing. We have no intention of ever being invested in an entity where we don't have a very meaningful investment to A, earn the returns like everybody else, but B, discipline ourselves to make sure that we earn great returns for everyone because that is our franchise. In the risk sections of a prospectus, often it says things like, which I'll read, Brookfield has the right to reduce its interest and it cannot be assured that Brookfield will own shares of BPY in the future. That's what I called a section in a prospectus. And the fact is, I guess that's true. But any investor that knows us knows that we will we start off firstly with 93% of the company, which is almost $12,000,000,000 of investment. It's very difficult to reduce from $12,000,000,000 too much. And secondly, people know us with the philosophy that we have. So it's structured just like the other two investments that we have and we think it will be very successful going forward and Rick's going to talk about it in a minute. And I guess the last thing I'd say is the likelihood of the sale of GGP as an owner afterwards having BPY there is virtually different. It's the same. And we try to earn in all of our entities outsized returns for our investors. We invest in real assets and we make the decisions based on the total return. BPY will have very significant interest in GGP and we will in BPY and therefore the situation will be almost identical afterwards. So we think this is irrelevant. We think the long term success of BPY and of GDP is very positive and it will play out as we go through the next 6 months. So that was all I was going to say on GDP. I didn't plan on taking any questions right now. What I thought we would do and we will if you want to, but Rick's going to talk a little bit about real estate as he goes through his presentation. And if there's anything appropriate for him, he'd be happy to take questions on it. And at the end, I'll take any if there are some. With that, I will turn it over to Brian. Thank you. Good afternoon. So I am going to pick up where Bruce left off on these slides and talk about the our 10 year plan, which sounds somewhat Stalin esque. But what I'll obviously, what I wanted to do is talk about the basically the impact on our business and in particular on what we call the general partner aspects of the business as we increase the fee bearing capital under management and Bruce and as we track towards and achieve an objective of having more than $100,000,000,000 of assets in under management and just illustrate what that takes us with respect to the general partner part of the business, which is really the value of those arrangements and the fee streams. And the invested capital, which is that large sum of capital that we've invested in our funds and also in some areas just directly of our balance sheet and other things. And as you can see from this slide, the impact is pretty dramatic. Historically, we've tended to create value with the invested capital compounding cash flows and that's we've had a lot of success in that regard. But as you'll see, we have the ability in growing the fee bearing capital and the associated fee streams to achieve a very high rate of growth in the contribution to the intrinsic value per share from our general partner activity. So I just want to walk through that. And if you focus on the business, the whole plan is really anchored by a relatively small number of very straightforward assumptions. And there's some very simple linear relationships that I'm sure you're all very familiar with that as we achieve certain milestones and objectives this will follow. And what we wanted to do is just set those out, put some metrics around them, link them to our operating objectives and what we think could possibly happen in the business, so that you can then monitor our progress, see how we are creating value in the business and get a better sense and understanding of it yourself. But basically, the listed fund capital will compound up with target distribution growth and we will issue equity from time to time to fund growth. We have fundraising goals. We're building the amount of capital in our private funds. We've had a lot of success and we believe we're very well positioned currently on that. Obviously, we're assuming that we are able to successfully invest the capital that we raise and achieve the returns that we're looking at. And we have not assumed any major reallocation of capital in this plan, although there's a point I want to come back to in the last couple of my slides just to point out one particular point of interest. So just give you a couple of highlights of it. But over the 10 years, based on the assumptions that I'll talk about, the fee bearing capital, which today is around $45,000,000,000 And I'm really just talking about the fee bearing capital in our private funds and our listed funds. So the total market capitalization of our listed funds including pro form a for Brookfield Property Partners and the amount of capital that our clients have invested in our private funds. And that compounds up around 10% $45,000,000,000 to $70,000,000,000 to $115,000,000,000 if you follow the assumptions. With that and just tracking the fee streams that would accord to those to that fee bearing capital along with growth and expected returns in invested capital would take our share values up to $130 a share from the current $40 Again, that's pro form a for the spin out of Brookfield Property Partners. And 35% of that at the end of the day is related to the general partner and it's a much smaller figure today. And supporting and behind all of that is 3 fold growth in FFO to nearly $6,000,000,000 I'm going to come back to each of those. So just focusing on the listed funds, we see the capital there growing from the current value today of $26,000,000,000 So that's Brookfield Infrastructure, Renewable Energy and Brookfield Property Partners. If you assume that the it grows at the stated target distribution growth rate for each of the entities 4% for properties, 4% for BREP, 5% for Brookfield Infrastructure Partners and we issue $500,000,000 out of each entity each year and you'll notice that Brookfield Infrastructure Partners recently did just that for the 1st 5 years, dollars 750,000,000 thereafter. Then this is what happens through the compounding and equity of issuance and issuance of equity, sorry, for us from $26,000,000 to $40,000,000 to $65,000,000 What flows out of that is we earned 1.25 on the increases in the market capitalization. This is on a 100% basis to Brookfield. And so every time we issue more capital or as we are successful in increasing distributions and therefore the market value market cap should follow, the fees increased by 15% over the 10 year period of time. I'll come back and roll all this together. In addition to the base fees, what we also are entitled to is 25% of increases in distributions above an initial hurdle. So this year on an annualized basis, we would expect to earn $16,000,000 of IDRs they're called from Brookfield Infrastructure Partners. And over time, for the next few years, those IDRs will start to kick in for the energy business and the property business as well. And while the numbers don't look that large today, they do have a disproportionate growth rate or more of an exponential growth rate. And so these will continue to become increasingly valuable. And because they track the distribution growth and the distribution rate, which can get set appropriately in the context of the growth in the underlying cash flows and hence the quality of the underlying cash flows and asset streams, we believe this is a very attractive source of income for the company. Well, that's the listed fund. So there's really the 2 things there, the base fees and the IDRs. And it's really just a mechanical calculation. You can build a model really easily on that. So on the private side, we've had a lot of success recently. We're very well positioned as you'll hear throughout the presentation. If you compound that up at 11%, you go from 17.5% to 30% to 50% it's just math. What that equates to is roughly $4,000,000,000 a year of capital raising in the 1st 5 years and roughly $6,000,000,000 thereafter. And so we think about the potential that we have in some of our prior experience in this regard and we look at some of what our peers have achieved over similar periods of time and this seems to be an entirely reasonable assumption on our part. And again, what that means and if we think about what current market economics are for these funds and the type of mix that we expect to have with our funds in terms of core versus value add versus opportunity, which might be 1 point, 1.5, 2 points in terms of the base fees, we would see ourselves trending towards an average weighted average fee of 135 basis points on our capital overall by 2017 and 150 basis points by 2022. And that's the simple math of what happens and it's a 19% compound annual growth rate in the base fees. And again, similar to the listed funds, there's a performance arrangement. As you all know, it's a carried interest. And again, if you look at the carried interest that we earn in our different funds based on the target returns and the investment strategy, it blends out to around a yield of 200 basis points on our on the capital in the funds. And so accordingly, it's a linear relationship in terms of what we should, I'll say, accrue as a carrier, the value that should build up in terms of the carrier. You may not receive it. You don't receive it until the investment gets liquidated. But as you create value with your investments and as cash flows and the values compound up, we are entitled to that. Built up over a period built up over a period of time. So in terms of pulling all that together and what it means for us in terms of, I'll say FFO on an accrual basis. From where we would stand today to where we would roll out in 10 years' time, the FFO would more than triple to $1,500,000,000 So a couple of important points there. It's carried interest on accrual basis. It's listed fees on a 100% basis to BAM. And we've assumed some margins on the expense load and the direct expenses associated with that. And that's a 15% compound annual growth rate. So as you can see, it's a very substantial increase in cash flow to the company. It does not require us to put additional capital into the business. And so for us, it's a very significant opportunity to substantially increase the cash flows that we generate for the shareholders and hence the underlying values. And what we see just turning to value and again this is a very simple approach to it, but we would see there being a 6 fold increase from what we put out today, which is $4,250,000,000 of franchise value we put on the general partner activities and there's a $500,000,000 of accrued carried interest on a net basis, rolls out to $30,000,000,000 by 20 22. And so what we're assuming there again just keeping it simple 20 times multiple for net base fees, so base fees net of associated G and A, 20 times for the IDRs. As I mentioned they're very they have a high growth rate, but they're backed by very substantial, very solid underlying cash flows. And then a 10 times on the carried interest, again, net of the associated G and A. So that's what happens on the general partner side. And I just wanted to make a couple of comments on the invested capital. So I guess the first comment is we do have substantial capital alongside our clients both in our LPs, but we also have direct capital invested off of our own balance sheet in a number of other businesses that we have. And you'll see that there is a substantial amount of it that's in the listed funds pro form a for Brookfield Property Partners. It's around $21,000,000,000 today. Now if you compound that up at 11%, which is a rate that we've exceeded substantially in the past, it grows to around $55,000,000,000 So that was the other part of the share values that I outlined for you upfront. Now this is one of the key points and first spoke about the amount of capital that we have invested in our various listed funds. So 93% or 95%, 90% in Brookfield Property Partners around 70%, 68% specifically in renewable energy and a little under 30% in Brookfield Infrastructure Partners. Now if we held 25% in each of these entities, which is still a very large number and creates a substantial alignment of interest, then arguably everything else that we've got is, I'll call it non strategic, meaning that there's no requirement to hold that specific asset. Ergo, we could monetize it. We could reinvest the capital somewhere else. We could buy back our stock. Would have tremendous flexibility in the business that we're creating as the value of this capital grows, which isn't to suggest we'll do any of those particular things, but we have the flexibility to direct our capital to where we see the best returns coming from for the benefit of all shareholders. And so in my view it's a tremendous opportunity for us as we head down the road. So that's the comments I wanted to make on what I'll call the numbers side of it. I do want to talk about a few non financial components of the 10 year business plan and Bruce spoke on a number of these points as well. But obviously, the most important point for us in this business plan and in general with our franchise is investment success and delivering solid returns both for us and for our clients. And having that kind of alignment of interest through the investment of capital alongside them through how we have our compensation arrangements structured is very critical to that success. Bruce alluded to the fact that management continues to own 20% of Brookfield and we being Brookfield have substantial ownership of our funds. So that alignment of interest just tracks right down through the company. And while the fees as I pointed out are very attractive, you'll note that still notwithstanding the substantial growth in the general partner, a tremendous amount of value in the organization still exists in the amount of capital that we have invested. And even if we were to liberate a lot of that capital and go down to 25%, it's still very, very significant and far outweighs return on that capital is really much in many ways much more important than the return on the fees. Just to focus a bit on some of the fee arrangements. Again, the alignment of interest that we have there in the listed funds, as I noted, we get rewarded for growing cash flows. And in essence, you get rewarded for that by increasing cash flows, increasing distributions. And if you do that in an appropriate way, you get a good yield and that drives increased market capitalization, gives you receptivity in the capital markets to issue more equity and therefore you earn increased fees. If you don't do any of the above noted then your fees don't increase. If anything, they go down. Same thing with the IDRs. The IDRs aren't worth anything unless you can demonstrate an ability and actually go and increase your distributions. And again, that comes down to comes back to compounding cash flows and compounding growth within the business. In the private funds, the biggest component there is the carried interest and that's a profit participation. So if we don't create value in those funds, carried interests really aren't worth a whole heck of a lot. So the keys to success overall need or exceed the target investment returns. I think another important part is being very clear in the communication of return expectations. Depending on the strategy of the fund or the listed entity is we need to align those return expectations and be clear on that and have those investment strategies well defined and have clear mandates for each entity. So people can understand when we're undertaking acquisitions, why certain activities happen in certain entities. It's because they're supposed to. It's because that's their mandate. That's what was agreed to at the formation of the entity. And we'll be very clear on that and very true to that. And then all of that obviously is backed up by and leads to reputation and integrity of the business. So in conclusion, we have the opportunity to create substantial value and it's not just the way that we've done it in the past through investment returns, but also through this GP activity. So I hope what you've seen is a pretty clear relationship between the objectives what we think we can achieve on that front and what it means for the FFO and the values of the business. Yes, the other point is just the amount of flexibility and the opportunities that we will have to further increase values that come from this increase in the amount of capital that we have to work with. And all of these together gives a great deal of confidence going forward with the plan. So that concludes the remarks that I wanted to make. And I would be happy to take any questions or at this time, comments. Brendan? Hey, Brian. So a couple of questions. One, just can you clarify if the AUM growth that you're talking about, is that equity or is that just assets? And then think about we've talked about this a little bit in the past, but the amount of investment dollars that BAAM has to do if you're taking either equity or assets from $45,000,000,000 to 130 is a lot of new investments per year. So do you think that you have the organizational bandwidth to be able to do that? And do you envision doing larger chunkier deals as a way to get that investment dollars out as opposed to what might have been smaller deals in the past? Sure. Thank you. So I think everybody heard that question through the mic. So just in order yes, what we're talking it's predicated on increase in fee bearing capital. So that would be generally equity. So that's the one. And with that, we would expect that Bruce talked about $150,000,000,000 of total assets in the system today. So that would exceed $200,000,000,000 if we achieve that kind of growth in the fee bearing capital. So that would be point 1. So the second point is, yes, that does provide us with a lot of capital each year to go and find investments. And while that is always a challenge, I think if you look back at our track record over the past number of years, I believe we have been quite successful in putting a lot of capital to work in attractive ways. And while it is always a challenge, I believe we've got the bench strength. And I think you'll hear this from my colleagues this afternoon in terms of the bench strength and the investment opportunities that we have. So we're very confident in having the resources to execute on that side of the equation. And then I guess the last point on the larger or chunkier deals. That is in fact one of the great benefits of having the structure that this dual structure that we put in place of having listed funds that provide you with, I'll say, a currency to raise cash in the public markets to fund transactions or in fact to use that as a currency in executing M and A transactions. And if you think back to how Brookfield Infrastructure Partners grew and the great success there, a lot was from both. It was from raising cash and also using its units as acquisition currency to take out a large infrastructure portfolio a couple of years ago. So it does give us the ability to be competitive. And again thinking about general growth to be competitive for very large transactions where there is in fact less competition. So you get a it's a double benefit. There's less competition for those sorts of transactions and you can also put meaningful capital to work at great rates. Okay. Going left to right, perhaps. Michael? Thanks. Michael Goldberg, Desjardins. Just want to make sure I've got I'm understanding the terminology that you're using. And I'm going to go back slide 37 where you've got it split between GP and invested capital. So is GP really what you've called your franchise value of the asset management? To do this here, but I show little numbers at the bottom of my slide here. What's the heading on that slide? Our intrinsic values correspondingly grow to $130 per share. Right. Yes. Okay. Got it. Yes. So I just want to understand GP is that what you call franchise value? So the $6.46 as at the end of the second quarter? Correct. With the remainder being the net asset value? Correct. Okay. My second question, looking at the non strategic capital that you talk about, is another way of looking at that rather than just capital being freed up as capital that could be redeployed into higher returns as general partner in part than the returns that than the lower returns that you get on invested capital? Yes, absolutely. And I think that's the key point is that as the values grow and as the as everything becomes much more fully in place that it does create that flexibility for us to reallocate capital within the business to whatever is going to create the best return for Brookfield shareholders. Yes, sorry. Sorry, do you mind waiting for the mic just one sec. Thanks. I don't understand why I don't the real estate such as this building isn't selling for much more money. In other words, the stock is much higher based on real estate values in New York City, for example. The 1 bedroom is now going for over $500,000 at a much higher price than real estate. Yes. And I think if you go back, I'm going to perhaps push some of that off to when Rick's talking about property in a few moments. But absolutely, I think with everything that Bruce has talked about in terms of the attractiveness of real assets, we are fully aligned in our view in terms of where values ought to be as opposed to where perhaps they are today. I don't want my glasses on. Oh, Michael, yes, sure. At the back. Thanks. Yes. Thank you. For the gross margins that you're assuming for 2017 of 50% for the base fees and 70% for the carried interest. Is that going to be a run rate going forward? And whereabouts ballpark are you currently? Well, I'd say in and I think I'm going to make this the last question, if you don't mind. I don't think I saw anybody else's hand up. Just try and keep us to schedule. Was there one more? Okay. Maybe I'll take one more quick one. In parts of our business, we're at or better than that. But in other parts, we're still building out and we're lagging. So and I know we haven't given full transparency on that in our statements just because it is hard to attribute activities and give you a full and fair view of margins. I think as the business grows, we can become a lot clearer on that point. But we will so there's a certain element of growing into that, I would to be completely candid on that point. Yes. Yes. Yes. Andrew? Andrew Kuske, Credit Suisse. Could you just give us a sense of your thought process and the evolution over the last 5 years in particular? Because I believe it was 5 years ago in this very room we talked about $80,000,000,000 of LP money, dollars 20,000,000,000 of VAM money in this kind of model. And now the numbers are a little bit different and the structure is a little bit different because you've got $65,000,000,000 of listed money 10 years out $50,000,000,000 of private money. So just could you tell us a little bit of what changed during that period of time? Obviously, the model is a little bit different on what you're pursuing on a go forward basis, but what was either wrong 5 years ago or how did the plan change? Sure. So I think one of the things and not to be cute on it or coy, but the we had this global financial crisis that I think ensued fairly shortly after some of those comments, which definitely slowed up a couple of things we're looking to do. I'd say in a couple of things that we thought about that perhaps didn't work as well as we thought they might have at the time was we thought we had a great advantage because of having a number of assets on our balance sheet that we could work with institutions and use those to seed funds and really ramp it up very quickly. And that wasn't as easy as we thought it would be. I think one of the very positive things that has changed since that time has been the strategy first through the introduction of Brookfield Infrastructure Partners and the tremendous success of that entity followed on by Brookfield Renewable Energy and we're looking to doing the exact same thing with Brookfield Property Partners establishing these listed entities. And some of the questions that were rightly raised at the time about having funds with defined life cycles and things like that and how it fit with our business and our strategy of compound cash flows over a long period of time. These entities are perfect for that. And so I think the establishment and the successful track record of those entities is has been a tremendous development over the past number of years and has greatly influenced our thinking and the planning going forward. Okay. So with that, if I could turn it over to Mr. Clark. Thank you very much. Thank you, Brian. Good afternoon, everyone. So I'm I'll say right up front, I'm battling a little bit of a cold. So if I'm not loud enough, please I've dealt with many of you long enough to know that you're not bashful. Just raise your hand and I will get closer to the microphone or speak up. So I'm going to spend the next 20 minutes or so as soon as I find where I am here. Sorry guys. All right, bear with me one second. Great. Okay. So I'm going to spend the next 20 to 30 minutes just giving you a brief update on what's going on within our property portfolio including quick overviews of our holdings, our investment performance, an outline of the next milestone for the property group a review of the investment environment in which we're operating which we're really excited about and then sum it up with a few of our priorities for the upcoming year. So just to start it off with our holdings. Brookfield's Property Group has investments in $86,000,000,000 of assets currently including interest in 550 high quality commercial properties comprising over 300,000,000 square feet. Since 1989, when there was a renewed focus and strategy around real estate investing for us, we've generated a gross IRR of just shy of 15%, which we believe is a pretty solid track record over a 24 year time frame. Our real estate group works out of 30 offices and is focused on investing primarily in North America, Australia, Western Europe and Brazil. We have 240 transaction professionals within the group and employ 15,000 people within our various businesses. Now this large organization we view as an advantage in many ways including giving us an edge when it comes to speed of transaction execution. I think these days we often find that how quickly you can get a deal done and how quickly you can mobilize your forces to work on a transaction is the difference between winning or losing. So among other things this large organization has been very beneficial to us. You'll note from this slide that the bulk of our property holdings currently are in the United States where we have $65,000,000,000 of asset investments. We have $8,000,000,000 to $9,000,000,000 in Canada and Australia and a growing presence and focus on Western Europe and Brazil. We'll talk more about what's going on there in a few minutes. We're often asked by investors to sum up the things that define and differentiate Brookfield versus our peers out there when it comes to real estate operations and investing. And when we think about that, there's really three things that come to mind. The first is we've been at this for a very long period of time and we have a healthy respect. You probably heard me say this before for the cyclical nature of real estate and financial markets. As a consequence, we use prudent capital structures. We don't attempt to manufacture returns through excess of leverage or those kind of things. The second thing is that we you've heard both Brian and Bruce talk about it. We have a strong alignment of interest with our investors and partners. Most of the things that we do involve partners in one form or another And we're always a very meaningful investor in anything that we do. Most times, we're actually the largest investor in any single transaction that we do. We're a big organization. At the end of the day, what moves the needle for us is return on equity and hence that's the major area of emphasis and focus for us. And finally, I think the third thing that I think defines and differentiates us is in combination with our prudent investment approach combining it with the knowledge and experience coming out of our operating group. And this has been really impactful for us. Everything from deal sourcing to underwriting to operational enhancements to risk mitigations, the platforms add value every step of the way. And it's been very meaningful as I said for us. This slide shows the sector composition of our property holdings. As I think you will all know office has historically been our major area of focus where we have $35,000,000,000 of asset investments. As we've worked to diversify our property holdings over the last 5 years, we've grown our retail investments from a very modest investment 5 years ago to $35,000,000,000 of assets today. Over the last 2 years, we've been working to diversify even further by investing in the multifamily and industrial sectors. As of today, we have investments in 47,000 multifamily units and 7,000,000 square feet of industrial and these are both areas that we expect to grow, currently $6,000,000,000 of asset investments in those areas. Further interest in each of these sectors are held within our opportunity investment initiatives. So just moving to investment performance. This slide gives a snapshot of the major milestones within the Real Estate Group that have led to our growth in our asset investments from $6,000,000,000 in 1989 to $86,000,000,000 today. And that's a 12% growth rate in our AUM over this 24 year period. Just hitting some of the highlights. In 1989, we initiated our distressed investing with the recapitalization of Olympia New York's U. S. Business. In 2004, we launched our real estate fund investment platform with our first real estate debt funds. In 2007, we established a presence in Australia and our platform there by doing an on balance sheet recapitalization of multiplex. And finally, currently we're working as both Bruce and Brian had mentioned to launch our next major milestone to set us up for future growth, which is the listing of Brookfield Property Partners and more on this in a couple of minutes. I should just point out on this slide that the top line is gross asset values and the bottom figures that you see are equity amounts. So moving on to this next slide, I'd say that those of you that know us well, we're not typically a pat yourself on the back kind of organization. But we threw this slide in there I think for one reason. As we have transformed Brookfield from a straight owner operator to a fund manager, we've received a lot of recognition for being one of if not the world's largest real estate asset manager. And this is nice recognition to have, but we've been determined not to grow simply for growth's sake. The growth of our fee bearing income of course is important. You've heard us all talk about that, but not at the expense of performance. So for us, it's noteworthy that while we have grown AUM and received recognition for this, we've also been recognized as a consistent top performing real estate asset manager as well. This chart will just kind of sum up a few things that we've done over the last several years as far as performance goes. Since 1989, we've invested $17,300,000,000 of equity in the area of real estate, generating gross returns of 15.4%. On the opportunistic side, we've invested $9,000,000,000 of equity since 1987, generating a 20% gross IRR and a 2.6 times multiple. In our private fund initiatives combined between core plus value add and opportunistic funds. We've invested $10,000,000,000 of equity since 2004 and generated a combined growth IRR of 17.6 percent or 1.6 times multiple on capital. Over the last 5 years, the merits of our investment and fund management approach, which is deliberately different, has been well received by the investor community as well. During that time, we have raised $16,500,000,000 in real estate funds, dollars 11,000,000,000 of third party capital, alongside $5,000,000,000 of our own capital. We now have 50 LP fund investors within our various real estate funds and growing. And most importantly, of the larger investors in these funds, of those investing $200,000,000 or more, we have a 70% repeat investor rate. And of those investing $50,000,000 or more, a 50% rate. We expect that those figures will grow over the next little while and as we book our performance on our existing funds. So just to recap a couple of data points. Assets under management in the real estate area $86,300,000,000 fee bearing capital $23,600,000,000 dollars dry powder currently $3,800,000,000 so plenty of room to do deals. Of the fee bearing capital in 2012, ACE annualized fees amount to about $114,000,000 and cumulative third party performance fees which are mostly unrealized are $440,000,000 We think as we move forward in our next milestone phase that we'll see meaningful growth in these fee generating areas as well. So I thought I'd take just 60 seconds to give you our view of the world and the economic environment in which we're operating. And as I said before, we're pretty excited about this. I'll start with Canada. Canada, it's a country that's in solid shape. The government and financial institutions have really solid balance sheets. The government has been fiscally responsible. So all that means to us is there hasn't been a whole lot of opportunities for us for growth in Canada. We're selectively growing through development and select acquisitions in Canada, but it's not a major area of emphasis for us I'd say. In Australia, it's very similar from an economy standpoint to Canada. The one I think important difference is that we find that the locals are a bit concerned about slowing growth and therefore have been a little reticent to transact. That's kind of good for us because we have very strong feelings positive feelings about the future of Australia. But also we're seeing that foreign institutions, particularly financial institutions are trying to move their investments back home to deal with problems and we've been able to capitalize on that. So we do expect to see some transaction activity coming out of Australia and we've recently announced a transaction involving a company called Stackhole, which I'll talk more about in a minute. Brazil, it's also an economy that's doing well. Although growth is temporarily slowing, it's all about the emerging middle class, which we think will fuel growth in this economy for a long ways to come. There's not a lot of distress. Our focus on investing there is primarily distressed investing. And what we find is there are moments in time where there are crises, a global crisis, which causes capital to fly home, which creates opportunities for us to come in and shore up solid business plans. So again, probably not a lot of transaction activity coming in the next little while out of Brazil. The two areas where we're most excited are the United States and Europe. In the U. S, for sure U. S. Recovery is underway, but it's spotty. It's not in all markets. Energy sector markets are doing well. Technology and media markets driven markets are doing well. But the middle of the country is really not doing so well. Additionally, a lot of the transactions that were done in the 2 1,005 to 2,007 time frame were done with excess leverage. The loans that were done on those deals are maturing in the next little while and we're seeing lots of transaction flow and have a very healthy pipeline in the United States. And in fact, I think most of our growth over the last 18 months has come out of the United States. Moving to Europe. As I think Bruce mentioned when he was up here a while ago, the balance sheets of the governments and banks aren't great. They need to deleverage. There are a lot of funds in real estate investors that need to deleverage as well. If they can't turn to the governments and banks for their support. A private solution is required. And we've been very encouraged by the ratcheting up in our dialogue with companies there and expect to be very active in Europe over the next little while. So as far as recent initiatives go, we've done a few things this year. It hasn't been our most active year, but we did a $830,000,000 transaction with Hammerson within our office entity. We did a $1,000,000,000 recapitalization of Thackrell Holdings, which is a diversified Australian listed company owning interest in hotels as well as some commercial density around a major transit hub. We've been active in the retail area, done a number of multifamily deals and a growing number of deals in the industrial space as well. So as far as the future, our plans, I think the steps that we're taking to capitalize on the opportunities that we're seeing around the world are primarily to expand our fee bearing assets under management and in equity invested and to invest this capital prudently and accretively. To help us do this, we will continue to fill out our investor base and our open fund offerings. We've raised about 3.5 $1,000,000,000 in this regard over the last 12 months and have a little ways to go. And we'll also roll out new funds when appropriate. And in continuation of Brookfield's strategy to enhance capital efficiency through the creation of publicly traded and industry specific flagship companies, we're working to complete the listing of Brookfield Property Partners. And I'll just talk a little bit about that. What we're doing here is transferring substantially all of our existing commercial and other income producing property holdings into Brookville Property Partners or BTY. In total, there's about $80,000,000,000 of assets on a gross basis going into this vehicle, dollars 50,000,000,000 on a proportionate basis. There's a $21,000,000,000 equity base, dollars 10,800,000,000 of BAM equity. We are planning to distribute somewhere between 7% to 10% of this entity to shareholders via a special dividend and the structure will be similar to the structures that have been put in place for Brookfield Infrastructure Partners and Brookfield's Renewable Energy Partners. The entity is intended to be a leading global owner operator and investor in high quality commercial properties. No different strategy than what we've employed over the last number of years just within a new entity. It will be a publicly traded limited partnership. We intend to list in both the New York and Toronto Stock Exchange. It will be managed by Brookfield. And we've worked very hard to make sure that we have an agreement in place that aligns the interests of investors with the manager as we do in all of our entities. The mandate for Brookfield Property Partners will be as always to invest for value and quality real estate in the world's most resilient and attractive markets and most importantly to generate long term predictable sustainable cash flows. We intend to provide investors with an attractive dividend yield and to grow through investments in low risk development. This next slide just kind of shows what we're trying to do. And initially, the book value of the Brookfield Property Partners will be $25 a share plus or minus based on IFRS values and we're targeting $1 a share annual dividend distribution or 4%. We intend to our goal is to grow this dividend distribution between 3% 5% a year and to pay out 80% of the FFO as we go forward. The targeted total returns for Brookfield Property Partners are 12% to 15% as you would find in any Brookfield sponsored vehicle. So I think there are obviously many benefits from the relationship with Brookfield. Brookfield has had a successful track record of launching high growth flagship companies both SAM and Fetch and we'll talk about infrastructure and renewable energy in a couple of minutes and their great successes. They've been a supportive sponsor. They provide resources, brains, capital resources if required and there's a strong alignment of interest with a significant ownership stake as both Brian and Bruce mentioned and management fees and incentive distributions that are tied to the increase in the dividend distribution and the capital appreciation of the entity. As always, there is appropriate corporate governance in place with independent boards and a majority of independent directors and conflicts committees that review every single transaction that we do. So just kind of summing up the priorities for us. Obviously, a major goal of ours is to complete the listing of Brookfield Property Partners. Hopefully, we will get that done by the end of the year in the distribution to shareholders and continue to raise private capital for our various investment initiatives, importantly to harvest capital from mature or under performing investments within BPY and existing funds recycling this capital into more accretive and higher growth opportunities and finally, to grow fee bearing income on a prudent and accretive basis. So I just in conclusion would say that we're really excited about the next couple of years within the area of real estate. The investment landscape has been is fantastic. There are still lots of opportunities. We're particularly excited about the U. S. And Europe as I said. We're also finding this good investment climate at a time when most of the competitors that we were up against over many years are sort of off the field. Many of them are in restructuring mode or flat out out of business. So the competitive field is a little shallow at this point, which is good for us. There's also been very little new construction over the last couple of decades. And what this means to us is once a sustained recovery kicks in around the world, you're going to find that there's a lot of competition for few real estate assets and we think that's going to result in sharp valuation increases. And finally, launching Brookfield Property Partners coupled with our various private fund offerings will provide us with abundant capital to chase these opportunities in this environment. So we're pretty excited about the next couple of years. I'm looking forward to coming back and talk to you next year about the performance of Brookfield Property Partners. This is really sort of a setup year for us, but the outlook we couldn't be more excited about. So with that as a brief overview of what we're up to in the property area, I'd be happy to respond to any questions that you might have. What is the rationale for keeping BPO as separately traded entity rather than rolling it up into BPY? We've always been agnostic about the form of investment that we make, the form of ownership. For us, it's really all about substance over form. So be it a publicly traded entity or a direct investment in real estate, as long as it's performing well, we're happy to hold it either way. And that's been a bit of an advantage of ours. Not many people have the guts to do that. So I think we see a bright future for BPO. And as long as they're performing well, we're here to help support it and help it to continue to grow. I have actually three questions or 2. I was just reading yesterday in New York Magazine about the related properties development, 12,000,000 I believe square feet under development. And I know that you have land over the rail yards right next to it and seeing to me that might be a lot of space and also what the situation is down in the World Financial Center where I know that billing is taking place. If you'd comment on that. And then the third question is I always read about how Brookfield's rent seem to be lower than the market average. And if I wonder I wonder if there's any particular reason or advantage for that. Okay. So on the first question, the West Side of Manhattan. So it's true. Within Brookfield Office Properties, we own a fantastic site, which is directly across the street from what will be the Moynihan train station, which is the most heavily traffic station in this part of the world. And we can build on that side I think 5,400,000 square feet of commercial density. On the related site, they have roughly twice as much half commercial half residential. And I think given the proximity to transportation and given the very meaningful advances in technology design and space utilization by tenants. This clearly is the next commercial precinct to come up in the city and the city continues to grow and our expectation is that it will grow more. We like our site versus related for a couple of reasons. We are immediately adjacent to the transportation. Our site is partially over railroad tracks where theirs is entirely over railroad tracks. So both of us have to build decks before we can commence construction of our office buildings. The economics of our deck is much more affordable than theirs. So but at the end of the day, I think what's good for them is good for us and vice versa. We're creating a new precinct within the city. And I think I would just keep an eye on Brookfield office properties to make an announcement in the near term about things that they're doing over there. That's about as much as I can say on that for now. As far as Lower Manhattan goes, we couldn't be more excited about what's happening there. Roughly $20,000,000,000 of federal funding has been spent on infrastructure and transit improvements. It's all coming online over the next 2 years. I think if you tried, you couldn't spend that much money without making an impact on a precinct. I think it would be hard to do. So and all of this is coming online right around the time when the office company has about 3,000,000 square feet of vacancy coming back to them. So the timing is pretty good for getting that space leased. There's no question Brookfield Office Properties have some work to do to do that. I would also just say keep an eye on them for some announcements about some of the leasing initiatives that they're doing. But we're pretty excited about what's happening downtown. It really is becoming a fantastic precinct unlike anything else given the transit improvements. And the last question you asked rents. Okay. So just overall the office companies rents in place rents are below market. And at times that's a good thing. When you have space to lease that's a good thing. And as space is leased, we're able to capture that mark to market and basically increase the value of this investment for shareholders. The reason for it was just the timing when the original leases were signed. They were signed in a down market and the market has since improved. And so it's a timing thing. I would say that the performance of the leasing group put in Brookfield office properties is excellent and they know how to push rents and capture value for our investors. So I think that's an area of opportunity for the company as well. Question in the back there. Thanks. Two questions. One is, is the 70% stake you guys have in Brookfield Residential going into Brookfield BPY? Is that going to stay up to BAM? And then secondly, you talked about opportunities in the U. S. There's been a lot written about Colony and others putting money into rental housing standalone housing? Is that something you guys have looked at? And is there some reason why you wouldn't want to do So the first question Brookfield Residential Properties is not going into Brookfield Property Partners. The reason is we really are only rolling in our commercial assets not our services businesses or the residential group. The reason is the earnings are a little less consistent and predictable. So we've left that aside. And as far as investments in the overhang in the housing inventory, we've looked at it a couple of times. We frankly would view an investment in that space as opportunistic something that would be done within our opportunity funds. And we haven't quite cracked the code on how best to manage a disparate group of homes around the world. It's a lot different than managing a multifamily building where you've got lots of tenants under one roof. This is a bit of a different animal. So we haven't yet figured out how to make money in that space. It's something we'll look at. And if we crack the code, maybe we'll do it. But I wouldn't say that it's high on our priority list given other opportunities that we've seen. There's a question down here. Maybe I'll take this question and one more. And then if there are any other real estate questions, we can get to them at the end. Thanks, Rick. I think I'm just probably being a little bit dense about BPY, but and I know you talked about it and Bruce talked about it a little bit, but the value proposition of owning BPY versus a shareholder just directly owning BPO and GGP, What is that sort of initially out of the gate given that BP so much of the value of BPY is tied up in BPO and GGP? And then I think I've got a follow-up after that. So initially there's no question a big part of BPY will be downstream listed entities. And over time the expectation is that we'll do meaningful transactions. We'll dilute the relevance of those entities within BPY and as we go forward. So at the beginning, they are going to be a big part of it. I would say you won't want to miss out on the things that we do. So you'll want to be there at the beginning. And we're we couldn't be more excited about this vehicle. Is the just as a follow-up is BAM keeping 93% of it or 90% of it at the beginning? Is that sort of a margin of safety because it is a little bit of an unusual structure coming out? And then as you guys do more deals that are outside of the listed existing listed entities that are downstream a way to sort of show the value proposition and then it's likely to BAM is likely to reduce its interest over time as there gains more interest? Yes. There's no immediate plan for BAM to and I should maybe let Brian speak to it if he wants. But there's no immediate plan for BAM to take equity off the table here. And they might around the fringes and they're certainly not precluded from doing it. But the plan is that their ownership percentage BAM's ownership percentage will be diluted as transactions occur. So they're 93% at the beginning. It's hard to predict where this goes. I'd be disappointed if we're not double the size in 5 years and which means if BAM doesn't trade out of any equity, it's they have a 50% interest. So that's kind of the plan. So last question here. Yes. Just in terms of general growth and maybe this is a question for Bruce as well. I think in your opening remarks you said that any sale of general growth was premature in your view. However, back in April you signed a standstill with Simon Property Group and investigated a sale of at least part of general growth. So I'm just sort of curious what's changed in a relatively short period of time? Thanks. I think to be honest nothing has really changed. Our view on general growth has always been that here's a company that from an operating standpoint has been neglected for the several years that it was undergoing its financial restructuring. And there's lots of low hanging fruit within the company and these are fortress kind of assets. And we can see a clear path to solid double digit returns over the next little while. So for us, it just really we think it's a good solid entity. It's going to generate the kind of returns that we're looking for our shareholders and it's a good investment. So but from time to time when opportunities arise, of course, we'll think about them and analyze them and see if they're in the best interest of our shareholders. So that's basically what I would say about that. So for now, that's it. If there are more real estate questions at the end, please feel free to bring them up in Bruce's wrap up. And for your convenience, we've decided that we'll give you a 10 minute break right now. So enjoy. Good afternoon, everyone. I guess I'll start while there might be a few other people filing in, but we'll try and keep things on track here. First of all, I'm pleased to be here to give you an update on the infrastructure business. My agenda today to cover off a number of things. 1st, to give you an overview of the business as it stands now, describe some of our investment products and funds, the recent accomplishments in the business, how we see the investment environment for the next little while and the financial profile of the business. So let me begin with an overview of our infrastructure business. We established it as a separate operating division just over 5 years ago. And in that period of time, we have established a very unique and leading infrastructure asset management company. It's unique in terms of its scale, its diversity and the high quality nature of its assets. To give you a sense of that in terms of scale, we have about $20,000,000,000 in assets operated by over 100 investment professionals and over 6,000 operating employees. We have diversity across geographies and across sectors. We've got investments on 4 continents and we have investments in the utility sector, transportation, energy and timber. And finally, our business is anchored by a number of great assets just to name a few and I think Bruce covered a few of them off our Australian coal terminal, our Australian railroad and our Chilean transmission system just to name a few. The growth in our business is also being reflected in the metrics that count for BAM, which are the amount of fee bearing capital under management and our fees earned. Fee bearing capital has increased $4,200,000,000 in 2 years or 50% and this has been achieved by raising new capital and from market value increases in Brookwood Infrastructure. Fees have also grown by $87,000,000 in 2 years, an increase of over 80%. In the infrastructure business, we manage both public and private investment vehicles, which altogether add up to about $14,000,000,000 of fee bearing capital including Brookfield's commitment to the private funds. On the public side of the business, we have Brookfield Infrastructure Partners, which is listed on the New York and Toronto Stock Exchanges and which is our flagship diversified pure play infrastructure company. And we have Acadian Timber, which is an East Coast Timberlands business. On the private side, we have fully invested funds in transmission and timber, our flagship Americas infrastructure funds and few regional infrastructure funds in Colombia and Peru as well as the global timber funds. I'm going to now focus on some of our flagship funds. 1st, let's look at our flagship public vehicle, Brookfield Infrastructure Partners. We spent on Brookfield Infrastructure Partners in 2,008 and it had 5 investments that we inherited from Brookfield and it has a market cap of around $800,000,000 to $900,000,000 Since that time, we have grown the business substantially through a number of acquisitions and we've generated great returns for our investors and in particular over the last 3 years, we've generated 45% per annum returns for investors in Brook Infrastructure Partners. We believe that the steady stock price performance is a result of the market recognizing that they have an investment in high quality assets, assets that generate sustainable strong cash flows and ones that are supported by regulated businesses and long term contracts. Peripheral infrastructure currently pays a solid distribution of about 4.5%. And since 2,009, our distribution has grown by an average of 12% per year, which is supported by strong FFO growth. And just to relate that back to what Brian was mentioning earlier, our target growth is around 3% to 7% and in our business plan, Brian referenced 5%. On many of our calls for Brooklyn Infrastructure Partners, we do mention that for the next couple of years, we believe we'll be able to hit the high end of our target distribution ranges. Today, Brooklyn Infrastructure has a market capitalization of just over $7,000,000,000 and it's very well positioned for future growth as we have a number of organic investments that are just coming on stream and we've just made a number of recent acquisitions, which will begin to integrate into our operations in 2013. Our flagship private fund is our $2,700,000,000 Brookfield America's Infrastructure Fund. In this fund, we invest both infrastructure and renewable power and it's primarily in North and South America. Through this fund, we've invested a number of high quality infrastructure assets and the returns to date are very strong. We closed this fund about 2 years ago and today around 88% of the total capital that's committed to the fund has been deployed And as of June 30, it's generated gross IRR of 24% to our investors. Now we talk a bit about our timber business. As many of you know, we are also a significant global Timberlands investor and fund manager and we successfully established 1 of the largest global Timberland Estates over the past 7 years. Timber is a core investment strategy that provides solid risk adjusted returns for investors. And since 2,005, we've invested about $3,500,000,000 through 11 timber transactions. Our return expectations for this business is typically around 10% to 12%. And while collectively our timber returns and our funds have achieved a gross IRR of around 8% to date, This has been achieved in a very difficult market environment due to the housing situation here in the United States. We expect far more robust conditions going forward as the housing market continues to improve in North America and as a number of supply factors take hold. And as a result, we expect our returns to improve as a result. Now I'm going to highlight some of our recent accomplishments. In fact, 2012 has been exceptional year for executing our investment strategy. Overall, we've invested about $3,000,000,000 into transactions that we expect will meet or exceed our target return levels of 12% to 15%. We did that by following a couple of investment strategies. 1 in particular was over the last several years, we have had a very significant European outreach program and the benefits of that strategy started to take hold this past year in a number of transactions. The ones I'll mention are in relation to the transportation sector, where we did 2 acquisitions. First, we acquired 100% of a toll road. It's an urban toll road in Santiago, Chile. We bought it from 2 European construction companies and 2 transactions, 1 at the end of last year and one that we closed on just this month. In addition to that, we also struck a partnership with Abertis Infrastructure, where we agreed to acquire controlling interest in a publicly listed Brazilian company called OHL Brazil. Altogether, these two transactions have a result of us having interest in over 3,200 kilometers of toll roads in South America in Brazil and Chile. And we think the opportunities for growth in these markets are fantastic. Excuse me, I got difficult as well. We like the toll road business in South America for a couple of reasons. First off, the regulatory framework is very attractive. We're able to achieve real rates of return because our rates are indexed to inflation. And in Chile, we're able to achieve additional rates increases from a 3.5% annual rate that were provided by the regulator as well as congestion pricing. In addition to that, these are also markets where we're seeing substantial increase in amortization rates and we expect that will drive significant traffic growth in the years ahead. The second transaction I'd like to point out is 1 Bruce mentioned earlier, which is EnWave in Toronto. This is a $480,000,000 acquisition of a district heating and cooling system company that serves the Toronto Central Business District. What we like about this business is that 90% over 90% of its revenue is generated from fully contracted counterparties with long term capacity charge contracts. So it's a business that's very secure. In addition to that, as many of you who've been to Toronto lately, there's significant commercial developments in the city and the opportunities for us to increase revenues by adding new commercial properties to our system are substantial and our ability to increase rates over time is also very robust as well. So we think it's going to be a fantastic investment for ourselves. As I mentioned earlier, the level of activity has been very strong and we've been quite successful in deploying quite a bit of capital in very high quality investments and what we believe are very attractive returns. Today, the investment environment is probably impacted by a number of trends, but I'll talk about 3 in particular. The first one is the European situation, which was one of the things that led to our success in acquiring the toll roads and a regulated distribution business in the U. K. That we acquired as well. That situation hasn't really changed. And in fact, we continue to pursue opportunities in Europe. And in the past, because of some of the challenges with sovereign debt and the concern over whether or not countries will stay within the euro, we've been mostly focused on acquiring Latin American assets from Europeans. I think going forward as we see the dust settle on the euro and as we get more comfortable with some of the redenomination risk that exists with making investments in Europe, there could be some great opportunities to buy European assets as well. And that's something we're going to look at quite a bit over the coming years. The second factor and one that was mentioned earlier is the government privatization process. And this is something this is a phenomena that we are seeing everywhere. It's in South America. It's in North America. It's in Australia and it's in Europe in fact. And we think there'll be numerous opportunities for us to acquire high quality assets from governments looking to raise cash. And just to give you an example of that, I put 1 on the slide here and it relates to the Brazilian situation. And it sort of highlights the challenges the governments have today. In Brazil, there's about 8% of the highways have been sold off to private owners. And these are the highest quality roads in the market today. And the number of paved roads in Brazil today is probably still less than 20% of all roads. The amount of capital that needs to go into that market to improve the transportation infrastructure is staggering and the governments recognize that and they're looking for companies like ourselves to help them fund that transportation expenditure. With the acquisition we just made of OHL Brazil, I think we're uniquely positioned to be able to take advantage of that trend. And finally, the last trend I'll mention is in relation to the recent commodities pullback. As a result of where commodity prices are today, there's a number of resource companies that have become cash strapped and are looking for capital to complete the projects that are underway. And so we've already started discussions with several of them where we'll be able to potentially buy some of the infrastructure assets that traditionally they would have held within their companies, but now they're looking to sell off in order to generate that cash to finish the projects. We think that's something we'll see for the next little while, while resource prices tend to be low. I think the other positive trend from an investment environment perspective is the fact that our access to capital is very strong. There is a number of investors both public and private that have recognized that the infrastructure sector is a great place to invest today. And so our ability to attract that capital has probably never been better. The next couple of slides I have just some numbers and the first one deals with our invested capital. As you can see from the slide, the majority of our capital in the infrastructure division is invested through Brookfield Infrastructure Partners. Going forward, it's our intention to make all new investments in infrastructure through Brookfield Infrastructure Partners and our plan is to seek to reduce our direct holdings. In that regard, Brookfield Infrastructure intends to acquire BAM's interest in the Chilean transmission system in 2013 subject to certain conditions. So BAM owns about 10% of it. Brooklyn Infrastructure Partners owns 18%. And in 2013, we'll buy the other Brooklyn Infrastructure Partners will buy the other 10%. With respect to the direct timber holdings, we've indicated previously that while we continue to like Timberlands as an investment class, we are exploring some strategic alternatives in relation to these assets, which may include the sale of some of our timber holdings. In the current low interest rate environment and given strong interest from institutional and strategic buyers, we believe that there may be an opportunity to monetize some of these timber assets at very attractive rates and then we can reinvest the capital in higher earning assets. Touched on a couple of these metrics before, but this slide gives you a bit more detail on our financial performance. Looking at our revenues, over the past 5 years, we have significantly grown our fees from both our public and private funds. And our GP revenues over that period of time have grown at a CAGR of about 80%. Base fees have grown from $19,000,000 to about $129,000,000 estimate for this year and this is as a result of the increase in fee bearing capital under management. This is all sort of the trend that Brian was talking about earlier. Brian also talked about the incentive distributions and you can start seeing how they're kicking in. And our expectation is now that our funds are maturing and as Berkeley Infrastructure has exceeded its incentive distribution thresholds, we expect significant growth in performance income going forward. Looking to the year ahead. Our priorities in the near term include closing the acquisitions that are pending and integrating those businesses into our infrastructure platform. In addition, we continue to progress the Texas transmission development project and our expectation is to electrify 2 of the lines by mid-twenty 13 and bring the final line on in June of 2013. So that project is progressing very well on time and on budget. The second organic project that we have been working on is in relation to our railroad project. I'm pleased to say that that the projects that we had underway, we had 5 projects underway, they've all been completed on time and on budget and are now contributing to our FFO. And then finally, as I mentioned earlier, we have about 88% of our Brookfield America infrastructure fund now fully committed and we'll look to raise new capital to fund future growth in the years ahead. So in summary, we see significant opportunities to deploy capital at attractive values that will benefit, as I mentioned earlier, from our access to capital and the substantial interest in the sector from both public and private investors. And we believe that our success over the last 5 years has made us a leading infrastructure manager will also lead to our ability to generate good returns for BAM from our increasing performance fees that should come online. So with that, I'll now take some questions. First, I should say I'm a shareholder in both BIP and BAM. So the first question is what is the rationale for a Brookfield asset selling some of its ownership of assets that they currently share with Brookfield Infrastructure? And the second is, can you give us some update or insight into what your plans are and possible expenditures for expanding the Dali Rambla coal terminal? So the first question is in relation to the Chilean transmission business. And going back to when we spun out Brook Infrastructure Partners back in 2,008, it was our desire at the time to include all of the assets into the company at that time. Unfortunately, we have partners in that investment and they disagreed with us and wanted BAM to maintain an interest in it. And it primarily had to do with the fact that at the time Brookfield Infrastructure Partners was a relatively small entity and they weren't sure whether or not it would be successful. So moving forward 5 years, we've proven to them that Brookfield Infrastructure Partners is a very successful entity. They now agreed to allow us to make that transfer. And from a from both a Brookfield Infrastructure Partners perspective and a BAM perspective, we felt it makes sense for the interest to be held by 1 party. I think your second question was in relation to Dogen Point, which is our adjacent development property to Darren Hope Bay Coal Terminal. We continue to try and advance that project. As you can appreciate with metallurgical coal prices coming off substantially over the last year, the desire for mining companies to contract to pay for both feasibility study and to commit themselves to taking space has come off a little bit. We still have some discussions going with a few of the majors, but the project has slowed down a bit. So we're continuing to work to progress that. I'm still optimistic over the next 6 to 18 months that we'll make progress in getting the feasibility studies underway. But at this stage, it's going to take some time. Question back there. Is the LNG export market out of the United States of interest to Brookfield Infrastructure? It's something we've looked at in the past. I'd say the it's not our current focus. Our current focus on the energy business has been the natural gas storage side of the business where we've acquired an asset this past year and where we think that with the significant reduction in spreads, this could be interesting time to make an acquisition there and benefit over the long run. We've also made a big investment in our district heating platform recently and that's an area where we see significant growth and where we now have a platform to grow from. So I think to answer your question, we'll optionistically look at LNG terminals. The capital is obviously very large and so it's something we'd have to be cautious approaching. But I think our focus for the next little while will be building up the storage business and the district heating. Michael? Sam, you talked about the potential to acquire infrastructure developments from resource companies that are becoming more cash strapped. Should we think if you do that that you would want to have in place long term contracts from those companies to take to use the infrastructure. And even if you do that, it's still a function of the covenant of those companies, how do you enhance that? Thanks, Michael. It's a good question. The we have a long history of doing these types of transactions. Richard and Harry built a business out of acquiring hydro facilities from industrial users and signing contracts back with them. So the intention would be in fact to keep the mining company as the foundation customer for any infrastructure. The stranded asset issue is something that we would be focused on. Obviously, we have to get comfortable with the underlying resource and weigh our risk adjusted returns against the credit quality of that mining company. So each situation is differently. If it's an asset adjacent to the Ballon Basin where there's a number of users that makes it much easier. If it's a single if it's a mine that is serving if its infrastructure is serving just one mine then obviously the stranded asset risk becomes much more prevalent. Cherilyn is back there? I guess we'll take 2 more questions and then move on. Thank you. Just wondered if you could elaborate a little bit more on the government privatization opportunity. And where I'm coming from with the question is that often those opportunities are competitive situations. Often the government wants to keep some sort of a golden share or some means of keeping some control. And those two circumstances would seem to be somewhat inconsistent with the kind of things that BAM likes to do. Thanks, Sheldon. I'd agree with you. That is the challenge in some privatizations where it's a fully exposed auction and they can become a cost of capital shoot out. And I guess a great example of that would be in the U. S. Here some of the airport and toll road acquisitions while a lot of them didn't go ahead, the ones that did were cost of capital shootouts. And I guess down in Brazil when they did the recent airport privatizations, there were some very goofy numbers that came out of that process. So not all these situations will be appropriate for us. But I think the EnWave situation was a good example where we had a unique advantage being such large owners of commercial properties in Toronto and understanding the opportunity there. And I think now in Brazil with the platform we have with OHL Brazil, I think we're well positioned for privatizations there. So I think we'll be selective and we'll obviously pick our spots where we can get good returns. One last question. I guess the short answer is no. I think in the U. S. Here, which is relatively modest part of our business, I think most of our assets are probably South America, Australia and Europe. But in the U. S, we're not banking on a significant amount of privatizations as a source of investment opportunities. I think where we are looking for investments are sectors that today are already in the private sector and acquiring them from private investors. So I don't think the U. S. Government will really affect that too much. Thank you very much. I'm going to ask Sash and Shah to come on. Good afternoon and thank you. I'm going to speak about the renewable power sector, which is, I'd say in Brian and Bruce going through the evolution as from an investment manager to asset manager and the establishment of infrastructure partners. The next leg in that stool was really our formation of Brookfield Renewal Energy dollars of $18,000,000,000 of assets under management in the renewable power sector spread across 3 countries Canada, the U. S. And Brazil. This is a combination of about 12 to 15 years of investing in renewable power and in particular in hydroelectric facilities. As Sam mentioned earlier, we've generally been acquiring either portfolios of assets or single assets in the renewable power sector often from industrials who no longer have a need for the capital to be tied up in the hydro facility and we can come in and acquire the position from them. We also have a full development expertise. And if you look over the last 10 years, our ability to either develop or acquire single assets, large portfolios or work on corporate transactions has allowed us to add over 140 assets to our portfolio, where today we have 170 facilities in the portfolio, 85% of which are hydroelectric. And I'll talk in a bit about why that's important to us. If you look at our gross returns over the last 12 years, we've been able to achieve 17% gross IRRs. And clearly, the theme today that we talk about from an underwriting perspective is that 12% to 15% is something that we strive for over the long term. Exceeded that over the last 12 years, but it's something that we continue to strive for as we look to build the business out over the next 5 to 10 years. One of the important, I'd say, evolutions of our power business is that we were able to establish Brookfield Renewable Energy Partners at the end of 2011. And why that's important from a BAM perspective is that it gave us another vehicle from which we could allocate resources to growing globally in a sector that we find extremely attractive and supported with very high quality assets. If you look at our fee bearing capital from 2010 to 2011 and then into 2012, you can see a market increase in the listed fund equity and the private fund equity growing up to $8,000,000,000 today from just over 2.5 years ago. In earnest, Brookfield Renewable Energy Partners has been operating for a year because as I said, we launched at the end of 2011. And you can see in our 1st year of operations, we expect to earn $30,000,000 of base fees at the asset manager level. And that doesn't include any future IDRs or growth in our capital base that we expect over the next 5 years. One of the benefits we have by being part of the Brookfield Group and having the breadth of offices and investment professionals globally that a number of my colleagues referenced is that we do have a true global reach. And it sounds like a tagline that a lot of people will use, but we have offices and operations and investment professionals located throughout the globe. And specifically in Power, we have offices in Canada, the U. S. And Brazil. But as we're doing outreach and looking into other markets to source opportunities and deploy capital, we can look to our colleagues in Europe and look to our colleagues in Australia and take advantage of opportunities and bring resources to bear extremely quickly. That combined with an operating focus down at the asset level and 1200 people running our operations on the power side every day gives us a tremendous advantage over our competition who are offering localized utilities, load serving entities or financial players who just don't have the capacity and the wherewithal to deal with the nature of these assets, the connections they need into the interconnected markets and the regulatory aspects to deal with across multiple markets and across multiple jurisdictions. As a manager, one of key expertise that we bring in addition to having the resources and the scale is that we are focused on operations, marketing the power across 10 different power markets in North America and Brazil and bringing the access to capital that comes by being associated with Brookfield and having Brookfield be the asset manager in this sector. If you look at our track record from 1999, we launched our first investment in the sector through a Canadian income fund, which would have been an income oriented product in Canada called Great Lakes Hydro Income Fund and I think it owned 3 assets on 1 river at the time. That represented about $200,000,000 of capital, which we've grown today to over $7,700,000,000 And this was the track record that I was referencing when I say that we've able to achieve a 17% gross IRR over that period, it's been to the benefit of all the shareholders involved either in the income fund directly or at the BAM level by owning shares of Brookfield Asset Management. During that period, there was a significant movement in gas prices and energy prices. We saw gas prices go from $2 to $3 in the early part of the decade up to $7,000,000 $8,000,000 $9 sort of midway through the decade and more recently coming back to levels where we saw in the early 2000s. That hasn't been prohibitive to us in terms of deploying capital to this sector and we've been able to make money throughout that commodity cycle all the way. And I'll talk a little bit further about why we look at this time when gas prices are quite low as an opportune time to invest capital into the power sector. During the mid-2000s, we grew significantly into the U. S. And in Brazil. Today, we have 35 plants in Brazil and represents about 20% of our business. It's an important market for us with strong growth profile and emerging middle class that's using power at a rate that's far greater than what we see in North America. We also diversified our technology. Although we're primarily hydro focused, which we view as having a very stable long term cash flow profile, strong margins supported by a high cash flow quality. Wind is something that we were always interested in. We saw lots of capital flowing into the wind sector. And although we were patient, we picked our spots and selectively deployed capital into the wind markets. And I'll talk a little bit later about some of the areas that we are focusing on today. Lastly, as I said in 2011, we launched Brookfield Renewable Energy Partners and we continue our expansion throughout the U. S. Particularly on the West Coast now into regions and markets where we see a strong requirement for renewable assets, where we feel that we can deploy capital on an accretive basis. So our strategy at the simplest level obviously is to deliver gross returns of 12% to 15% for investors in our managed funds. And by doing so, we can continue to retain the track record that we've established over the last decade. But more importantly, if we can generate returns of 12% to 15% and deploy meaningful amounts of capital over the next 5 years into this sector, our view of meaningful is if we can double the amount of assets we have under management over the next 5 years by now having a global profile and being able to access capital to grow in markets outside of our core markets, we think we can increase our base management fees and the IDRs that kick in to over $100,000,000 net on a BAM base for BAM over that 5 year period. We also think that through that period if we're creating value for our underlying funds and the shareholders in those funds that we can execute a strategy which would deliver over $50 a share for the underlying shareholders of Brookfield Renewable Energy Partners. Those shares today trade at almost $30 a share. So our strategy clearly looks to create value for all levels of shareholders by deploying capital at strong returns and being able to be highly aligned with investors by being aligned to increase the market cap of those businesses, is to be aligned to increase distribution and to being aligned to increase value on a per share basis for those investors. We have a number of organic growth initiatives in our portfolio today that we are pursuing. Having 1200 people in an operating business in multiple markets gives you a number of organic initiatives. We have a 2,000 megawatt development pipeline in the business, which we've selectively built out over the last 10 years. We currently have 3 development projects on the go. And we continue to access multiple sources of capital, whether that be public equity, preferred equity, corporate debt or private equity through our institutional funds. 1 of the critical pieces of investing for us is maintaining a low risk profile to be able to generate those types of returns that we're targeting and having an investment grade rating or having investment grade philosophy to capitalizing our businesses is something that's paramount to our strategy. So what are some of the things that we would look back and say we've done well in 2012? And I'll talk a little bit about some of our challenges going forward in the next slide. Clearly, launching BREP was an important step for Brookfield Asset Management. It was the next pillar in simplifying our operations and our strategy putting all of our power assets under 1 global flagship vehicle and giving us an entity through which we can issue equity and use capital to fuel global growth. We also continue to progress development projects that were in our pipeline. We've been progressing $1,300,000,000 of development in our business. We had 7 development projects on the go over the last 3 years. Today, 5 of them are completed on scope, schedule and budget. 2 more are underway. They're also on scope, schedule and budget. These are in Brazil. And we started a new one this year. This is an important piece of our capital allocation strategy in that we recognize that there are always times when a significant amount of capital will be chasing transactions in this sector. Having a development pipeline gives us the flexibility to dial back the amount of capital that we allocate to acquisition opportunities and focus those resources on development opportunities in our portfolio. So when I referenced gas going to $7 or $8 a few years ago, we actually dialed back the amount of acquisition based capital we were allocating to the power sector and we start to pursue high value development opportunities in our portfolio. A number of those opportunities are now coming online to the point where we've now added we now have 800 megawatts of wind in our portfolio where 3 years ago we had none. Lastly, we continue to have very strong access to capital markets. And in 2012, we will have raised over $3,000,000,000 of public and private debt and equity through various transactions showing the tremendous strength of the platform and the Brookfield brand enabled to access capital and get various sources of capital from different types of investors. In doing so, we also, as I said, focus on the returns we can generate and have been able to lower our cost of capital by 50 basis points in the business. So what are some of the challenges that we're facing looking forward? Clearly today at $3 gas and 6 months ago it was $2 Gas prices are extremely low and that means the corollary is the power prices are very low. And in a low price environment, if you have assets and they're uncontracted, it can be challenging to make strong margins. We like hydro assets because the margins are protected by a very low cost structure. And that being said, the vast majority of our portfolio is highly contracted. I think there's 2 things that come out of being in a market that's oversupplied today and has a cheap commodity. One is that it's a great opportunity for us to deploy capital into this sector. We've been doing so this year. We've spent $600,000,000 on buying a portfolio of 4 hydros in the Southeast U. S. That gives us tremendous optionality and future value to increase small increases in gas prices and power prices. The second thing is, we're looking for opportunities to take any exposure we may have to spot prices and find contracts that are of a long enough duration and in markets where renewable power is valued to be able to take them out of the spot market and effectively transact or contract those with utilities and government entities at values that recognize the renewable attributes in our portfolio. As I mentioned, we do have a significant development capability in the business and a pipeline that we can tap into. That being said, we operate in markets where there clearly setting aside slower growth in the last 6 months, Brazil is a market where there's an emerging middle class. On the energy side, the country needs 5,000 megawatts of new capacity every year to keep up with demand. And that means the amount of investment going on in that sector is significant and the amount of infrastructure growth in that economy is significant. Construction and labor is tight and it's something that we have to be mindful. I'd say our advantage in that market is we've been there for over a decade on the power side and we have people on the ground. We have 400 on the ground and the expertise to develop our own assets, which gives us a tremendous advantage over a newcomer in the marketplace. Clearly, energy markets are subject to regulation and legislative requirements and it's something that having an operating business gives us a distinct advantage over financial players. These are assets that are highly regulated by FERC, NERC, other regulators in other parts of the world. And having an operating business and having people on the ground gives us a tremendous advantage when we're competing for assets against a number of our competitors on the amount of value we can place on assets and understanding the complexity and the dynamic that we're entering into. So what have we been able to achieve in the midst of this lower price environment that I've been talking about? And how do we feel that it's going to fuel our future growth? Over the last few years, we've been able to allocate over $2,000,000,000 to the sector and grow our installed capacity base from 4,000 megawatts to 5,000 megawatts today. As I said, we've been extremely selective on wind, choosing to hold back a little bit when a number of competitors were deploying capital in this sector, I'd say in 2,007 and 2,008 and probably as early as 2,005. Part of our thesis in setting stepping back was that we felt that there was a significant amount of capital that was being risked on strong energy prices going forward on a merchant risk profile and also on wind resource data that wasn't substantiated with a long term track record. Both of those things made us uncomfortable and we took a patient approach. And I'd say some of the critical or the fundamentals that we decided to live with where we wanted to have contracts for these assets And if we were going to pursue a wind strategy and deploy capital, we needed contracts to support the revenue profile. We also wanted markets that supported that were supported by a strong wind resource and a wind resource that was substantiated by longer than 2 years of data. In Ontario, we found a great market where contracts were available for us to warrant the amount of capital we're investing there. In California, California has one of the highest renewable power standards in the U. S. And has certain parts of California where wind farms have been around for 20 years, giving us significant confidence that the resource was there and that there was support for renewables in order to allow our contracting opportunities to occur. Today, as I mentioned, we have 800 megawatts in this sector and it's an area that I say, if we look forward on the wind side, it will become a meaningful area where we allocate capital, but we'll continue to do so in the manner that we've talked about. I'd say one of the changes we're seeing is that a number of wind owners who've come into the U. S. And even in Europe are now dealing with distressed situations and there may be more opportunistic opportunities for us to deploy capital on the wind side. On the hydro side, as I mentioned today 85% of the business is hydroelectric. Clearly, this is going to be the majority of the content in our portfolio for the foreseeable future. We feel like it gives us a tremendous cash flow advantage in terms of its margins. And we continue to acquire hydros in this market. And if we can acquire hydros that have price exposure longer term in a $3 gas market or in a $40 power market, we think that we're deploying capital on a very low risk basis with significant downside protection, but tremendous upside optionality if gas even goes to $4 or $5 or $6 and power prices commensurately grow to $60 $70 or $80 Very rarely do you have opportunities to put capital at work where you can see a path of doubling your value in over 10 years. And this I'd say is one of those without taking outsized risk and without having strong downside protection. Finally, based on the investments we've made over the last 2 years, we've been able to generate an additional $15,000,000 to $20,000,000 of fees at the BAM level that we should see kick in over the next year. In terms of our track record, as I mentioned, the original fund that we launched in 1999 was really combined with our direct holdings that you see at the bottom of this table to establish Brookfield Renewable Energy Partners. And our returns in the various segments although that they all aggregate to over 17%, you can see that the Canadian fund had a track record of 16% on its own. And the 1st year for BREP has been tremendously successful. We obviously hope to continue 26%, but we're targeting 12% to 15%. So what are our priorities over the next 5 years? As I mentioned, we clearly want to deploy a meaningful amount of capital. And I'd say what we the standard we set for ourselves is to double the amount of assets under management. And that's not just growth for the sake of growth, but it's because we see this time when power prices are so low as a very important time to allocate capital to the sector for value. And if you combine that with owners who have their own fiscal pressures, there are going to be opportunities for us to deploy meaningful amounts of capital, double the amount of assets under management and significantly expand the fee base that we have in the business, while maintaining a strong underwriting standard. Having a 2,000 megawatt development portfolio, having contracts on assets that need to be renewed and having repowering opportunities on our wind portfolio gives us significant organic growth that we can tap into. BREP, which is the underlying fund, which trades at $30 a share today, has about $6 to $8 of value that we see a path to realizing over the next 5 years just through organic growth initiatives. And I think that's something that we want to continue to stay focused on. Having operating platforms gives you the luxury to be able to pursue both organic growth and acquisitive growth through the manager and through the investment professionals we have. Clearly, re contracting our price exposures in a low price market is very important to us. We have 5 terawatts of BAM of power that are exposed to merchant prices. One of our strategies today that I align is to take that power and contract it outside of the spot market into areas where the renewable content is highly valued and it's something that we're significantly focused on. We think that although maintaining an investment grade profile in a low risk basis for the business is extremely important, we don't think we would compromise that by having certain parts of our business financed on a more optimal basis. Today, there's probably $400,000,000 to $600,000,000 of capital that we think we can pull from assets just through refinancing activity, which would allow us to grow the vehicle without diluting the shareholder base and continue to maintain the low risk profile that we desire. And finally, obviously, managing the business on a low risk basis is something that we've always strived to do. Any questions? Andrew? And if I broke it down into 3 categories, there's really the Europeans that are retrenching and moving back to Europe. There's assets available there. There's private developers that don't have access to capital. And then there's some public players that have PPAs in hand and they don't really have access to capital because a lot of them are on the small cap side. So of those three categories, where are you seeing the greatest opportunities? I'd say the greatest opportunities and Richard Lego is here with me too, who's our CEO on the power side. I'd say the greatest opportunities are clearly in the U. S. Today and probably Latin America from just being able to deploy capital into either utilities who are looking to transact or industrials who are looking to move their capital outside of what's tied up in the renewable power assets that they own. No different than the Alcoa assets we just bought. Europe is an interesting place because it's opportunistic in terms of that there is significant distress, but a number of European utilities and owners of infrastructure assets actually took their rate bases in Europe and took their capital in Europe and expanded globally over the last 5 to 7 years. So when we're seeing opportunities in the U. S. And in Latin America, we're often seeing it from owners that come from European countries. And so there is clearly a European theme to that. But I'd say those two markets are clearly very strong for us. And then Europe, obviously. Australia, we've been we've had an active outreach in Australia. Today, it's probably less exciting from a place that we think we can grow meaningfully. But it's clearly a place that BAM has a strong presence that we would keep open to. Just wait for the mic. Thank you. It seems like Brookfield is gravitating towards the strategy of having kind of one public flagship fund and 1 private flagship fund across each of its operating platforms. So given kind of some of the pricing that you talked about being attractive and whatnot, can you talk about the fundraising environment today for renewable energy particularly and whether there's an opportunity there for Brookfield on the private side to execute on that in the next 6 to 12 months? I guess, first of all, just be very careful about talking about potential fundraising just given that I think it's a bit of a no no to talk about things that are active in life. That being said, the market today, as many of you know, if you followed Renewable Energy Partners is we have been deploying capital with our institutional partners through our broader infrastructure fund. That was the fund that Sam was referencing in his slides. And today we've used a strategy of having a broader infrastructure fund with an allocation to renewable power to support our growth objectives, but also to allow a broader fund to deploy capital in a number of sectors rather than just having a renewable power fund. That's worked quite well. I don't see any reason for that to change. And in terms of the fundraising environment, I think it's clearly very strong. You can ask a number of our colleagues up here. It's clearly been strong, but it's strong based on a track record. And I think as long as we continue to deliver that track record, it will only get stronger. Can you speak about your long term power price assumption particularly at the BAM level? And then how much of the 5 terawatt hours that you have uncontracted at the BAM level, do you think you can realistically contract in markets where you would have recs or environmental attributes? Sure. So coming back to gas today, as you know, it's around $3.03 And if you look at 2015 gas, it would be somewhere in the $4.30 to $4.50 range. Our gas price assumption that we use in establishing the power price that we think will incent new development in the sector is based on about $80 power price. Dollars 80 to $90 is what we think you need to incent new gas plants to enter into the market and earn a reasonable return, reasonable return being 10% on their capital on their equity. That's based on today's interest rates. And let me just put that in context for you. So today in an economy that's weak in the U. S. With significant shale on the ground, clearly prices are much lower. But if you go and the markets will continue to be sloppy probably for 2, 3, 4 years. But if you get beyond that and you think that economic growth will normalize, you think that the U. S. Will use the significant resource that sits underneath the ground to fuel economic growth, what we've done is said that reserve margins in the markets that we operate will continue to tighten. And how are you going to add to the grid or add supply to the grid? It's not going to be through nuclear. It's likely not going to be through the expansion of coal when in many of our markets coal is already scheduled to retire. The likely bulk supplier of power is going to be gas. And so that's a good thing because it means the demand side will continue to be increased. And seeing gas at anywhere between $450,000,000 $650,000,000 is not unreasonable in our view over the long term. At that level and at the returns I said a 10% return, we think that with the price you need to incent new development in these technologies is about 85 dollars $80 to $90 a megawatt hour and that's really the value that we're trying to capture through the 5 terawatts. In terms of answering your question about how are we going to do that, as I said, we're focusing our energy marketing group on going out and securing contracts in the short term that protect us against the sloppy market and in the longer term going out to secure contracts like we have in other parts of our portfolio where we've got 15, 20 year contracts that recognize the renewable attributes in the portfolio and recognize the certainty at which we can deliver the power at prices well in excess of $80 to $90 So that's what we're trying to achieve. Bert, I think that I'll just have one more question and then I'll hand it over to Cyrus. Yes. Just thanks. Quickly Sachin just in terms of Brazil, there's been some changes as concession ends. Has that affected how you think about deploying capital in Brazil or risk adjusting the capital that you're deploying in Brazil? Yes. Look, I think anytime rules change, you have to take stock and understand them. And I think it's prudent to step back and understand the implications of changing rules and what the motivation behind those changing rules are. And this is all still evolving and I'm not an expert on Brazil. So I'm going to give you sort of my take on it, but I'm sure everybody will have a different view. Clearly, there's a large infrastructure gap in Brazil. There's an emerging middle class and growth will ebb and flow, but most people would view Brazil as a growing emerging market over the next 2 decades. And in the government's, I'd say, zeal to support their industrial output and support local manufacturing, they took a position on concession renewal. That doesn't have a direct impact to our business because our assets actually don't get caught up in the tenure that they picked, but one that has many peripheral impacts to short term power prices. The desire they had was to lower short term prices. But as I said earlier in my comments that this is economy that needs 5,000 megawatts of new supply every year to keep up with growing demand. So you can take short term initiatives to help spur your economy, no different than banks central banks' lower interest rates. But longer term, you need new investment and new capital to continue to be deployed in Brazil to support growth, to provide electricity, to support their economic engine. And our view is that that actually creates an amazing environment to invest in, but we'll be careful and we'll be cautious on understanding where the law goes. Today, the law is in front of Congress and it has over 430 amendments to it. So clearly, the government themselves is retracting a little bit on trying to understand all the stakeholders' concerns. That's it. And I think with that, I'll hand it over to Cyrus. So I realize some of you have had a long day and I'll try and move this along. I wanted to give you an update on our private equity group in general today. And at the end of that, I was going to do a small section on the U. S. Housing recovery and how we see it impacting Brookfield. We thought you might be interested to understand that a little bit, because it's certainly topical. Brookfield's private equity business is focused on making highly opportunistic investments on a value basis. And we have a 2 pronged strategy of distress investing with an objective of controlling the underlying businesses we acquire and private equity investing in industries where we have deep in house operating expertise. We have a long history of finding great investments in all types of market environments, so we aren't dependent on waiting for a distressing environment nor do we need stable capital markets to execute our strategy. A key differentiator of our business is the strong and deep operating skills we have to bring to bear to any situation. And ultimately, it's those operating skills and our industry expertise that gives us the conviction to take contrarian views in an otherwise very competitive market. And as many of you know, we have a high level of expertise when it comes to distressed situations, which really benefits our Private Equity Group and Brookfield's other platforms during periods of industry or market dislocation. Our private equity group currently has about $7,000,000,000 of assets under management of which $3,000,000,000 is through private equity funds and $4,000,000,000 is directly owned investments. Over time, like the other presentations you've heard today, a greater proportion of our assets under management will be held through private equity funds. And as we sell down our direct investments, we will recycle that capital into our share of future private equity fund commitments. This will help us to increase our assets under management and also increase Brookfield's return on its invested capital. Since the launch of our first fund in 2,001, we've raised a total of $2,400,000,000 for private equity. Brookfield provided 50% of the capital for the first fund compared to 27.5% of the capital for our most recent fund. Our first two funds are fully invested and we've invested just over $150,000,000 or 15% of our most recent fund Brookfield Capital Partners III. And we have a very interesting pipeline of opportunities for Fund III. Our senior management team is highly experienced. Most of us have worked together for at least 10 years. The team has grown substantially as you can see on this chart, particularly over the last 6 years, which means that we're very well positioned to raise and manage significantly more capital in the future. We now have dedicated private equity offices in Canada, the U. S, U. K. And Brazil. And within our team, we have 8 operating professionals who can draw upon Brookfield's broader operating resources at any time. Since the launch of Fund 1 11 years ago, we've invested 1 point $7,000,000,000 of capital through funds. Our realized investments have returned 2.4 times for our investors and 1.7 times on an overall basis and that's net of fees. We expect the performance of our unrealized investments to improve substantially as operating enhancements continue to be implemented, market positioning continues to improve for these businesses. Importantly, none of our investments have resulted in a realized loss. These multiples translate into IRRs over 11 years of 24% or 17% net of fees to our investors. And as you can see and as you know, this is a significant outperformance compared to the S and P over the same time frame and bodes very well for our future fundraising. Our investment approach really hasn't changed that much over the last couple of decades and it's in fact been highly successful for us, our overall objective is to invest at discounts to intrinsic value of the underlying assets we're acquiring. We do this in a number of ways, but primarily by understanding the cash flow generation potential of the underlying assets should they be managed properly. When pursuing distressed investments, we're looking for mispriced securities and when making private equity investments, we look for under managed businesses. And using different strategies to make our investments and focusing on business improvement enables us to invest during all types of market environments. Common theme to our investment approach is to look for great assets that are under managed and that may be far more valuable as part of a larger platform. We focus on industry sectors we know, which enables us to bid with confidence and take a contrarian view when many others have no interest. And when we make investments, we don't rely on revenue growth. This is especially important in a weakened economic environment. In fact, a large part of our returns come from increasing efficiency and reducing overheads. Finally, like our other businesses, we are relentlessly focused on downside protection and as a result, our portfolio generally has a lower level of volatility than many others. Now we may miss out on a few fantastic opportunities with this approach, but we should seldom have a horrible outcome where our entire capital investment is wiped out. In sourcing transactions, Brookfield has a proven ability to create proprietary ideas, which turn into investments. This comes with experience, scale and reputation. For example, during the last 12 months or so, our private equity group has considered about 40 transactions. As you can see from the pie charts on this page, the vast majority of these ideas were developed within Brookfield and across industries within our areas of expertise. 3 of these investments within our Fund are within our Fund 3 today and we are actively pursuing additional opportunities. We also have long standing and deep relationships with various professionals and intermediaries and our deep knowledge in the distressed arena enables us to find many off market transactions during periods of market dislocation. And our knowledge and insight benefits from Brookfield's global businesses and perspective, which few other private equity groups would have access to. So what do we do once we've made an investment? We become actively involved with our portfolio companies and take several steps to enhance performance. Our operations team is continually focused on improving margins, reducing fixed costs and enhancing the competitive position of our businesses. In those instances where we own a commodity business, our operations team produces commodity exposure by focusing on value added products, which have less cyclical end markets. They also implement plans to diversify the customer base and expand our markets wherever possible. I'm going to talk about this in a minute a little more specifically. And we often find opportunities to monetize non core assets including working capital that's under managed. And finally, in order to ensure that our companies have enough runway to undertake an operational transformation, we seek to implement very low risk capital structures and this is particularly important in distressed situations where companies are often cash flow negative at the outset. So this is a select list of our portfolio investments, which span a variety of different industries and are of various sizes. In total, we have 26 companies, which generate $8,000,000,000 in aggregate revenue with 13,000 employees across 10 industries. We successfully implemented business improvement in all of these companies and each one of our companies is today a low cost producer in its industry or has an exceptional market position in its particular niche. And if we do our jobs right, we will create companies that become highly attractive to industry buyers and that's our preferred exit for all of our investments because strategic buyers can afford to pay for synergies. So just on our portfolio progress over the last year, we have made meaningful progress across the portfolio, particularly in strengthening our company's market positions. As an example, Western Forest Products, our Canadian based lumber producer has significantly expanded shipments to China and Japan. Ainsworth Lumber, one of our OSB companies has developed a new flooring product, which is today being tested in China and holds enormous potential. In fact, if the new flooring product is as successful as we believe it could be, we will be able to restart 1 of our largest, but idled OSB mill and this would increase Ainsworth's production by 50%. Hammerstone, our industrial minerals company with a 1,000,000,000 ton mining reserve of limestone in the heart of the Canadian oil sands has created enough interest with its superior aggregate product that it is now negotiating multi year contracts with major oil sands producers. Given that all other aggregate deposits of scale in the region are almost depleted, Hammerstone is now able to exert considerable pricing power. Beyond expanding our markets, several of our companies have grown through acquisitions. For example, Amber Resources has acquired 45,000,000,000 cubic feet of adjacent coalbed methane assets and today is among the very lowest cost natural gas producers in North America, there are few others in the industry that can generate cash flow at $3 natural gas. Our global relocation business was tied for number 2 in market position. And with our acquisition of Prudential Realty, we are now tied for number 1 in this global industry and are well on our way to generating $50,000,000 of annual synergies for this business. We believe the current markets provide a very interesting opportunity for our business and our strategy. On the one hand, equity multiples are at reasonable levels on an historic basis and we are seeing private equity platform opportunities. On the other hand, high yield spreads while currently at all time record lows have been extremely volatile over the last few years. That volatility creates interesting opportunities for us and we believe we're going to see more of it given anemic growth with high unemployment in the U. S. And continued structural problems in Europe. As an example, we acquired a significant position in the distressed debt of a building products company early this year. And with the rally in high yield markets, we would earn a capital gain of about 40% if we were to sell it today. Even though markets are reasonably strong today, there are many operationally challenged businesses that can be acquired at discounts to intrinsic value or have lost access to capital markets. And Sam talked about commodity prices in the for mid market mining companies with delayed development projects, they would have limited access to capital today given softening commodity prices. And exceptionally low natural gas prices have pressured many natural gas producers as well as merchant power generation businesses, which cannot generate cash flow in the current environment. For those companies with a reasonable level of cash flow predictability though, the financing markets have been truly exceptional and we too have been taking advantage of these markets. And just as an example, we've refinanced our debt in Western Forest Products and in Norbord, our other OSB company at very attractive terms. Finally, there is a record amount of high yield debt being issued in the market today at exceptionally low yields and we view a substantial part of this as potential inventory for future distressed opportunities. We plan on continuing to grow our business in a number of ways. This includes actively pursuing underperforming businesses with great underlying assets. Some of these are owned by larger businesses and some of these trade in the markets. You may be interested to know that there are about 3,000 listed companies in North America that have not increased in value over a 10 year period. And by and large, this is because of operational weakness. Many of these companies are of great interest to us. We're also using our international platform to pursue transactions in Brazil, where the middle class is growing every day and to proactively work with European banks and businesses that wish to deleverage. And of course, we'll continue to seek larger distressed situations on an opportunistic basis. Finally, with continued success, we're very well positioned to launch larger successor funds. So as you've heard today, our Private Equity Group has several competitive advantages compared to many other organizations, including significant restructuring distress capability, operating skills, global insight from Brookfield's other businesses and access to capital to pursue growth. And in summary, we believe our private equity group offers a compelling opportunity for investors. I'm going to move on to the housing section now and then I'm happy to take questions at the end of that. As you've heard today, we have a few significant housing related businesses in our private equity portfolio. On a broader basis, Brookfield has several businesses driven by the housing industry across a few of its platforms. I thought I'd address the 6 year housing depression, which we believe is now in early stages of recovery. We believe this to be the case because inventories have declined, unemployment continues to decrease, although at a very moderate pace, household formations are strengthening, home prices are increasing and public homebuilders are reporting increased backlogs. Finally, we shouldn't forget that the U. S. Population grew by 13,000,000 people over the last 5 years and is expected to increase by a further 15,000,000 over the next 5 years, which will require incremental housing. We don't expect a full recovery yet because of low levels of consumer confidence, high delinquency rates and abnormally large levels of shadow inventory. Our expectations are for housing starts of 750,000 in 2012, 900,000 in 2013 and more normal levels of 1,500,000 starts within the next 5 years. The reason we're planning for a slow recovery is that the industry drivers I mentioned while improving are still far from healthy as you can see on this slide, but they're clearly very clearly off the bottom. Having said that, affordability is high and inventories are low, which is very healthy. You can see this with the home price index and mortgage rates at near all time lows and single family inventory, which is approaching more normal levels compared to the very high levels it reached at the peak of the housing crisis. And as a result, all U. S. Public homebuilders are seeing improved order books. Overall backlogs have increased more than 20% for the major public homebuilders year over year. So what does this mean for Brookfield? During the industry downturn, Brookfield invested about $1,200,000,000 in businesses driven by housing. Brookfield's overall housing related portfolio companies generate about $4,000,000,000 in revenue and employ about 7,000 people. Several of Brookfield's portfolio companies have been operationally repositioned to generate cash flow even at 500,000 to 600,000 housing starts and are now becoming highly profitable with significant further upside potential. As you can see on this slide, our portfolio companies comprise land development and homebuilding, building products, timberlands and real estate services. Now these are owned by Brookfield directly and through funds and some of them are public companies and some of them are private companies. This is an estimate of the portfolio's leverage to a recovery in U. S. Housing. As you can see in 2,009, we had a trough of negative $110,000,000 in EBITDA when housing starts dropped to 600,000 dollars More recently on a trailing basis with housing starts closer to $700,000 combined with the operational enhancements we've made and some pricing improvement, EBITDA has improved to about $500,000,000 In a more normal market of $1,500,000 starts, while we can't precisely determine or project where earnings will be, we'd expect to see EBITDA in the $1,500,000,000 range for this portfolio. Brookfield's share of this is estimated as follows on a look through or a proportionate basis. At trough housing starts, we incurred an EBITDA loss of about $80,000,000 Our trailing EBITDA is about $300,000,000 and we would expect to be generating in the order of $700,000,000 to $800,000,000 as housing starts recover to a more normal level of 1,500,000 dollars In conclusion, I just wanted to say that the rapid decline in housing starts has obviously caused many casualties. The survivors have captured a lot of market share and given the volatility we expect to see during this period of improvement, there will be very meaningful opportunities for companies that understand and are involved in the sector. Finally, there is substantial operating leverage embedded in our portfolio. So thank you. And with that, I'm happy to take any questions. Thank you. I just want to make sure I understand your past performance. I guess over the last 11 years you had 24.3% gross returns on the private equities and then there was 17.1% net of fees and expenses. So the fees are what Brookfield earns because that's what we charge our investors. Okay. So that delta You should be happy about it as an investor. Exactly. So now going forward, if you were to do another 24.3%, would we see the same kind of gap or spread? Probably. For private equity funds, a 6% to 7% sort of differential is pretty common. And what's your target? What's the reasonable expectation for the next 5 or 10 years? Our target returns are 20% to 25%. 20% to 25%. And would you still have that? Gross returns. That would go down a little bit because as it goes down a little bit. If it was let's say 20%. Yes. Then you would have you'd probably have a 6% differential. 6%. Okay. Thank you. Cyrus, as you said, the fees are what you earn. So what does that boil down to in terms of the return on your investment in private equity? And I have another question also. That's a good question. I have to do the math for you. But it's very, very meaningful because if just for argument's sake, if 3 quarters of a fund is 3rd party capital, which is sort of where we're heading to in this business. And we earn a promoted interest of 20% on the gain. And let's just say we double our fund investment. We'd probably pick up an extra 15% return from our promoted interest on our capital. Do you want to look at it and maybe get back to me? Yes. My other question Brian will give you a more precise answer, I'm sure. Okay. I'm sure. The other question has to do with your comments on housing. Do you have any thoughts about the on the way down there was a mutually reinforcing trend related to the decline in house prices and the decline in employment in the United States. Do you have any thoughts about how there may be a similar mutually reinforcing trend as Hess prices go higher? Yes. The it's a good question. I don't remember the exact statistic, but housing is a massive employer in the U. S. And I can't recall the number, but every home build creates 4 new jobs or something like that. So it is going to be very, very positive for the economy as housing gets better and better. I think the amount of realization gains that you've had over the past couple of years has been low relative to the historical amount of gains that you guys have had. As you look out of the portfolio of companies that you have over the next couple of years, should that number increase? Or as we look at that housing chart and a recovery that's long tailed, do you think it's going to take a little while before we get back to a more normalized level? It's going to take a little while and we're always balancing what someone will pay us versus what the income potential is ourselves. But look clearly for our private equity business, it's fantastic if we can create realizations for investors that's what they want at attractive returns. So we're highly motivated to do that. And we will do so wherever we possibly can. In housing, we're probably a couple of years away, but I suspect we'll have some very large realizations. You spoke about the U. S. Housing market downturn. The Canadian housing market has been very strong and it's a lot of press, but maybe too strong. Does that concern you at all? And do you have any investments in Canada that you think would be affected by that? Yes. We are I would say we are cognizant of it and cautious because of it. And we're not a massive homebuilder in Canada. We've got a large land development operation primarily in Alberta where there's a very vibrant strong oil and gas industry. Our other businesses are really driven more so by the U. S. Even though a lot of the operations are in Canada, the vast majority of their sales are into the U. S. I'd say we're in a pretty good position. We're not 100% shielded that's for sure, but a pretty good position. Hi. I just wanted to ask a question about the fundraising environment. Bruce's slide spoke to an increasing allocation to real assets by institutions and the alternative piece of the pie basically stays the same. So I wonder if you could just comment on the fundraising environment for private equity versus infrastructure and real estate? Yes. Our private equity is really focused on tangible asset businesses. And for some investors, they that falls into their real asset bucket and for some, it doesn't. And I'd say it's a very competitive environment fundraising for private equity, but we're developing a fabulous track record. So I think we're really well positioned when I look out for the next 5 years. Thank you very much. So as everyone knows from past years, the method to my madness is to endure 3.5 hours and then I don't have to answer any questions. But there is 2 things I think I'll just start off on and maybe just answer or add to questions that were answered. One was just since 2007 what's different in fundraising in our business plan. And I think probably our plans are identical to what they were 5 years ago, but I'd say that they always evolve given capital markets and what happens in the world. There's no doubt we went through a global mess for 3 years of that 5. Probably the biggest thing that affected us was that entering into that we were in relatively good shape compared to many others. And therefore, coming out of it, we were able to continue to run the business that we had and keep going. And therefore, on a relative basis today compared to 2,007, we are very significantly ahead. And that's not that we advanced anything compared to others. It's just a lot went away. And that gives us a tremendous advantage. When you look at these returns, what's maybe more important than the absolute numbers is that they include 2,008, 'nine and 'ten, which were very damaging to many franchises like ours. And that's largely because we focus on downside risk and mitigation of the issues within a business. So I guess I'd just say, I think one of the great things that we have going forward and we have to protect it at all cost is the reputation for that. And on a relative basis, the access of capital that we have gives us tremendous competitive advantage, which we didn't have in 2,007, because capital was freely available. The second thing I would just maybe just note and Rick talked about BPY and it's being spun off recently or in the short while the next short while. The only other thing I'd add to his answer, which I was excellent, is that when we spun off or took Brookfield Energy Partners as predecessor to it in 1999, which eventually became that Brookfield Renewable Energy Partners in 210. I remember doing the initial roadshow for a $400,000,000 company and no one wanted to buy it. And we had to beg and grovel to do a $400,000,000 to issue $100,000,000 in the company. And we just didn't know where the future led. We knew where we had a plan. And that's what Brookfield Renewable Energy Partners is today and the returns have been phenomenal. When we took Brookfield Infrastructure Partners public in 2,007, it rapidly went from spin off to down 30% or 40% with the global crisis. It was a $700,000,000 company and we really didn't know. And I remember sitting at one of these investor meetings and someone asked me a question, are you going to take it back up? And I said, well, if it sits like that for another 2 years and trades like it has, we probably will and we'll have no choice and that'll be has been a mistake and but we have a plan and we want to move towards building it into a global infrastructure company. And if you fast forward to today, Sam has done an incredible job I think in building that business. And I'd say with Brookfield Property Partners, it's never perfect when you start. In answer to the question, you have some public companies in there, it's maybe not perfect. Absolutely. It is but what we do believe is that we have the global resources and the access to capital to turn this into one of the great property investments in the world. And there will be 10 years from now if we do our job right. Just like looking back to Renewable Energy Partners, there will be no other entity like it in the world if we can do it properly. And so that's the mission we're on. And I guess we will report to you each year as we go through the next 5 and maybe I'll 5, 3 years from now I'll have to say, well, it was a mistake, but we will see and I don't think it will be. And I guess that's the only other thing I'd add on Brookfield Property Partners. With that either we can conclude and people can go upstairs or leave, or I'd be happy to answer any questions if there are any that I can clean up after others. Bruce, you mentioned earlier that the value of general growth properties had gone up considerably. I just wondered if you could break out how much Brookfield Asset Management itself not your other people that invested with you, has gone from your initial investment to where it is today and what your current holdings are of Brookfield Asset Management and General Growth Properties, Rous and Howard Hughes and how many warrants you own? So that's a lot of arithmetic I have to do in my head, But I'll try to answer the question. I'm sure Brian Lawson or others can give you an exact answer if you're really interested in the exact numbers. But of the original investment, we put up $850,000,000 or $900,000,000 Some of that's been returned through shares of Rous and Howard Hughes. We then bought another $1,700,000,000 of stock. So call it our own investment. We put about 2 point just under 2,500,000,000 dollars And it's I guess we own 200,000,000 around 200,000,000 common shares plus warrants, plus our promotes, etcetera. So it's probably worth in the range of $5,000,000,000 So it's been a good outing for our capital that we invested into it. And for our clients, it's been even better because they invested the 1st round with us not the 2nd round. But hopefully that gives you some round numbers. And if you need more definite numbers we can give them to you. Every Investor Day, there's a discussion on your investor base, the institutions, the pension funds, sovereign wealth funds. And just going back to that 2,007 where you were in 2,007 versus today, can you talk about your marginal investor you're attracting to your platform? And I guess in the context of the publicly listed entities, it seems like there's more and BPY being a yield product, is it attracting are you looking to attract more retail investors? Or can you just talk about the investors you're currently targeting? Yes. I'll try. I guess I'd say the bottom line we do just one thing for our all of our investors. We try to earn a decent risk adjusted return and deliver it to people through both cash flows and increase in return of the security. And whether that's a fund or an investment in the capital market or the stock market, it's the same thing we do. So the returns we generate essentially are the same for each of those investors. Sometimes we package them a little differently because the retail market is more focused on cash flow return than the private market is much more focused on total return. So you can be more opportunistic in nature. I'd say the 2 maybe even part of the question I deal with is just saying on the fund side. On the private fund side, we see in every institution we visit globally, they have firstly, there's an enormous amount of money plowing into these funds and maybe even more important than the capital that's amassing in some of these funds, which as you well know some of them will be in the $500,000,000,000 to $1,000,000,000,000 range within 5 to 10 years. So these are massive amounts of money. More importantly, when they look at the returns, they can't invest in things to earn 2%. And as everyone in this room knows, you earn 2% of buying a treasury bill today. And that's just not possible in most pension plans or other things. So across the whole institutional fund market, sovereign wealth market, they're looking to earn real returns. Some do it themselves because they have the ability and they have the people and the platform to do it. Often they need someone like ourselves. And our strategy to market to them is if you don't have the people, we're beside you and we'll invest with you. And that's the sole selling feature we have with them. If you take that to the retail market, I guess what we're trying to do is do the same thing on the retail side. There's very few products out there. The pipeline partnerships are one of them. There's very few products out there that are managed by institutions that can deliver a decent cash flow return and some upside over time if we can invest properly. And so I'd say on the we're just trying to on the stock market side with our listed funds, we're trying to do the same thing generally for stock market or retail investors, which we otherwise do for our institutional clients. And I think over time, we'll have I guess our long term view is having access to both of those markets gives us a tremendous competitive advantage because right now we have access to both markets. There will be times when one will not be there and the other one will be. Hopefully, there's not times when nobody's there. But I think it gives us a tremendous competitive advantage. Yes. Your presentations today give me a great feel for the leverage inherent in your operating model by having private funds side by side your public entities. But what I don't hear a lot about is how you manage the conflicts between the two entities. Specifically, when a new investment manifests itself, how do you decide whether it goes in a public entity, a private entity or both? And on the way out, when it comes time to liquidate your private funds, what are the decision rules you'll employ to determine whether or not Brookfield Capital Brookfield assets are used to take out the private investments? Thank you for asking that question, because it's we didn't deal with it today. We assume that we always operate with the highest standards of governance and therefore we don't it's just implicit in our dealings, but I think I'm happy to deal with it. So I'd say the following. We spent a long time ensuring that we try to align the capital within the organization to avoid as many conflicts as possible. Inevitably though in as large organization as we have, you have conflicts and you have to deal with them. I guess the first thing that we try to do is to be extremely transparent with everyone as to what we do. And that is easier to do with the private funds, because in most private funds we have 20 investors. We can put them on a phone call or go and visit each one of them in their office and tell them what we're doing. With the reseller stock market it's harder. You have to have meetings like this and then sometimes things don't get communicated properly or you write something down and it doesn't it gets out there and gets communicated differently than you might otherwise want. But we try to be transparent. Specific to your question and I'll use the Infrastructure Partners as an example. Brookfield Infrastructure Partners makes all investments to the extent they want to for any infrastructure investment that Brookfield Asset Management investment. There are a few historical things on our balance sheet because they didn't go in and those will either be sold into the market or if it made sense 1 or probably only 1 will be maybe will be put into Brookfield Infrastructure Partners because it matches it. Other than that, anything we have will just be sold into the marketplace when it makes sense. The private fund is underneath that entity. So the sovereign wealth funds and institutional investors invest with that public partnership. So in essence, it's a limited partner along beside the other clients we have. So any investment that comes along that's appropriate for a private fund would go through the private fund and Infrastructure Partners, who's the public entity, would get its share by investing through the fund. If an asset isn't appropriate for the private fund and we want to still invest in Brookfield Infrastructure Partners, it will buy it directly itself. As a result of that, you've avoided most of the conflicts that come along. And we spent a long period of time of thinking through that, because a long time to do it. It's not perfect everywhere. But eventually that will be the structure that avoids most of the conflicts you have. And I can tell you that we have very few we have had very few issues with conflict. I think implicit within your question was on the exits, do we is there conflict between us or funds? And I guess I would just have to say that we have an investing theory and that's that if you can invest in assets on a relatively value basis, you can earn very outsized returns. Often what occurs when you have a very short period of time, you make a lot of money, you sometimes think you can sell. We found that in past that if you still have a great investment and it keeps compounding, it's tax free that everybody can make a lot of money. And it's much better to keep compounding away. That's not to say that we don't sell and we often we sit every year or every month with our assets and we look at whether we should sell them. And I don't think we have really any differences of opinion with clients very often. And sometimes if funds are winding up, we would rather not sell an asset, but we have to. And the good thing about our business, it's very broad, it's very diverse. 1 asset is not 1 asset or group assets is not going to kill our franchise. And if we can make a lot of money and that's the right thing to do, we're happy to do it. It's just our investing theory is you should keep compounding because wealth gets created that way as opposed to taking short term returns, because it's very difficult to find. Some of the assets Sam talked about in infrastructure, these are incredible assets. Our hydro plants are incredible assets. You'll never amass a portfolio of 170 hydro plants ever. In fact, ever in the life time of anyone other than if we sell ours, you won't amass 170 hydro plants in a portfolio. And those are unique things that we have and therefore keep compounding is a good thing other than if you view gas prices staying at $2 forever, maybe we should sell them. And so I don't know if that answers the question, but I guess we think a lot about alignment of interests and other end clients. A somewhat similar question maybe more from a cultural perspective. One of the hallmarks of a good value investor is discipline, is being able to wait for lots of pitches to go past and then execute on the great opportunity. As the business slow over time transforms to more of the overall value coming from fees from assets under management, I understand you mitigate some of that from co investment on the funds. But how do you think about the culture of Brookfield preventing it from changing from being an opportunistic allocator of capital to a business that generates fees from increasing assets under management? The conflict inherent in so many money managers, but you're unique in that you've gone from being one to the other. The other not totally? Yes. No. Look your question is I think I understand it. I guess I'd just say it's never easy. It's I guess we view that having the asset management business is an incredible differentiator in the businesses we are and it allows us to be a value investor. We couldn't do it. But the scale of capital we have on our own other than if you just wanted to dilute shareholders every year, which we have no intention to do, You could never create the competitive advantages that we think we have today. So that's why we're doing it. With inherent with any business plan is things like that, which take away from the natural advantages you have. And I can tell you we have a robust debate with many of our senior people and partners about that. And I think it's twofold. 1, we strive to work very hard at keeping the culture investment oriented and return oriented. And if you listen to these presentations today, we talked about what we return for the investors in every one of our funds. And if we keep doing that, I think all the people we bring through the organization will accord to the same culture. There's no doubt it possibly gets diluted over time. But I think what we have is that the advantages we get from the diversification and size and scale outweigh the small disadvantages you get from loss of maybe investment culture from being larger? That was the first question. You had a second one and I now forgot what it was. But I think it the bottom line, I think that's how we're trying to do that. Thank you, Bruce. It was a great presentation all afternoon. Putting we've been around for a long time, 10 years ago, Brookfield Asset Management having changed from Braskem to Brookfield Asset Management was trading at about 75% of net asset value. About 2,007, 5 years later, touching on this gentleman's question maybe, in our view it was trading at a pretty big premium to net asset value. Today, we're back at a very big discount to net asset value. If I look at this slide 37, today $40, Docs at $33 read everywhere we have about $30,000,000,000 of invested capital at BAM and yet the market cap is $22,000,000,000 $23,000,000,000 So I'm just surprised and I'm maybe you're frustrated too that given the track record, given that the goal is to compound the 13% a year going forward for the next 10 years, when most stocks have an expected rate of return of 8%, we should be at a premium today, not at a discount. What am I missing Or do you agree? Or what can be done to close this tremendous gap between where we see fair value versus where the market sees fair value? Thanks for the question, Joe. I would say the following. Maybe firstly, we should have sold everything in 2,007, because all of us should have been that smart, right? Here's what I'd say. A great business, which keeps growing and keeps adding wealth to it, will always trade at a perceived undervaluation to what you might think of the business. That's actually why you should buy 1, because the future value is really what a company is about, it's not what is there today. So I can't tell you. And I think over time, the only thing I could say to you is and when I think the change in people's perception of the stock will be is that when people see this business as an asset manager with assets added onto it as opposed to assets with an asset manager added onto it, I think will change dramatically the way they perceive the business and way they value it in the stock market. In the interim, I think it is a very it's a great investment because if you buy it at 30, you have 40 working for you. And that is usually a good way to start to ensure that you have a margin of safety or you get outsized returns over time. And so I think I don't know. I guess I'd say the fact is, only performance over time continues to assist stocks trading properly in the market. All our all we continue to do every day is try to produce returns and build the business. And I think we're still partly we're still in the like this may sound funny, but it's only been 10 years that we've been transforming the business. And it probably takes another 5 to really complete the transformation of the company to the point where everyone will understand exactly what we were doing. And those that were with us or and that are with us, I think will be rewarded. I can't promise that, but I think we'll be rewarded when that occurs. I can't tell you when it will occur or won't occur. This is probably might be a question for Rick Clark. We started to talk about this at the break. And this is more of a granular sort of a curiosity question. But there are a number of big real estate assets or portfolios out there. And I'm just curious as to I'll name the portfolios and then you can sort of talk through if they do cross your desk which pocket they go. Go. Worldwide Plaza just up the street, MPG Property Trust, dollars 5,000,000,000 or $6,000,000,000 of Prologis industrial assets in Europe, maybe even a few $1,000,000,000 of Prologis industrial assets in Japan. How does that work its way through the Greater Brookfield system? So I saw Rick getting up to answer the question and then I saw him sit down. Do you see what happens? All things that don't want to be dealt with by anyone else finally get to me. It's my job. I wasn't sure how long the question was going on. So I think this is kind of a variation on a question that was asked earlier. And just to add on to what Bruce said earlier is that Brookfield is a fiduciary at every level. We're in joint ventures. We manage funds. We manage listed entities. And we take governance very seriously. There are governance committees set up in every one of these entities. There is a conflicts committee, which believe it or not reviews every single transaction that we do. And there's a documented protocol on where transactions belong. So just to give you an anecdotal example, if we're looking at an office asset in Canada, the first thing that we do is we ask Brookfield Office Properties Canada or Box do they want the investment? If they don't, we go upstream. So we start downstream, work our way upstream. And along the way, we just we look at whether or not it fits within the mandate of a fund. And if it fits within the mandate of the fund, the downstream operating entity should they want to do the investment would partner up with the fund and provide Brookfield's portion of the capital to that. So in these examples that you mentioned, it would be the same decision matrix that we would follow to find out where that it would go. In the case of Maguire, if it's since you brought it up, I'm not going to say we're interested in it or not. But the first call since it's not a Canadian office asset would be to Brookfield office properties. And then we'd look to see whether or not the returns fit within a mandate of a fund that was operative to see if they wanted to do it together. And that's basically how it works. And we take this stuff seriously. If we screw it up once, we screw it up for the whole franchise and we're determined not to do that. Can you talk a little bit about the investment culture from the perspective of I don't think there's a whole lot of truly great contrarian value investors in the world as you start buying assets all over the world with lots of people under your roof, how many key people are really driving the investment decision process today? What does that look like in 5 or 10 years when you have the AUM that you're talking about? And can you really have that many great contrarian value investors making decisions? So we have a big apparatus and a lot of sourcing people and a lot of people that execute and a lot of people that are out doing things, but a very small group of people make every investment decision that we have within the company. And that's largely because the things that we buy are large scale, sometimes mostly complicated. But they're either repetitive transactions, which we can very simply look at and say, yes, I understand we're buying 100 and Sachin said we had bought 140 hydro plants. We're buying 140 first. We've done this 140 times before. We actually know how to buy these. So it's either very repetitive process that we have to buy the things or a very small group of people, I'll put it at 10, within our organization, make those decisions. We're bringing 5 more through the organization to be able to make those decisions. But I don't think I think we can run this business, as Brian described, with less than 15 people that make all value investing decisions within the company. That's not to say that there aren't an enormous amount of people that are out there sourcing things and finding things and executing things and closing things and running things and all that, which is tremendously important. But the investing decisions are discrete, not that many. And therefore, they can be done by a small amount of people. So I think we can keep it, but it's always a risk as you grow. Thanks. Chris going back to the question where you or the question I don't remember talked about going from assets with an attached asset manager to an asset manager with attached assets. I went and looked back at slide 34. And so currently your general partnership value is about 1 sixth of intrinsic. And when I look at the projection for 2022, even then 10 years from now, it would be about 35% of intrinsic with the assets still being about 65% of the intrinsic and the assets being much more tangible in that they show up on the balance sheet. So it's much easier to demonstrate the value of the net asset value if you want to put it that way. How do you actually demonstrate the value of the franchise? Or are there other things that you can do in order to speed up the recognition of that value? So I think I can answer I'll try to answer that question. And the first is in arithmetical models that Brian produced for you, which shows those numbers which you refer to on page 36. What that shows is that all capital within the business is retained and that it piles up on the balance sheet 10 years from now. I'm quite positive that 10 years from now we won't be sitting here with a business with enormous amount of capital piled up on this balance sheet given the plan that we're on within the business. 1 of 3 things will occur. We will deploy that capital to even have a larger asset management business than we otherwise contemplate. That's possible, but maybe not true because I think some of the things on culture that we just answered a couple of questions on earlier get diluted if you go over a certain scale. Number 2, we can use substantial amounts of that capital to have bigger investments into the LPs that we otherwise have. And that's possible, but I suspect not the route that we're heading. Number 3, we will give that capital back to the shareholders in some format either through greater distributions to shareholders, through repurchases of securities or through other means where they receive it. And I think that one of those 3 and probably some of all is inherent within the business. And maybe part answer to the question of earlier is how do people eventually see this business. I think when you have the business and we are over capitalized for the scale and for the size that we want then maybe greater amounts of capital being returned to shareholders is the time when people actually understand where you're going, because then they get a very substantial amount of capital back. So I think it's one of those 3, but we'll have to see as we go along. Are there any other questions? Seeing none, it is 4 And Catherine is pointing upstairs where there are cocktails if anyone wants them. But we appreciate you all coming today.

• Slides