Good afternoon. It is 12:30 P.M., which is when I think we said we would start. We're going to start. 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 4:00 P.M. At 4:00 P.M., there's cocktails upstairs that anyone can. Last four hours through our presentations. You're obviously free to leave at any time. You get bored of us, but we'll keep talking nonetheless. 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. I'd offer that anyone that has ideas for us for next year after this presentation, if you email them to one of us, we'd love to take them into account.
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 everything pulls together into what we call the 10-year plan and where we're going. We're going to talk about our four different businesses, which are property, infrastructure, power, and private equity. 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. 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. 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. I guess we've spent the last 10 years turning Brookfield from an investment management organization into an asset manager. We have four business areas, which are property, power, infrastructure, and private equity. It includes approximately 100 offices around the world, 500 investment people, and close to 25,000 in 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 today. Our goal is to earn 12%-15% compound on what I'd say are relatively risk-free assets that can earn decent returns. 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 billion of total assets through the whole system when you accumulate them up. It includes 27 private funds, which we've raised committed capital of $27 billion. I can't believe the arithmetic's 27 and 27. We have three listed funds, which we'll talk about a little bit afterwards with a market cap of $26 billion. We are global, as most of you know. The only point I'd make on this slide is our belief as value investors is that if you have a competitive advantage, you can often find opportunities that others can't access.
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, we can put it in areas in places where there is a lack of capital. That usually allows us to find opportunities which can give us outsized returns compared to the risk where there's excess capital. I 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, that was because it was distressed. I suspect in the last year, we bought a lot of assets from European companies because they needed to transfer assets off their balance sheet.
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 simplified into really 4 basic points. One, we source equity from clients and from our own balance sheet. Two, 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 low-risk basis. Today we're trying to extend as much term as we possibly can on financings. It's incredible what the spreads on financings are today to asset returns. We're financing in the 2.5%-4% range.
I don't think any of us ever imagined doing that before on these type of assets. Lastly, 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. 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. 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.
If you cut across all of our businesses and try to make it very simple as to what we own, essentially we own 80 million sq ft of office properties, through the business for various clients in our own balance sheets and entities. Firstly, I think it's the largest office portfolio in the world. More importantly, it's one of the highest quality. These are tremendously valuable assets within the franchise. Within the various entities, both funds and public companies, there's about 165 million sq ft of retail space. We have 170 hydroelectric power plants, which I think is the largest hydroelectric business in the world. It gives us a competitive advantage with knowledge to be able to pick up assets from people when they're selling them. We've continued to do that for the past 15 years. We've started a wind business.
Wind was very overvalued 5 years ago. We bought very little in the crisis. Over the last while, we've bought a number of wind facilities and built some, we continue to build that business. We have a port business, which includes the largest metallurgical coal facility in the world in northeastern Australia. It's an incredible asset which ships coal out to China, Korea, India, and Japan. In our infrastructure business, we own ports, rails, toll roads, and transmission lines. All of those businesses are essentially cash flowing, real return type businesses, which we try to enhance the values over time. Lastly, we have about 3 million acres of timberlands, which have been a great asset for investors, despite what went on in U.S. housing. There should be good times going forward for these type of assets.
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. Should we ever head into inflation over time, there are inflation hedging attributes in many of these type of assets. We think they're tremendous assets in this environment. 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. We base 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.
We have a tremendous amount of discussions with these institutional clients. That leads us to believe that there's this transformation going on right now. I guess our theory is that in the 1970s and 1980s, most of you know this, but just to remind you, it was a fixed income era. Most pension sovereign funds accounts were 90% fixed income and 10% equities. These are directional numbers. Obviously, there's differences in many different plans. In the 1990s, equities started to take over, equities went up to close to 30% allocations, and funds and fixed income started to go lower. In 2000, what was called alternatives started to emerge. Most of that was private equity investing in the United States into the major private equity funds. Real estate started to get significant allocations, and here we note it being 5%.
Today, 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%, the pie is getting eaten into fixed income and equities. Most importantly, for our business and for this transformation, I guess, 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%-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.
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. If we flip back in the 1970s, the second component of all of this is that in the 1970s, there was $5 trillion of assets in plans. In the 2000s, it had grown to $30 trillion. Today, we estimate, and again, this is tough to exactly find, but we estimate there's $45 trillion in sovereign and other plans in the world. We think that's going to $70 trillion in the 2020s, which means that there's close to $15 trillion of new money which will flow to real assets, which is from two situations. One, there's an exponential increase of numbers going into plans as they grow bigger.
It's called compounding, as you well know. Secondly, the allocations are increasing to real assets. We think there's a very significant amount of money will go into these type of assets. The real question is, why are they doing that? 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. You can earn outsized returns on a relatively low risk basis. We estimate that real asset yields in general earn 7%-15%, depending on the risk and the type of asset you're buying and where you're buying it. That compares very favorably to what you can earn today in a long bond.
Equity yields will change from year to year, but it's probable that 8% may be a number over the longer term. Secondly, and most importantly, interest rates are in essence, and we said zero in this calculation. It's different than that. 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. 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 you usually get yourself in trouble.
There's a confluence of events occurring, and the second event is that global governments have a lot of debt on their balance sheets, and they need to get assets off the balance sheets to pay that debt down. 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. That's an asset going off a balance sheet of a city into private hands. We think there's an enormous number of assets that will come available as we go through that. I guess for us, we think that we spent the last seven or eight years building the organization to be able to take care of this transformation.
I'd say we didn't understand that interest rates were going to go this low, and we didn't understand that the debt levels of governments were going to go that high. We did know that directionally, that this transformation was occurring. 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. Then flagship private funds, which bring our sovereign and institutional clients to invest beside those entities. 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 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. As you know, many of us in management own a significant interest in Brookfield. Every fund, whether it's publicly traded or private, we have a very significant investment from Brookfield Asset Management's balance sheet within that fund. Because of that, it's just a philosophy within the organization. We think we've been able to withstand the markets over the past 5 years and before that and earn good returns for our investors.
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. 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. 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 other things and then turn it over to Brian.
I guess we think all of this will allow us to take our fee-bearing capital to about $100 billion and total AUM to approximately $200 billion. It breaks out on this slide, which you can look at later, and I won't describe. 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. You never know what the future brings you. We think with the machine we have, we think we can take care of this. 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 the 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. We're actually relatively positive about the environment on the economic front today. I think we can respond as we go along. 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'd just address, because most of you are here as BAM investors, I'd just address General Growth Properties, which has been more in the paper than many of our other investments. I figured it would come up later.
I thought I'd just say a couple of comments. The best news, I guess I'd say for Brookfield investors is that on behalf of investors and clients, we put about $3.5 billion net after other spinoffs into General Growth Properties, which, based on different metrics, is worth between $7 billion and $10 billion today. By any estimation, this is one of the most successful investments ever made in real estate over time. It's not just the percentage return or IRR, it's the total dollar return that's been made in the investment. It's been great. I'd say that the GGP investors, 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. 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 three 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, with the dealings of the board since then. 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 of the shares.
We can vote those shares in any shareholder meeting on any transaction brought before the shareholders. I guess those are two important things. At the time of emergence, we owned about 29%, Pershing Square owned 8% of the equity in GGP. Now we own about 41%, because we put up $1.7 billion of cash to do it, as many of you know and asked us about at the time when we did it. We did that off our balance sheet. 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. I guess it's been our view that it's tremendously premature to do that. I would say that this is a personal comment.
Very seldom do you find companies like this that have amazing franchises that can compound wealth over a long period of time. We as investors believe that if you keep compounding wealth over time, you can make a lot of money. 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. We had hoped he would respect ours, with respect to that. 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. While I don't intend to address any of them, I guess I would just say a few things. The agreements we have 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 the 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 spinoff of Rouse, 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 billion. I think 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, which is called Brookfield Property Partners, and I guess that's similarly said as BPY. We think this will be a tremendously successful entity over the longer term. If you think of it as our other two spinoffs, our spinoff of Brookfield Infrastructure Partners, which Sam, I know, will include in his presentation, it started off with approximately a $900 million market cap. It's $7.2 billion today. More importantly, it's earned a 35% return, approximately, for the investors.
Maybe more importantly, we own 30% of that company and continue to own a very substantial amount of it. Our Renewable Energy partnership was launched in 1999. It had a market cap of $500 million. More recently, we merged our own wholly owned assets into it, and the market cap today is $7.6 billion. The compound return over 14 years has been over 15% for a very low-risk business. Today, we own approximately 68% of the company. We have a very meaningful investment in that. The structure of BPY is identical to those two entities. 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 spinoff of BPY, we believe if people actually go and understand the prospectus, it's almost irrelevant to a GGP shareholder. Whatever rights accord to BAM today, will be owned by BPY and BAM later. BAM is in control of both entities or the management of BAM. Second, BPY is 93% owned, or will be owned by Brookfield Asset Management afterwards, and 7% by the shareholders of GGP. 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 are in 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 called a risk section in a prospectus. The fact is, I guess that's true. Any investor that knows us knows that we start off firstly with 93% of the company, which is almost $12 billion of investment. It's very difficult to reduce from $12 billion too much. Secondly, people know us with the philosophy that we have.
It's structured just like the other two investments that we have, and we think it will be very successful going forward. Ric's going to talk about it in a minute. I guess the last thing I'd say is the likelihood of a sale of GGP as an owner afterwards, having BPY there, is virtually different. It's the same. 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. We think this is irrelevant. We think the long-term success of BPY and of GGP is very positive, and it will play out as we go through the next six months.
That was all I was going to say on GGP. I didn't plan on taking any questions right now. What I thought we would do, and we will if you want to, but Ric's going to talk a little bit about real estate as he goes through his presentation. If there's anything appropriate for him, he'd be happy to take questions on it. At the end, I'll take any if there are some. With that, I will turn it over to Brian.
Thank you. Good afternoon. I'm going to pick up where Bruce left off on these slides and talk about our 10-year plan, which sounds somewhat Stalinesque. What I wanted to do was talk about 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. As we track towards and achieve an objective of having more than $100 billion of assets under management, just illustrate what that takes us with respect to the general partner part of the business. This 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 off our balance sheet and other things.
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 we've had a lot of success in that regard. 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. I just want to walk through that. If you focus on the business, the whole plan is really anchored by a relatively small number of very straightforward assumptions. 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.
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. 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.
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. Just give you a couple of highlights of it, over the 10 years, based on the assumptions that I'll talk about, the fee-bearing capital, which today is around $45 billion. I'm really just talking about the fee-bearing capital in our private funds and our listed funds. The total market capitalization of our listed funds, including pro forma for Brookfield Property Partners, and the amount of capital that our clients have invested in our private funds. That compounds up around 10%, 45 to 70 to $115 billion, if you follow the assumptions.
With that, just tracking the fee streams that would accord to that fee-bearing capital, along with growth in expected returns on invested capital, would take our share values up to $130 a share from the current $40. Again, that's pro forma for the spin-out of Brookfield Property Partners. 35% of that, at the end of the day, is related to the general partner, and it's a much smaller figure today. Supporting and behind all of that is threefold growth in FFO to nearly $6 billion. I'm going to come back to each of those. Just focusing on the listed funds, we see that the capital there growing from the current value today of $26 billion. That's Brookfield Infrastructure, Renewable Energy, and Brookfield Property Partners.
If you assume that 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 million out of each entity each year. You'll notice that Brookfield Infrastructure Partners recently did just that for the first five years, $750 million thereafter. This is what happens through the compounding and issuance of equity. It grows from $26 billion to $40 billion to $65 billion. What flows out of that is we earn a point and a quarter on the increases in the market capitalization. This is on a 100% basis to Brookfield. Every time we issue more capital or as we are successful in increasing distributions, and therefore the value market cap should follow, the fees increase 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. This year, on an annual basis, we would expect to earn $16 million of IDRs, they're called, from Brookfield Infrastructure Partners. Over time, for the next few years, those IDRs will start to kick in for the energy business and the property business as well. While the numbers don't look that large today, they do have a disproportionate growth rate or more of an exponential growth rate. These will continue to become increasingly valuable.
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, enhance the quality of the underlying cash flows and asset streams, we believe this is a very attractive source of income for the company. That's the listed funds. There's really the two 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. On the private side, we've had a lot of success recently. We're very well-positioned, as you'll hear, throughout the presentation. You compound that up at 11%, you go from $17.5 billion to $30 billion to $50 billion. It's just math. What that equates to is roughly $4 billion a year of capital raising in the first five years and roughly $6 billion thereafter.
We think about the potential that we have in some of our prior experience in this regard, we look at some of what our peers have achieved over similar periods of time, this seems to be an entirely reasonable assumption on our part. Again, what that means, 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 a point, a point and a half, two points in terms of the base fees. We would see ourselves trending towards a weighted average fee of 135 basis points on our capital overall by 2017 and 150 basis points by 2022.
That's the simple math of what happens, it's a 19% compound annual growth rate in the base fees. Again, similar to the listed funds, there's a performance arrangement. As you all know, it's a carried interest. 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 the capital in the funds. 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 carry. You may not receive it. You don't receive it until the investment gets liquidated. As you create value with your investments and as cash flows and the values compound up, we are entitled to that.
We already report on that in our financial statements in terms of how much accrued carry we've built up over a period of time. 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 $1.5 billion. A couple of important points there. Carried interest on accrual basis, it's listed fees on 100% basis to BAM, we've assumed some margins on the expense load and the direct expenses associated with that. That's a 15% compound annual growth rate. 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.
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. What we see, just turning to value, again, this is a very simple approach to it, we would see there being a sixfold increase from what we put out today, which is $4.25 billion of franchise value we put on the general partner activities, there's a half a billion dollars of accrued carried interest on a net basis, rolls out to $30 billion by 2022. What we're assuming there, again, just keeping it simple, 20 times multiple for net base fees, so base fees net of associated G&A. 20 times for the IDRs. As I mentioned, they have a high growth rate, they're backed by very substantial, very solid underlying cash flows.
A 10 times on the carried interests, again, net of the associated G&A. That's what happens on the general partner side. I just wanted to make a couple of comments on the invested capital. 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. You'll see that there is a substantial amount of it that's in the listed funds pro forma for Brookfield Property Partners, and it's around $21 billion today. If you compound that up at 11%, which is a rate that we've exceeded substantially in the past, it grows to around $55 billion. That was the other part of the share values that I outlined for you up front.
This is one of the, I guess, the key points. Bruce spoke about the amount of capital that we have invested in our various listed funds. 93 or 95, 90% in Brookfield Property Partners, around 70%, 68% specifically in Renewable Energy , and a little under 30% in Brookfield Infrastructure Partners. If we held 25% in each of these entities, which is still a very large number and creates a substantial alignment of interest, 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.
We 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. In my view, it's a tremendous opportunity for us as we head down the road. 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, Bruce spoke on a number of these points as well. 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.
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, we, being Brookfield, have substantial ownership of our funds. That alignment of interest just tracks right down through the company. 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. Even if we were to liberate a lot of that capital and go down to 25%, it's still very significant, return on that capital is really, 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. 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. Again, that 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. If we don't create value in those funds, carried interests really aren't worth a whole heck of a lot. The keys to success overall, meet 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, 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.
All of that obviously is backed up by and leads to reputation and integrity of the business. 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 these GP activities. I hope what you've seen is a pretty clear relationship between the objectives, what we think we achieve on that front, and what it means for the FFO and the values of the business. Yeah. 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. All of these together give us a great deal of confidence going forward with the plan.
That concludes the remarks that I wanted to make, and I would be happy to take any questions at this time, and comments. Brendan?
Hey, Brian. Two questions. One, just can you clarify if the AUM growth that you're talking about, is that equity or is that just assets? Think about, we've talked about this a little bit in the past, but the amount of investment dollars that BAM has to do, if you're taking either equity or assets from $45 billion to $130 billion is a lot of new investments per year. Do you think that you have the organizational bandwidth to be able to do that? Do you envision doing larger, chunkier deals as a way to get that investment dollars out as opposed to what might've been smaller deals in the past?
Sure. Thank you. I think everybody heard that question through the mic. Just in order, yes it's predicated on an increase in fee-bearing capital, so that would be generally equity. That's the one. With that, we would expect that Bruce talked about $150 billion of total assets in the system today. That would exceed $200 billion if we achieve that kind of growth in the fee-bearing capital. That would be point one. The second point is, yes, that does provide us with a lot of capital each year to go and find investments. 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.
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. We're very confident in having the resources to execute on that side of the equation. I guess the last point on the larger or chunkier deals, that is in fact one of the great benefits of having this dual structure that we put in place of having listed funds that provide you with a, I'll say, a currency to raise cash in the public markets to fund transactions, or in fact to use as a currency in executing M&A transactions. 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 a large infrastructure portfolio two years ago. 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. 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, I'm going left to right, perhaps. Michael?
Thanks. Michael Goldberg, Desjardins. Just want to make sure I'm understanding the terminology that you're using, and I'm going to go back to slide 37, where you've got it split between GP and invested capital. Is GP really what you've called your franchise value of the asset management?
I hate to do this to you, 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. Yeah. Okay. Got it.
Yeah. I just want to understand, GP, is that what you call?
Absolutely
the franchise value? 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 lower returns that you get on invested capital.
Yes. Absolutely. I think that's the key point is that as the values grow and 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.
Thank you. I don't understand why the real estate, such as this building, isn't selling for much more money. In other words, the stock much higher based on real estate values in New York City, for example. A one bedroom is now going for over $500,000. A much higher price than real estate.
Yes, I think if you go back, I'm going to perhaps push some of that off to when Ric's talking about property in a few moments. 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 have my glasses on. 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? Where about ballpark are you currently?
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 to try and keep us to schedule. Is there one more? Okay. Maybe I'll take one more quick one. In parts of our business, we're at or better than that. In other parts, we're still building out and we're lagging. 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. There's a certain element of growing into that, 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? I believe it was 5 years ago in this very room, we talked about $80 billion of LP money, $20 billion of BAM money in this kind of model, and now the numbers are a little bit different and the structure's a little bit different because you've got $65 billion of listed money 10 years out, $50 billion of private money. Just could you tell us a little bit of what changed during that period of time? Obviously, the model's a little bit different on what you're pursuing on a go-forward basis, but what was either wrong 5 years ago or how'd the plan change?
Sure. I think one of the things, not to be cute on it or coy, we had this global financial crisis that I think ensued fairly shortly after some of those comments, which definitely split up a couple of things we were looking to do. 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. 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, we're looking to doing the exact same thing with Brookfield Property Partners, is establishing these listed entities. 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 compounding cash flows over a long period of time. These entities are perfect for that. I think the establishment and the successful track record of those entities has been a tremendous development over the past number of years and has greatly influenced our thinking and the planning going forward.
With that, if I could turn it over to Ric Clark. Thank you very much.
Thank you, Brian. Good afternoon, everyone. 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. 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. 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. Just to start it off, with our holdings.
Brookfield's Property Group has investments in $86 billion of assets currently, including interest in 550 high-quality commercial properties comprising over 300 million sq ft. 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 timeframe. 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. 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 U.S., where we have $65 billion of asset investments. We have $8 billion-$9 billion 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.
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 excessive leverage or those kind of things. The second thing is that you've heard both Brian and Bruce talk about it. We have a strong alignment of interests 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. 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. This has been really impactful for us. Everything from deal sourcing to underwriting, to operational enhancements, to risk mitigation. The platforms add value every step of the way. 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 billion of asset investments.
As we've worked to diversify our property holdings over the last five years, we've grown our retail investments from a very modest investment five years ago to $35 billion of assets today. Over the last two years, we've been working to diversify even further by investing in the multi-family and industrial sectors. As of today, we have investments in 47,000 multi-family units and 7 million sq ft of industrial. These are both areas that we expect to grow. Currently, $6 billion of asset investments in those areas. Further interest in each of these sectors are held within our opportunity investment initiatives. 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 billion in 1989 to $86 billion today.
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 & York's U.S. business. In 2004, we launched our real estate fund investment platform with our first real estate debt fund. In 2007, we established a presence in Australia and our platform there by doing an on-balance sheet recapitalization of Multiplex. 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.
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. 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. 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. 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 $17.3 billion of equity in the area of real estate, generating gross returns of 15.4%. On the opportunistic side, we've invested $9 billion of equity since 1987, generating a 20% gross IRR and a 2.6x multiple. In our private fund initiatives, combined between core plus, value add, and opportunistic funds, we've invested $10 billion of equity since 2004 and generated a combined gross IRR of 17.6%, or 1.6x multiple on capital. Over the last five 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've raised $16.5 billion in real estate funds, $11 billion of third-party capital, alongside $5 billion of our own capital. We now have 50 LP fund investors within our various real estate funds, and growing. Most importantly, of the larger investors in these funds, of those investing $200 million or more, we have a 70% repeat investor rate. Of those investing $50 million 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. Just to recap, a couple of data points. Assets under management in the real estate area, $86.3 billion. Fee-bearing capital, $23.6 billion. Dry powder, currently $3.8 billion, so plenty of room to do deals. Of the fee-bearing capital in 2012, base annualized fees amount to about $114 million.
Cumulative third-party performance fees, which are mostly unrealized, are $440 million. We think as we move forward in our next milestone phase, that we'll see meaningful growth in these fee-generating areas as well. 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. 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. 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. 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. We do expect to see some transaction activity coming out of Australia, and we've recently announced a transaction involving a company called Thakral, 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. 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. 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, the U.S. recovery is underway, but it's spotty. It's not in all markets. Energy sector markets are doing well. Technology and media-driven markets are doing well.
The middle of the country is really not doing so well. Additionally, a lot of the transactions that were done in the 2005 to 2007 timeframe 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. 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 de-leverage. There are a lot of funds and real estate investors that need to de-leverage as well. 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. 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 an $830 million transaction with Hammerson within our office entity. We did a $1 billion recapitalization of Thakral 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 multi-family deals and a growing number of deals in the industrial space as well.
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 the 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 three and a half billion 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. In continuation of Brookfield's strategy to enhance capital efficiency through the creation of publicly traded industry-specific flagship companies, we're working to complete the listing of Brookfield Property Partners. 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 Brookfield Property Partners or BPY. In total, there's about $80 billion of assets on a gross basis going into this vehicle, $50 billion on a proportionate basis. There's a $21 billion equity base, 10.8 billion of BAM equity. We are planning to distribute somewhere between 7%-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 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'll be a publicly traded limited partnership.
We intend to list them both in New York Stock Exchange 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 in quality real estate in the world's most resilient and attractive markets. 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 and low-risk development. This next slide just kind of shows what we're trying to do.
Initially, the book value of Brookfield Property Partners will be at $25 a share, plus or minus, based on IFRS values, and we're targeting a $1 a share annual dividend distribution or 4%. 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%-15%, as you would find in any Brookfield-sponsored vehicle. 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 Sachin will talk about infrastructure and renewable energy in a couple of minutes, and they're great successes. They've been a supportive sponsor.
They provide resources, brains, capital resources if required, there's a strong alignment of interest with a significant ownership stake, as both Brian and Bruce mentioned, in 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. 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 and the distribution to shareholders. Continue to raise private capital for our various investment initiatives.
Importantly, to harvest capital from mature or underperforming investments within BPY and existing funds, recycling this capital into more accretive and higher growth opportunities. Finally, to grow fee-bearing income on a prudent and accretive basis. 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 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 of business. 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. 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. 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. 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. The outlook, we couldn't be more excited about.
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 a 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. 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. That's been a bit of an advantage of ours. Not many people have the guts to do that. 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 two. I was just reading yesterday in New York Magazine about the Related Companies development, 12 million, I believe, square feet under development. I know that you have land over the rail yards right next to it, and seem to me that might be a lot of space. Also what the situation is down in the World Financial Center, where I know that building is taking place. If you'd comment on that. The third question is, I always read about how Brookfield's rents seem to be lower than the market average, and I wonder if there's any particular reason or advantage for that.
On the first question, the West Side of Manhattan. 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 trafficked station in this part of the world. We can build on that site, I think, 5.4 million square feet of commercial density. On the Related site, they have roughly twice as much, half commercial, half residential. I think given the proximity to transportation and given the very meaningful advances in technology and design and space utilization by tenants, this clearly is the next commercial precinct to come up in the city. 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. 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. 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, 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 billion of federal funding has been spent on infrastructure and transit improvements. It's all coming online over the next two 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. All this is coming online right around the time when the office company has about three million square feet of vacancy coming back to them. The timing's pretty good for getting that space leased. There's no question Brookfield Office Properties has some work to do to do that. I would also just say, keep an eye on them for some announcements about some leasing initiatives that they're doing. We're pretty excited about what's happening downtown. It really is becoming a fantastic precinct, unlike anything else, given the transit improvements. The last question you asked, rents. Just overall, the office company's 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. 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, the market has since improved. It's a timing thing. I would say that the performance of the leasing group within Brookfield Office Properties is excellent, they know how to push rents and capture value for our investors. I think that's an area of opportunity for the company as well. Is that question in the back there?
Thanks. Two questions. One is the 70% stake you guys have in Brookfield Residential going into BPY, or is that going to stay at BAM? 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? Is there some reason why you wouldn't want to do it?
Yeah. 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. We've left that aside. As far as investments in the overhang and 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. 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 multi-family building where you've got lots of tenants under one roof. This is a bit of a different animal.
We haven't yet figured out how to make money in that space. 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 was 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, Ric. I think I'm just probably being a little bit dense about BPY. 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 so much of the value of BPY is tied up in BPO and GGP? I think I've got a follow-up after that.
Initially, there's no question a big part of BPY will be downstream-listed entities. Over time, the expectation is that we'll do meaningful transactions. We'll dilute the relevance of those entities within BPY as we go forward. 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. You'll want to be there at the beginning. We couldn't be more excited about this vehicle.
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? As you guys do more deals that are outside of the existing listed entities that are downstream, a way to sort of show the value proposition, and then BAM is likely to reduce its interest over time as there gains more interest?
Yeah. There's no immediate plan for BAM to. 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. They might around the fringes, and they're certainly not precluded from doing it. The plan is that their ownership percentage, BAM's ownership percentage will be diluted as transactions occur. 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 five years, which means if BAM doesn't trade out of any equity, they have a 50% interest. That's kind of the plan. Last question here.
Yeah. Just in terms of General Growth, 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, investigated a sale of at least part of General Growth. 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. There's lots of low-hanging fruit within the company. These are fortress kind of assets. We can see a clear path to solid double-digit returns over the next little while. For us, 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. 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. That's basically what I would say about that. 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. For your convenience, we've decided that we'll give you a 10-minute break right now. Enjoy.
Good afternoon, everyone. I guess I'll start. 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. First, 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. Let me begin with an overview of our infrastructure business. We established it as a separate operating division just over five 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 billion 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 four continents. We have investments in the utility sector, transportation, energy, and timber. 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 $4.2 billion in 2 years, or 50%, and this has been achieved by raising new capital and from market value increases in Brookfield Infrastructure. Fees have also grown by $87 million 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 billion 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 Stock Exchange and Toronto Stock Exchanges, and which is our flagship diversified pure-play infrastructure company. 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 a global timber fund. I'm going to now focus on some of our flagship funds. First, let's look at our flagship public vehicle, Brookfield Infrastructure Partners. We spun off Brookfield Infrastructure Partners in 2008, and it had five investments that we inherited from Brookfield, and it had a market cap of around $800 million-$900 million. Since that time, we have grown the business substantially through a number of acquisitions, and we've generated great returns for our investors. In particular, over the last 3 years, we've generated 45% per annum returns for investors in Brookfield 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 that generate sustainable, strong cash flows, and ones that are supported by regulated businesses and long-term contracts. Brookfield Infrastructure currently pays a solid distribution of about 4.5%, and since 2009, our distribution has grown by an average of 12% per year, which is supported by strong FFO growth. Just to relate that back to what Brian was mentioning earlier, our target growth is around 3%-7%, and in our business plan, Brian referenced 5%. On many of our calls for Brookfield 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, Brookfield Infrastructure has a market capitalization of just over $7 billion, 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 we'll begin to integrate into our operations in 2013. Our flagship private fund is our $2.7 billion Brookfield Americas 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 30th, it's generated gross IRR of 24% to our investors. Now, I'm going to talk a bit about our timber business.
As many of you know, we are also a significant global timberland investor and fund manager, and we successfully established one of the largest global timberland estates over the past seven years. Timber is a core investment strategy that provides solid risk-adjusted returns for investors. Since 2005, we've invested about $3.5 billion through 11 timber transactions. Our return expectations for this business is typically around 10%-12%. 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 U.S. We expect far more robust conditions going forward as the housing market continues to improve in North America, as a number of supply factors take hold. 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 an exceptional year for executing our investment strategy. Overall, we've invested about $3 billion into transactions that we expect will meet or exceed our target return levels of 12%-15%. We did that by following a couple of investment strategies. One in particular was, over the last several years, we have had a very significant European outreach program, 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 two acquisitions. First, we acquired 100% of a toll road. It's an urban toll road in Santiago, Chile.
We bought it from two European construction companies in two transactions, one at the end of last year, one that we closed on just this month. In addition to that, we also struck a partnership with Abertis Infraestructuras, where we agreed to acquire a controlling interest in a publicly listed Brazilian company called OHL Brasil. Altogether, these two transactions have a result of us having interest in over 3,200 km of toll roads in South America, in Brazil and Chile, we think the opportunities for growth in these markets are fantastic. Excuse me, got a bit of a cold 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.
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 motorization rates, we expect that will drive significant traffic growth in the years ahead. The second transaction I'd like to point out is one Bruce mentioned earlier, which is Enwave in Toronto. This is a $480 million acquisition of a district heating and cooling system company that serves the Toronto central business district. What we like about this business is that over 90% of its revenue is generated from fully contracted counterparties with long-term capacity charge contracts. 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 development 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. I 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 at what we believe are very attractive returns. Today, the investment environment is probably impacted by a number of trends, but I'll talk about three 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. 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 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. 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. This is a phenomenon 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. We think there'll be numerous opportunities for us to acquire high-quality assets from governments looking to raise cash. Just to give you an example that I put one 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. These are the highest quality roads in the market today. 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 Brasil, I think we're uniquely positioned to be able to take advantage of that trend. 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.
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 resource prices tend to be low. I think the other positive trend from 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, our ability to attract that capital has probably never been better. The next couple of slides I have just some numbers, 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, 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. BAM owns about 10% of it. Brookfield Infrastructure Partners owns 18%. In 2013, Brookfield 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, 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, then we can reinvest the capital in higher earning assets. I touched on a couple of these metrics before, this slide gives you a bit more detail on our financial performance. Looking at our revenues over the past five years, we have significantly grown our fees from both our public and private funds. Our GP revenues over that period of time have grown at a CAGR of about 80%. Base fees have grown from $19 million to about $129 million, the estimate for this year. 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, you can start seeing how they're kicking in. Our expectation is now that our funds are maturing, as Brookfield 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 integrating those businesses into our infrastructure platform. In addition, we continue to progress the Texas Transmission development project, our expectation is to electrify two of the lines by mid-2013 and bring the final line on in June of 2013. 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 the projects that we had underway, we had five projects underway.
They've all been completed on time and on budget and are now contributing to our FFO. Finally, as I mentioned earlier, we have about 88% of our Brookfield Americas Infrastructure Fund now fully committed, and we'll look to raise new capital to fund future growth in the years ahead. 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. We believe that our success over the last five 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. With that, I'll now take some questions.
First, I should say I'm a shareholder in both BIP and BAM. 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? The second is, can you give us some update or insight into what your plans are and possible expenditures for expanding the Dalrymple Bay Coal Terminal?
The first question is in relation to the Chilean transmission business. Going back to when we spun out Brookfield Infrastructure Partners back in 2008, 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. 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. Moving forward five years, we've proven to them that Brookfield Infrastructure Partners is a very successful entity. They've now agreed to allow us to make that transfer.
From both a Brookfield Infrastructure Partners perspective and a BAM perspective, we felt it makes sense for the interest to be held by one party. I think your second question was in relation to Dudgeon Point, which is our adjacent development property to the Dalrymple 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 the 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. We're continuing to work to progress that. I'm still optimistic over the next 6-18 months that we'll make progress in getting the feasibility studies underway.
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 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 an 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. I think, to answer your question, we'll opportunistically look at LNG terminals. The capital is obviously very large, and so it's something we'd have to be cautious approaching. I think our focus for the next little while will be building out 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 you would want to have in place long-term contracts from those companies to use the infrastructure? 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. 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. 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 had to get comfortable with the underlying resource and weigh our risk-adjusted returns against the credit quality of that mining company. Each situation is different. If it's an asset adjacent to the Bowen Basin, where there's a number of users, that makes it much easier. If it's infrastructure serving just one mine, obviously, the stranded asset risk becomes much more prevalent. Cherilyn, just back there. I guess we'll take two more questions and then move on.
Thank you. Just wondered if you could elaborate a little bit more on the government privatization opportunity. 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. Those two circumstances would seem to be somewhat inconsistent with the kind of things that BAM likes to do.
Thanks, Cherilyn. I'd agree with you. That is the challenge in some privatizations where it's a fully exposed auction, they can become a cost of capital shootout. I guess great examples 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. I guess down in Brazil, when they did the recent airport privatizations, there were some very goofy numbers that came out of that process. Not all these situations will be appropriate for us. 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 opportunities there.
I think now in Brazil, with the platform we have with OHL Brasil, I think we're well-positioned for privatizations there. I think we'll be selective, 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 a relatively modest part of our business. I think most of our assets are probably South America, Australia, and Europe. 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. I don't think the U.S. government will really affect that too much. Thank you very much. I'm going to ask Sachin Shah to come up.
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 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 Renewable Energy Partners, which carried on a long track record of investing in this sector. Today, we have $18 billion of assets under management in the renewable power sector, spread across three countries, Canada, the U.S., and Brazil. This is a culmination of about 12-15 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. 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.
Clearly the theme today that we talk about from an underwriting perspective is that 12%-15% is something that we strive for over the long term. We've 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 5-10 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. 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 2010-2011, then into 2012, you can see a market increase in the listed fund equity and the private fund equity growing up to $8 billion today from just over two and a half years ago. In earnest, Brookfield Renewable Energy Partners has been operating for one year because, as I said, we launched at the end of 2011, and you can see in our first year of operations, we expect to earn $30 million of base fees at the asset manager level. That doesn't include any future IDRs or growth in our capital base that we expect over the next five years.
One of the benefits we have by being part of the Brookfield 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. It sounds like a tagline that a lot of people use, but we have offices and operations and investment professionals located throughout the globe. Specifically in power, we have offices in Canada, the U.S., and Brazil. 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 1,200 people running our operations on the power side every day, gives us a tremendous advantage over our competition, who are often 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 the 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 three assets on one river at the time. That represented about $200 million of capital, which we've grown today to over $7.7 billion. This was the track record that I was referencing when I say that we've been 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 two to $3 in the early part of the decade, up to seven, eight, $9, sort of midway through the decade. 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. 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 a strong growth profile and an 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. Although we were patient, we picked our spots and selectively deployed capital into the wind markets, 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. We continue our expansion throughout the U.S., particularly on the West Coast now, into regions and markets where we see a strong content requirement for renewable assets, where we feel that we can deploy capital on an accretive basis. Our strategy at the simplest level, obviously, is to deliver gross returns of 12%-15% for investors in our managed funds. By doing so, we can continue to retain the track record that we've established over the last decade.
More importantly, if we can generate returns of 12%-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 million 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. 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, to be aligned to increase distribution, and to be 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 1,200 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 three development projects on the go.
We continue to access multiple sources of capital, whether that be public equity, preferred equity, corporate debt, or private equity through our institutional funds. One 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. Having an investment-grade rating or having an investment-grade philosophy to capitalizing our businesses is something that's paramount to our strategy. What are some of the things that we would look back and say were done well in 2012? 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 one global flagship vehicle.
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 a $1.3 billion of development in our business. We had seven development projects on the go over the last three years. Today, five of them are completed on scope, schedule, and budget. Two more are underway. They're also on scope, schedule, and budget. These are in Brazil. 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. 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 started to pursue high-value development opportunities in our portfolio. A number of those opportunities are now coming online to the point where we now have 800 megawatts of wind in our portfolio, where three years ago we had none.
Last week, we continued to have very strong access to capital markets, in 2012, we will have raised over $3 billion of public and private debt and equity through various transactions, showing the tremendous strength of the platform and the Brookfield brand in being able 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. What are some of the challenges that we're facing looking forward? Clearly today at $3 gas, and six months ago it was $2, gas prices are extremely low, and that means the corollary is the power prices are very low.
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. That being said, the vast majority of our portfolio is highly contracted. I think there's two 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 million on buying a portfolio of four hydros in the Southeast U.S. That gives us tremendous optionality and future value to 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 is significant growth and cost pressures, and labor markets are tight. Latin America is one of those, and in Brazil, we see that clearly setting aside slower growth in the last six 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. 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 people 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. 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. 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 two years, we've been able to allocate over $2 billion 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 2007 and 2008, and probably as early as 2005. Part of our thesis in 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. I'd say some of the critical or the fundamentals that we decided to live with were 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 were supported by a strong wind resource, and a wind resource that was substantiated by longer than two years of data. In Ontario, we found a great market where contracts were available for us to warrant the amount of capital we invest in there. In 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. 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. 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 two years, we've been able to generate an additional $15 million-$20 million 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. Our returns in the various segments, although they all aggregate to over 17%, you can see that the Canadian fund had a track record of 16% on its own. The first year for BREP has been tremendously successful. We obviously hope to continue 26, but we're targeting 12%-15%. What are our priorities over the next five years?
As I mentioned, we clearly want to deploy a meaningful amount of capital. I'd say the standard we set for ourselves is to double the amount of assets under management. 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. 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-$8 of value that we see a path to realizing over the next five years just through organic growth initiatives. 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, recontracting our price exposures in a low-price market is very important to us. We have five terawatts of BAM of power that are exposed to merchant prices.
One of our strategies today that I outlined 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 and 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 million-$600 million 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. Finally, obviously, managing the business on a low-risk basis is something that we've always strived to do. Any questions? Andrew?
If I broke it down into three 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. Of those three categories, where are you seeing the greatest opportunities?
I'd say the greatest opportunities, Richard Legault 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. 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 five to seven years.
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. There is clearly a European theme to that. I'd say, those two markets are clearly very strong for us. Europe, obviously. Australia, we've had an active outreach in Australia. Today, it's probably less exciting from a place that we think we can grow meaningfully. It's clearly a place that BAM has a strong presence that we would keep open to.
All right.
Just wait for the mic, Mario.
Thank you. It seems like Brookfield is gravitating towards a strategy of having one public flagship fund and one private flagship fund across each of its operating platforms. Given some of the pricing that you talked about, being attractive and whatnot, can you talk about the fundraising environment today for Renewable Energy Partners particularly, and whether there's an opportunity there for Brookfield on the private side to execute on that in the next six to twelve 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 live. That being said, the market today, as many of you know, if you've 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. 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. 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. 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? How much of the five 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. Coming back to gas today, as you know, is around $3. If you look at 2015 gas, it would be somewhere in the $4.30-$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 an $80 power price. $80-$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. Let me just put that in context for you. Today, in an economy that's weak in the U.S., with significant shale in the ground, clearly prices are much lower. The markets will continue to be sloppy probably for two, three, four years.
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. 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, that's a good thing because it means the demand side will continue to be increased. Seeing gas at anywhere between $4.50-$6.50 is not unreasonable in our view, over the long term.
At that level, at the returns, I said a 10% return, we think that what the price you need to incent new development in these technologies is about $80-$90 a megawatt hour, that's really the value that we're trying to capture through the five 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 a sloppy market. 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-$90. 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.
Yeah. 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?
Yeah. Look, I think any time rules change, you have to take stock and understand them. I think it's prudent to step back and understand the implications of changing rules and what the motivation behind those changing rules are. This is all still evolving, and I'm not an expert on Brazil, so I'm going to give you 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. Most people would view Brazil as a growing emerging market over the next two decades. 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 tenor 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. As I said earlier in my comments, this is an economy that needs 5,000 megawatts of new supply every year to keep up with growing demand. You can take short-term initiatives to help spur your economy, no different than central banks lower interest rates. 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. 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.
Clearly, the law is in front of Congress, and it has over 430 amendments to it. Clearly, the government themselves is retracting a little bit on trying to understand all the stakeholders' concerns. That's it. I think with that, I'll hand it over to you, Cyrus.
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. 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. We have a two-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.
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. 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. 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 billion of assets under management, of which $3 billion is through private equity funds and $4 billion 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. 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 2001, we've raised a total of $2.4 billion 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 million or 15% of our most recent fund, Brookfield Capital Partners III. 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. Our team has grown substantially, as you can see on this chart, particularly over the last six 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. Within our team, we have eight operating professionals who can draw upon Brookfield's broader operating resources at any time. Since the launch of Fund I 11 years ago, we've invested $1.7 billion 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. As you can see, and as you know, this is a significant outperformance compared to the S&P over the same timeframe 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.
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. 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. 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. Three of these investments are within our Fund III today, and we are actively pursuing additional opportunities. We also have longstanding 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.
Our knowledge and insight benefits from Brookfield's global businesses and perspective, which few other private equity groups would have access to. 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 reduces 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. We often find opportunities to monetize non-core assets, including working capital that's under-managed.
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. This is particularly important in distressed situations where companies are often cash flow negative at the outset. 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 billion in aggregate revenue with 13,000 employees across 10 industries. We've 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. If we do our jobs right, we will create companies that become highly attractive to industry buyers.
That's our preferred exit for all of our investments because strategic buyers can afford to pay for synergies. 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 one of our largest, but idled OSB mill, and this would increase Ainsworth's production by 50%.
Hammerstone, our industrial minerals company with a 1 billion tonne 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, Ember Resources has acquired 45 billion cubic feet of adjacent coal bed 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 two in market position, and with our acquisition of Prudential Realty, we are now tied for number one in this global industry and are well on our way to generating $50 million 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're 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. 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. Sam talked about commodity prices. For mid-market mining companies with delayed development projects, they would have limited access to capital today, given softening commodity prices. 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. 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 distress 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. 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. 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. 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.
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. 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 six-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 home builders are reporting increased backlogs.
Finally, we shouldn't forget that the U.S. population grew by 13 million people over the last five years and is expected to increase by a further 15 million over the next five 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 1.5 million starts within the next five 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. They're very clearly off the bottom. Having said that, affordability is high and inventories are low, which is very helpful.
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. As a result, all U.S. public home builders are seeing improved order books. Overall backlogs have increased more than 20% for the major public home builders year-over-year. What does this mean for Brookfield? During the industry downturn, Brookfield invested about $1.2 billion in businesses driven by housing. Brookfield's overall housing-related portfolio companies generate about $4 billion 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. They are now becoming highly profitable with significant further upside potential.
As you can see on this slide, our portfolio companies comprise land development and home building products, timberlands, and real estate services. These are owned by Brookfield directly and through funds. 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 2009, we had a trough of negative $110 million in EBITDA when housing starts dropped to 600,000. 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 million. In a more normal market of 1.5 million starts, while we can't precisely determine or project where earnings will be, we'd expect to see EBITDA in the $1.5 billion range for this portfolio.
Brookfield's share of this is estimated as follows on a look-through or proportionate basis. Pardon me. At trough housing starts, we incurred an EBITDA loss of about $80 million. Our trailing EBITDA is about $300 million, and we would expect to be generating in the order of $700 million to $800 million as housing starts to recover to a more normal level of 1.5 million. In conclusion, I just want 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. Thank you. With that, I'm happy to take any questions.
Great. Ric.
Thank you. I just want to make sure I understand your past performance.
Yeah.
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.
Right. The fees are what Brookfield earns. That's what we charge our investors.
Okay. That delta-
You should be happy about as an investor.
Exactly. 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%-7% sort of differential is pretty common.
What's your target? What's a reasonable expectation for the next five, 10 years?
Our target returns are 20%-25%.
20%-25%. Would you still have that?
Gross returns.
-that goes down a little bit because as it goes down a little bit, if it was, let's say, 20.
Yeah. You'd probably have a 6% differential.
6%. Okay.
Yeah.
Thank you.
Cyrus, as you said, the fees are what you earn. What does that boil down to in terms of the return on your investment in private equity? I have another question also.
That's a good question. I have to do the math for you, but it's very meaningful because if, just for argument's sake, if three-quarters of a fund is third-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 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?
Yeah.
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 house prices go higher?
Yeah. It's a good question. I don't remember the exact statistic, but housing is a massive employer in the U.S. I can't recall the number, but every home build creates four new jobs or something like that. 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? As we look at that housing chart and a recovery that's long tail, 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. We're always balancing what someone will pay us versus what the income potential is ourselves. 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. We're highly motivated to do that. We will do so wherever we possibly can. In housing, we're probably a couple of years away, I suspect we'll have some very large realizations.
You spoke of the U.S. housing market downturn. The Canadian housing market has been very strong. There's a lot of press about 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?
Yeah. I would say we are cognizant of it and cautious because of it. We're not a massive home builder 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. I wonder if you could just comment on the fundraising environment for private equity versus infrastructure and real estate.
Yeah. Our private equity is really focused on tangible asset businesses. For some investors, that falls into their real asset bucket, and for some, it doesn't. I'd say it's a very competitive environment, fundraising for private equity, but we're developing a fabulous track record. I think we're really well-positioned when I look out the next five years. Thank you very much.
As everyone knows from past years, the method to my madness is to endure three and a half hours, and then I don't have to answer any questions. There was two 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 and our business plan. I think probably our plans are identical to what they were five 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 three years of that five.
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. Therefore, on a relative basis today compared to 2007, we are very significantly ahead. That's not that we advanced anything compared to others, it's just a lot went away. 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 2008, '09, and '10, which were very damaging to many franchises like ours. That's largely because we focus on downside risk and mitigation of the issues within a business.
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. On a relative basis, the access of capital that we have gives us tremendous competitive advantage, which we didn't have in 2007, because capital was freely available. The second thing, I would maybe just note, Ric talked about BPY and it being spun off in the next short while. The only other thing I'd add to his answer, which I thought was excellent, is that when we spun off or took Brookfield Energy Partners as a predecessor to it in 1999, which eventually became that Brookfield Renewable Energy Partners in 2010.
I remember doing the initial road show for a $400 million company, no one wanted to buy it, and we had to beg and grovel to issue $100 million in the company. We just didn't know where the future led. We had a plan. That's what Brookfield Renewable Energy Partners is today, and the returns have been phenomenal. When we took Brookfield Infrastructure Partners public in 2007, it rapidly went from spinoff to down 30% or 40% with the global crisis. It was a $700 million company, we really didn't know.
I remember sitting at one of these investor meetings, and someone asked me a question, "Are you going to take it back up?" I said, "Well, if it sits like that for another two years and trades like it has, we probably will, and we'll have no choice, and that'll have been a mistake, we have a plan, and we want to move towards building it into a global infrastructure company." If you fast-forward to today, Sam's done an incredible job, I think, in building that business. I'd say with Brookfield Property Partners, it's never perfect when you start. In answer to the question, do you have some public companies in there that's maybe not perfect? Absolutely.
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. 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. That's the mission we're on. I guess we'll report to you each year as we go through the next five, and maybe three years from now, I'll have to say, "Well, it was a mistake." We'll see, and I don't think it will be. 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.
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, Rouse, and Howard Hughes, and how many warrants you own.
That's a lot of arithmetic I have to do in my head. 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. Of the original investment, we put up $850 or $900 million. Some of that's been returned through shares of Rouse and Howard Hughes. We then bought another $1.7 billion of stock. Call it our own investment. We put about just under $2.5 billion. I guess we own around 200 million common shares, plus warrants, plus our promotes, et cetera. It's probably worth in the range of $5 billion. It's been a good outing for our capital that we invested into it. For our clients, it's been even better because they invested the first round with us, not the second round.
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. Just going back to that 2007, where you were in 2007 versus today, can you talk about your marginal investor you're attracting to your platform? I guess in the context of the publicly listed entities, and BPY being a yield product, are you looking to attract more retail investors? Can you just talk about the investors you're currently targeting?
Yeah, I'll try. I guess I'd say the bottom line, we do just one thing for 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. Whether that's a fund or an investment in the capital market or the stock market, it's the same thing we do. The returns we generate essentially are the same for each of those investors. Sometimes we package them a little differently because the retail market's more focused on cash flow return than the private market is much more focused on total return. You can be more opportunistic in nature. I'd say the two, 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, 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 billion-$1 trillion range within 5 to 10 years. These are massive amounts of money. More importantly, when they look at the returns, they can't invest in things to earn 2%. As everyone in this room knows, you earn 2% on buying a treasury bill today, and that's just not possible in most pension plans or other things. 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. Our strategy to market to them is, if you don't have the people, we're beside you, and we'll invest with you. 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. I'd say 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.
I think over time, 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. 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. 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? 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 assets are used to take out the private investments?
Thank you for asking that question because we didn't deal with it today. We assume that we always operate with the highest standards of governance, and therefore, it's just implicit in our dealings. I think I'm happy to deal with it. 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 an 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. 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 retail or 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 gets out there and gets communicated differently than you might otherwise want. We try to be tremendously transparent. Specific to your question, 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 invests in.
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, one or probably only one 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. The sovereign wealth funds and institutional investors invest with that public partnership. In essence, it's a limited partner alongside the other clients we have. 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 it 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. We spent a long period of time thinking through that. Took us a long time to do it. It's not perfect everywhere. Eventually, that will be the structure that avoids most of the conflicts you have. I can tell you that we have had very few issues with conflict. I think implicit within your question was on the exits, is there conflict between us or funds? 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've found that in the 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. It's much better to keep compounding away. It's not to say that we don't sell, and we sit every year or every month with our assets, and we look at whether we should sell them. I don't think we have really any differences of opinion with clients very often. Sometimes, if funds are winding up, we would rather not sell up an asset, but we have to. The good thing about our business, it's very broad, it's very diverse. One asset or group asset is not going to kill our franchise.
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. 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 lifetime of anyone other than if we sell ours, you won't amass 170 hydro plants in a portfolio. 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. I don't know if that answers the question.
I guess we think a lot about alignment of interests in 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 slowly 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. 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. Not totally.
Yeah, no. Look, your question is, I think I understand it now. I guess I'd just say it's never easy. I guess we view that having the asset management business is an incredible differentiator in the business as we are, and it allows us to be a value investor, or we couldn't do it. With 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. That's why we're doing it. Inherent with any business plan is things like that which take away from the natural advantages you have. I can tell you, we have a robust debate with many of our senior people and partners about that. I think it's twofold.
One, we strive to work very hard at keeping the culture investment-oriented and return-oriented. If you listen to these presentations today, we talked about what we return for the investors in every one of our funds. 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, I think what we have is the advantages we get from the diversification in 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, I now forgot what it was. The bottom line, I think that's how we're trying to do that.
Thank you, Bruce. It was a great presentation all afternoon. We've been around for a long time. 10 years ago, Brookfield Asset Management, having changed from Brascan to Brookfield Asset Management, was trading at about 75% in net asset value. About 2007, 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. Exit $33. Read everywhere, we have about $30 billion of invested capital at BAM, and yet the market cap is $22 billion-$23 billion.
I'm just surprised, and maybe you're frustrated, too, that given the track record, given that the goal is to compound at 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? Do you agree? 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've sold everything in 2007. All of us should've 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 one. The future value is really what a company's about, it's not what is there today.
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 a 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 the way they value it in the stock market. In the interim, I think it's a great investment because if you buy it at $30, you have $40 working for you. That is usually a good way to start to ensure that you have a margin of safety, or you get outsized returns over time. 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 we continue to do every day is try to produce returns and build the business. I think partly, we're still in the trans-- This may sound funny, but it's only been 10 years that we've been transforming the business. It probably takes another five to really complete the transformation of the company to the point where everyone will understand exactly what we were doing. Those that were with us or, and that are with us, I think will be rewarded. 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 Ric Clark. We started to talk about this at the break, this is more of a granular sort of a curiosity question. There are a number of big real estate assets or portfolios out there, I'm just curious as to I'll name the portfolios, then you can sort of talk through, if they do cross your desk, which pocket they go. Worldwide Plaza, just up the street, MPG Property Trust, $5 or $6 billion of Prologis industrial assets in Europe, maybe even a few billion of Prologis industrial assets in Japan. How does that work its way through the greater Brookfield system?
I saw Ric getting up to answer the question, 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. I think this is kind of a variation on a question that was asked earlier, just to add on to what Bruce said earlier, is that Brookfield's a fiduciary at every level. We're in joint ventures. We manage funds. We manage listed entities. 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. There's a documented protocol on where transactions belong. 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.
We start downstream, work our way upstream, and along the way we look at whether or not it fits within the mandate of a fund. 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. In these examples that you mentioned, it would be the same decision matrix that we would follow, to find out where it would go.
In the case of Maguire, 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. That's basically how it works. We take this stuff seriously. If we screw it up once, we screw it up for the whole franchise. 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 five or 10 years when you have the AUM that you're talking about? Can you really have that many great contrarian value investors making decisions?
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. That's largely because the things that we buy are large scale, mostly complicated. They're either repetitive transactions, which we can very simply look at and say, "Yes, I understand." Sachin said we had about 140 hydro plants. We're buying 141st. We've done this 140 times before. We actually know how to buy these. 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 five more through the organization to be able to make those decisions.
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 incredibly important. The investing decisions are discrete, not that many, and therefore, they can be done by a small amount of people. I think we can keep it, but it's always a risk as you grow.
Thanks. Just 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. Currently, your general partnership value is about one-sixth of intrinsic. 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. 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? Are there other things that you can do in order to speed up the recognition of that value?
I think I'll try to answer that question. 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. One of three 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 I answered a couple of questions on earlier, get diluted if you go over a certain scale.
Number two, we can use substantial amounts of that capital to have bigger investments into the LPs that we otherwise have. That's possible, but I suspect not the route that we're heading. Number three, 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. I think that one of those three, and probably some of all, is inherent within the business. 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.
They get a very substantial amount of capital back. I think it's one of those three. We'll have to see as we go along. Are there any other questions? Seeing none, it is 4:00 P.M. Catherine's pointing upstairs where there are cocktails if anyone wants them. We appreciate you all coming today