Q4 2020 Brookfield Asset Management Inc Earnings Call
Yes.
Ladies and gentlemen, thank you for standing by and welcome to today's program entitled Brookfield Asset Management 2020 year end results conference call and webcast.
At this time all participant lines are in listen only mode. So if you require operator assistance. Please press Star then zero.
After the presentation, there will be a question and answer session to ask a question. During the session you will need the press Star then one.
As a reminder, today's program is being recorded.
I would now like to introduce your host for today's program Suzanne Fleming managing partner of Brookfield asset management. Please go ahead.
Thank you operator, and good morning, everyone welcome to Brookfield fourth quarter and full year 2020 conference call on the call today are Bruce Flatt, Our Chief Executive Officer, Nick Goodman, Our Chief Financial Officer, and Adrian Foley, President and C. O all of out of North America Development group within Brookfield properties.
Bruce will start off by giving a business update followed by NEC, who will discuss our financial and operating results and finally, Adrian will give an update on our residential single family business.
After our formal comments, we'll turn the call over to the operator and take analyst questions.
I'd like to remind you that in today's comments, including in responding to questions and in discussing new initiatives and our financial and operating performance. We may make forward looking statements, including forward looking statements within the meaning of applicable Canadian and U S Securities law.
These statements reflect the predictions of future events and trends and do not relate to historic events. They are subject to known and unknown risks and future events and results may differ materially from materially from such statements for further information on these risks and their potential impact on our company. Please see our filings with the securities regulators in Canada, and the U S and the information.
Available on our website.
And with that I'll turn it over to Eric.
Thank you Suzanne and good morning, everyone on the call.
Despite the extra ordinary circumstances of 2020, we ended the year with our best quarter on record.
For the year, we earned a record level of <unk> and cash available for distribution as well.
All of this was achieved despite roughly 20% of our business is being impacted during the economic shutdown.
I use this point to underscore for you.
One more time, the strength of our capital structure and the long term nature and resiliency of our asset management franchise.
And the businesses that we own.
The environment in 2020 was unusual to save of leased.
Just a few points.
We saw GDP drop in almost every country.
Unprecedented stimulus put in the the economies dramatic increases in unemployment rates and interest rates dropping to effectively zero in almost every major market.
As we now look into 2021, we are seeing positive momentum in global markets.
Low borrowing costs.
The pharmaceutical companies have come through an amazing and amazing time, and the vaccines are now being rolled out.
We expect the economies will normalize at the as the at risk populations are vaccinated.
We are starting to see this happen now although unevenly.
And as governments and people get comfortable enough to resume normal life, we expect to see a strong recovery in economic numbers, starting now and into next year.
We expect interest rates to remain low as there is no meaningful inflation on the horizon.
This low interest rate environment should continue to provide of.
Very positive backdrop for our asset management business.
And the real assets that we own.
It is worth noting that while our business has been very resilient over the last 12 months.
It is and it is built to perform at all points in the cycle.
In general our operations are more geared to economic recovery.
As a result, we should be able to grow the value of our businesses coming out of this recession even more.
One business that we own that has been very strong is our residential single family business in the United States we.
We don't often profile of this business, but given what is going on in the residential markets.
We asked Adrian fully to join our call today.
You will hear from him in a moment.
Looking back on 2020, we raised over $40 billion of capital across a number of diverse strategies.
Of note in the year, we saw strong growth in our perpetual private funds strategies.
We had a successful first close for the flagship distressed fund.
And we saw sizable inflows to other credit.
As we look to 2021 and beyond all indications are that the strong momentum is continuing.
We are in the early stages of of fund rate raising super cycle and remain confident in our target laid out at our Investor day of $100 billion per this round of flagship fund of fund raising.
The size of our flagship fund off rate offerings differentiate us differentiate us in the scale of things that we do.
And this scale in itself creates opportunities. So this is additive to the franchise in many ways.
Specifically, we are now in the market fund raising for our fourth real estate flagship fund.
And with our private equity and infrastructure funds, almost 60% invested or committed in aggregate, we expect them to launch fundraising for their next vintages in the next 12 months.
We also recently laid out for you for new growth areas.
Each which we believe will be meaningful to our long term growth strategy.
These are reinsurance.
Energy transition.
Secondaries and technology investing.
Since then we've been working on two reinsurance transactions and are closing in on $15 billion of long dated annuities in that business have.
We have made a number of investments and are raising capital for real estate secondaries.
Established the team focused on technology.
And recently launched fundraising for our global transition fund, which we hope to be over seven 5 billion.
We have committed $2 billion ourselves to this strategy.
This fund is focused on high quality sustainable investments that will accelerate the transition of the world two of net zero carbon economy.
As an organization more broadly we are committed to the movement to a net zero carbon economy, and our global transition fund will be supportive of this school.
All around the world, we are seeing countries, making commitments to this effort and in some cases once who have already done that are accelerating their targets.
As we come out of this health and economic crisis, we expect it to be a good time for companies to reset their strategies and focus on sustainable growth.
We are in an enviable position of being carbon.
Zero across our entire 600 billion asset footprint.
As a result, we are well positioned to assist others with this transition.
To put it very simply all companies that want to be around for the long term, we will need a net zero strategy.
This is no longer of choice.
Turning to transaction activity. It was obviously slow in the first half of 2020.
But we saw a pickup in the second half of the year and a very busy start to 2021, we.
We are very active today with close to $80 billion of capital for deployment.
At the same time selling activity or sales activity out of our funds stopped in 2020.
But started again in the summer.
And has accelerated into 2021.
Nick will discuss what is going on in more depth.
In his remarks in a moment.
So by four I turn it over to him. Thank you for your ongoing support we look forward to reporting on the progress of.
2021 over the year.
Thank you Bruce and good morning, everyone.
So we ended the year with very strong financial results and have an equally post of outlook for the year ahead, our asset management business continues to benefit from lung data of predictable revenue streams.
As we execute on our next round of flagship fundraising our.
Scale of our other strategies, we expect to see another step growth in fee revenue.
In the current environment, we expect to be harvesting capital by selling mature assets in the last few months, we of advanced and closed a number of asset sales and we expect that momentum to continue in the coming months.
We also believe our operations are well positioned to deliver growth as we emerge from the current economic recession recession.
Before I get into the financial results for the quarter I want to highlight some of our recent and upcoming capital recycling initiatives.
Across our private funds and directly on our balance sheet, we of many investments where we have executed our business plans.
Created significant value and we're now thinking about monetizing to realized profits return capital to our investors or reinvest the proceeds into the business.
As transaction activity ramped up in the third quarter of last year, we restarted several sales processes that had been postponed from earlier in the year.
We have conviction the our assets having performed well throughout the year would be very attractive to a broad pool of buyers.
Add to the the factor in the near zero interest rate environment globally, and every major economy has experienced significant stimulus it felt like a very constructive environment to be monetizing investments.
Since that point, we've sold more than $15 billion of assets across our private funds listed affiliate balance sheets of directly held investments crystallizing total gains of approximately 6 billion.
Our $1 5 billion of our share.
Highlights from the fourth quarter include the sale of of real estate self storage business sale of of Prime office building in Central London, We exited the fund investment in the Port terminal in Australia.
<unk> done an interest of our graphite electrode business IP.
<unk>, the leading manufacturer of solar tracking solutions and completed the partial silver directly held real estate portfolio.
All of these sales were executed at values higher than the <unk> carrying values generate the disposition gains of $810 million and led to the recognition of $434 million of carried interest in the fourth quarter, taking the total for 2000 $20 million to $684 million.
Since the start of the year the pace of activity has accelerated we recently announced the sale of of district heating and cooling business called <unk> crystallizing, a profit of nearly $2 billion.
Which represents the multiple of capital of six times and an IRR of over 30%.
We also recently sold the life Sciences portfolio at a two seven times multiple of invested capital of 55% IRR successfully listed our Indian REIT, which was eight times oversubscribed and of these values represents an IRR of over 30% and multiple of capital of roughly three times, we IPO of the technology provider.
<unk> to the solar empower storage industry took public one of our ventures investments cold launch an iPhone to enable looking system for apartments and also participated in the successful spot merger with the multi specialty telehealth platform.
These sales have been executed at a premium to carrying values and of either crystallized carried interest or taken the fund within which they were held significantly closer to the point of carry realization.
Given our outlook on the macro environment on our current pipeline of non realizations, we anticipate a very active first quarter and believe the 2021 will be a strong year for realized carried interest with up to $1 billion currently anticipated.
We also expect to be able to opportunistic bolt opportunistically bolster bombs liquidity by selling directly held investments into the strong markets.
We recently completed the merger of North Ward with West Fraser.
And now of 20% of the combined company our investment has doubled in the last six months and we currently own roughly $1 $5 billion worth of shares which are benefiting enormously from one of the hottest wood product markets ever.
Turning to results.
Total funds from operations or <unk> in the fourth quarter was $2 1 billion or $1 34 per share, which was the 74% increase over the prior year quarter.
Our operating <unk>, which excludes the impact of disposition gains unrealized carried interest was a record $1 billion in the quarter of 66 of share reflected the growth of our asset management franchise and the resiliency of our underlying businesses.
All of this resulted in income to shareholders in the quarter of $643 million of <unk> 40 on the per share basis.
Our asset management business also had a successful year.
Fee bearing capital increased by $22 billion to $312 billion at year end, which when combined with the few years contribution from our credit business led to strong growth in fee related earnings.
The fee related earnings increased to $411 million for the three months period and totaled $1 4 billion over the year, an increase of 19% from 2019.
We also of a further $33 billion of capital that will become fee bearing when invested.
When it does it will generate approximately $330 million of incremental fee revenue annually.
In the quarter, we generated $1 2 billion of gross carried interest, bringing our unrealized carried interest balance of four 7 billion.
And this is reflective of value enhancement strategies, we have implemented within our various operating businesses and our credit business.
Turning to invest the capital, including disposition gains asset.
<unk> for the quarter was $644 million.
An increase of 45% from the prior periods.
The increase was driven by excellent performance within some of our private equity businesses, most notably Norbert and similar strong performance within our portfolio of financial assets. We also saw contributions to <unk> from newly acquired businesses and same store growth across the number of our segments.
Our strong results in the quarter led to $957 million of cash available for distribution or what we call <unk> during the quarter of 45% increase from the fourth quarter of 2019, when excluding the impact of carried interest.
On a full year basis, we generated a record $3 billion of <unk>, which is up 19% from the prior year and highlights our ability to continually generate strong cash returns across the whole market cycle. The.
Cash flow continues to bolster our liquidity, which is used to redeploy to higher growth opportunities or over time return to shareholders over the past year, we've returned over $1 $1 billion of capital to our shareholders through dividends and share repurchases.
Our liquidity remains very strong in addition to $61 billion of Uncalled fund commitments, we have approximately $16 billion of core liquidity across the group, including over $7 billion directly of bomb.
For a total of 77 billion of deployable capital.
Our balance sheet continues to remain conservatively capitalized with 94% of our debt having no recourse of the corporation.
Today, our corporate debt to market capitalization ratio was 12% an average remaining term of our corporate debt is 14 years and we have no individual piece of debt maturing before 2023.
Furthermore, our investments continued to remain the source of significant additional flexibility with mature investments that can quickly be converted the cash often a significant premium to book value.
In the last quarter alone, we were able to unlock approximately $677 million.
Of added liquidity by Opportunistically selling investments.
And just this morning, we announced that we generated a further $750 million of liquidity from our secondary offering of Betsy shares.
Finally, I am pleased to confirm the our board of directors has declared the 13 cent per.
For share dividend payable at the end of March this represents an increase of 8% over the current quarterly dividend rate.
With that I will turn the call over to Adrian fully to provide an update on our north American residential business.
Thank you Nick and good morning.
Today, I am going to talk to you about Brookfield residential wholly owned North American homebuilder and developer of residential lots.
Just so we're clear on the nomenclature, we currently have three businesses.
Yes.
The new land type of lift.
Put it into lots to sell the then.
So those lots to someone who builds of the house.
Second.
Sometimes buy those lots of ourselves and we build houses.
Third.
In our credit business, we use the specialized knowledge, we have to lend on some months when others want to control of those lots, but not put up the capital.
Brookfield first invested in this business and 1987 and.
And since then it has delivered a gross IRR of invested capital of 22%.
On the compound basis for 35 years, that's an amazing multiple of the capital.
Today, our business generates over $600 million in.
Operating and operating cash flow is annually.
The value of the land, we count of yellow is about $7 $5 billion at todays prices on an undisclosed day basis.
And the majority of these land positions will be converted to cash over the next 10 years.
The current equity value of approximately $3 billion.
And our outlook for the business is very positive.
We believe we are well placed to continue delivering very strong returns on equity.
We operate today in approximately 30 master planned communities and 100 neighborhoods in 12 cities across North America.
Annually, we build on average 4000 homes and sell an additional 4000 lots to other builders.
That's one of the top five residential land owners in North America.
Troll of approximately 85000 lots, which equates to just over 10 years' worth of supply in the markets we operate.
We take a disciplined approach and.
The proactively manage that land book to deliver consistent returns for Brookfield.
In addition to this we support our credit group.
And then the money to a homebuilder friends producing good returns that's the loss.
Yes.
At a lower risk as we truly understand the value of what we're lending on.
Our long term strong returns can be attributed to a few things.
One leveraging greater Brookfield knowledge, we use our strategic land investment lens to control of assets in the right place at the right time.
Two two.
Creating value through thoughtful planning and product segmentation.
And three having of homebuilding business to monetize that land value and third party builders pause I'll step back.
The business of entitlement land development of Master planning is time consuming and requires very specialized skills.
There are a few who do it instead of smaller number who do it and also have the capital to do it well.
It requires the detailed technical knowledge of the entitlement process.
The product knowledge that maximizes the land values.
Capital management to invest and absorbed planned uses of efficiently.
When properly executed generates excellent risk adjusted returns and significant cash flows of the long periods of time.
Moving to the current situation, which I'm sure. Many of you are interested in so many reasons.
Over the past 12 months, we have seen the new home market respond positively to structural pent up demand.
Of the advent of sub 3% mortgage rates greatly increasing consumers buying power coupled with the significant drop in the supply and the use of our market has produced the strong demand for new homes.
Maybe the strongest I've seen in my 30 plus years doing this at least on par with 2005 of 2006 the <unk>.
Difference now on the fundamentals are much much better.
The U S. New home industry saw the 800000, new single family sales in 2020.
An increase of approximately 20% from 2019.
And the actually the inventory in the market. That's the used homes available for purchase down by 35% at the end of 2020.
Our own home sales grew six times from the low point in April through July August and September and this increased demand has continued.
We finished the year with over 3500 sales and 15% increase in year over year performance what are the 30% increase when you offset the eight.
<unk> of almost zero sales when the world totally shut down.
We enter 2021 with over 9500 homes in backlog, that's 50% higher than our 2020 number.
In addition, the strong sales we've seen the home pricing growth by approximately 10% and all of our U S markets and we forecast 2021, and 2022 to have a similar growth trajectory.
Assuming all pro forma costs remain the same about 70%.
The home price depreciation drops to the land and.
And therefore, our margins will improve appreciably the <unk>.
All of this generates enormous upward revaluations of land value.
When we look some some years ahead of forecast of demand. Our view is that the Atlanta housing business is in a strong position in.
The non demographic shifts the driving heavy household formation across many markets and.
And we believe there is a strong need for housing and is located in price correctly.
The for sale and for rent.
The past 10 years of senior average of just over $1 million multifamily and single family housing starts.
Annually, that's well below those demographic drivers.
We believe we will see continued demand in the next decade.
With the lot supply industry, largely unable to keep pace with the formation of households.
The top 10 public builders have grown their market share to approximately 40% of total housing starts.
And the desire to control lots through land light structures of.
The balance sheet.
This is where it gets exciting as we both sell lots of these homebuilders and sometimes finance net loss there are a few others that compete with us.
We anticipate increasing our land manufacturing to become a supplier of a greater number of lots of public builders. While also looking to grow our own housing business under the land growth umbrella.
This demonstrates the power of the Brookfield business model.
Finding alternative avenues to invest capital, while always being focused on earning excellent returns.
The pandemic has accelerated a series of innovations in the way homebuilders find housing.
Actually since the viewing purposes conduct their own evaluation of pricing and ultimately purchase homes.
We have spent operationally in the past 12 months.
A series of times repositioning digital sales operations and the manner in which we speak to our customer.
Net sales environments of open virtually almost every hour of the day and you can physically access our homes at your leisure from seven to nine PM seven days of week, often without meeting another person.
We provide you with transparency in our pricing and offer our services virtually or in person to bring you closer to the home buying purchase.
You will shortly be able to view design and purchase of home online with the purchase now option.
If you of a home to sell we will provide you with an avenue to monetize that value.
All while sitting on your sofa at home.
A remarkable step forward in reducing unnecessary friction in the home buying and homeownership process.
I believe the advent of new technologies like this will produce lower cost of sale moving forward from these advances and operating efficiency will drive increased lot value as the reduction in costs will also flow to the landlord pricing.
In closing the industry has enjoyed considerable tailwind in the last 12 months and we foresee this continuing during 2021.
We remain excited about the long term prospects of our growth in both of our controlled land position and of housing operations.
Thank you and I'd like to hand, the call back to the operator.
Ladies and gentlemen, if you'd like to ask a question at this time. Please press the star and the number one key on your Touchtone telephone.
To withdraw your question press the pound key.
That is star then one if you'd like to ask the question.
Our first question comes from the line of Sohrab <unk> with BMO capital markets.
Thank you just had the three hopefully quick questions.
Or clarifications.
On the transition from.
I think you mentioned about $7 $5 billion.
Is that something that would of been contemplated as part of the.
Figure of $100 billion number that was talked about of would that be additive.
The second question.
Is around.
What Aegean with just talking about I wanted to clarify Adrian did you say the portfolio of has about $3 billion in equity per generates about $600 million.
Cash flow is annually.
And then the third question I.
I guess Sam.
The since I got is that it's a very good market for dispositions and realization.
And I wanted to see Nick or Bruce if you could handicap how that.
Toggles with.
With you being able to deploy debt $33 billion of capital which can become.
The bearing.
When committed so as we look to 2021 is it going to be more.
Europe realizations and dispositions or is it going to be more of the acquisitions and capital deployment or how should we think about the thank you.
Okay. Thanks tore up so maybe I can go with the first and the third and then the question for aging clarification, we can.
You can jump in at the end so on the transition fund the window when we laid out the 100 I assume the 100 youre, referring to the next round of flagship.
Fund raising.
Yeah listen I think when we laid out of that target we would of envisaged the renewable investing would become a larger component in either it would be a part of the next flagship infrastructure fund or we could go about raising a.
The new strategy. So I would just think about it this way we used to have before.
For this we would have had four flagship funds being an infrastructure private equity real estate and our distressed credit fund I think almost of five flagship funds and this is just an evolution and complementary to the strategy. So at largely think of it as being helpful towards reaching the target of $100 billion in the next round of flagships and but then it will probably give us more scale.
For growth in the future.
That's helpful and then on your third question.
On the interplay of dispositions and putting capital to work obviously, we're in a market right now as we touched on.
The public markets are obviously very strong right now in the private markets are very strong given the abundance of capital on low rates and search for yield and growth.
So I think given the quality of our assets is obviously very logical for us to be looking to monetize the value we've created and we do half of number of funds.
The earlier vintage funds of funds with assets of crystallized or delivered a lot of value and makes sense to leave to crystallize in the short term.
That doesn't mean that we're not going to be able to put capital to work. We will look for ways to find transactions that will probably be away from the mainstream where there is may be a scarcity of capital in the can still put money to work for value.
Although I would say the at this period of time, we're probably being more patient the pace might be a little bit slower given what's going on in the market, but I think we feel good and the pipeline is a strong enough that we have conviction, we will be able to put the money to work and we'll just do it in a disciplined manner.
And Thats the question on the cash flows and the equity.
Equity invested yes, 3 billion and that's an average of the forecast of five year cash flows.
Momentum in housing.
Thank you.
Our next question comes from Cherilyn Radbourne with TD Securities.
Thanks, very much and good morning.
My first question I think sort of picks up on that last discussion there around capital deployment. It sounds like maybe there's been some change in your thinking interest regarding the timing of investment opportunities that will.
Arise as the result of the pandemic, maybe you could just sort of revisit your thinking on sort of the scale of the investment opportunities that you're expecting.
So look I'll make a couple of comments and then Nick may make some more specific ones but.
I'll just say that.
Generally the market changes, we have to change with it and when we started 2020.
It was a good market and we are investing broadly across the world. The market's changed in March and we started putting a lot of capital end of the public markets.
And come May June that ended and so.
The first point I'd make is we have to be flexible with our business strategies, and where we invest because of the world changes and we have to change with it. So we're always attuned to that the strength of our organization I think is that we have broad global mandate.
And therefore, we can pick our spots and and the the second point I'd make and just as a broad comment.
Is the is that the markets are very strong in many things and therefore, we're selling or monetizing in this environment because they may go higher but it's just the good time to monetize the number of things.
Irrespective of that there still are many countries. Many places many businesses in many things that aren't trading or not trading properly and therefore, we can put capital to work. So we do not worry that we have of lack of places to put money to work on balance, though I would say.
This is not a period, where we're in March you could put.
Enormous amounts of money to work into the public markets at the stress valuation.
Okay.
Great that's helpful.
And then thank you for the update on the residential business and I apologize if I missed this but can you comment on how that business is carried within your invested capital under IRS and how that carrying value would compare to the intrinsic value of the land Holdings, Inc.
Also just the timing of when the strong market dynamics that were referenced should start to flow into at that though.
Yeah sure Linda Smith, So I think on our London housing business on the balance sheets in our directly held unlisted roughly about $3 billion combined there are some projects.
Within that debt are more of like investment properties of fair value, but most of it is.
Just inventory held at depreciated cost of that value uplift comes through as we look to sell those parcels overtime.
So there could be an uplift them on monetization over time from there on the realization into our financial statements of the strong.
Operating performance from backlog that we have and you'll start to see that come through in the.
The early part of this year the first half of this year as we deliver on those laws.
And then crystallize the profit and the earnings into the P&L, we take a more conservative approach the as we deliver the the houses of the law then youll start to see the income flow through so you should see a strong pickup in the in the contribution in 2021.
That's my two thank you for the time.
Our next question comes from Ken Worthington with Jpmorgan.
Hi, good morning, and thank you for taking my questions.
Assuming the <unk> deal closes as expected what do you see as the right balance of selling B Py real estate assets outright versus the sale of these investments to new and existing Brookfield funds.
And then there seems to be a tradeoff between how quickly Brookfield could sell BP y assets into new Brookfield funds and the price that Brookfield might get by holding on to these properties for a more lengthy period of time. So this concept of of time versus price.
Do you think there is the right balance when maximizing Brookfield shareholder values between time and price or is it obviously sort of one versus the other.
Okay.
It's a good it's a good question, Ken I think of the outright versus going into funds.
We'll have to see how it evolves we have we have a view that we have a portfolio of very very high quality assets that should be attractive to clients and over time, we should be able to create products around these assets that will be attractive, but as you say that will be balanced with some assets that it makes sense just the sellout rate the exact breakdown of that it's hard to say.
It will be case by case, but I think to the second part of your question. It will be disciplined and we will look to do it for value. There are certain parts of the portfolio that even in today's climate the still attract.
The strong valuations, we sold an office building in Central London in the fourth quarter at the very strong valuation and there are other markets that are active and then there are markets. The right now are not as active in where you could sell assets would not be attractive so.
I think it will be of balance and I think over time, we hope as we've communicated.
To reduce our exposure to real estate over time, and it will be a combination of outright sales and creating new products.
I think it will just be disciplined.
The price versus time.
Is it good question I think the overwriting principle was to be disciplined and crystallize. What we think is it fair value for the assets.
Okay. Thank you and then we just had elections here in the U S. In infrastructure is a priority for the Democrats here in the states can you talk.
And if so how a meaningful increase in U S infrastructure investment could offer Brookfield both infrastructure.
Truck share investment in infrastructure realization opportunities or maybe it's neither.
Yes.
I would say maybe as the further backdrop I'll, even make it more broad than that and then specifically comment on the U S. But.
Governments around the world haven't spent slash invested enormous amounts of money to deal with the COVID-19 situation more than they ever expected the spin.
There's only two ways out tax or sell assets.
And when they say when I say sell assets, what that means is sell infrastructure cell infrastructure or fund the infrastructure infrastructure.
Through doing it in a private method.
And.
Our belief is that globally.
Governments will need to do both they will need the tax and they will need to sell infrastructure and that set the very constructive backdrop for both things you said, which is there.
There will be.
Other institutions that will want to buy.
Fully completed infrastructure with long tailed cash flows and the weekend, therefore have a good market to sell into.
And there will be.
The assets, which are less perfect or larger in size or more.
[noise] diverse in nature of that we can participate in and turn them into the first category.
And so I think it's there is nothing.
But good news on the supply for infrastructure coming over the next 10 years and that specifically is in the United States, but also in many other countries in the world.
Great. Thank you.
Our next question comes from Geoff Kwan with RBC capital markets.
Hi, good morning.
You actually kind of answered a little bit of the question that I was going to ask and just going back to just.
With governments kind.
Kind of spending.
And deal with the pandemic and then how you're kind of fix that.
My question is I guess, the little bit more.
And have you.
Have you done much work in terms of trying to figure out kind of targeting preferred assets that you might want to try to invest from various governments globally.
Have you had any discussions of our government's kind of of stuff right now or are they still kind of in just trying to deal with the pandemic mode and kind of thinking about kind of.
Finance debt a bit further down the road.
The answer is I'd say, it's still early in the game and these things don't happen overnight its not like.
There isn't going to be of switch one day happen and everyone's going to sell assets, but but every month.
Increasingly for many for a long for a long time more infrastructure has been going into private hands and no. One no one really sees it or knows about it but every day that is happening. So I think just increasingly more cities more states more countries.
Are going to be facilitating more private funding coming in the infrastructure and the follow on <unk>.
Continue so I think it's just.
It's happening every day and and.
And you just don't really see it and the.
I actually I think my comment would be the.
The less drama.
That is.
With respect to it the better it is the.
Because when there are big plans are often.
Nothing happens and therefore, adjusted the slow and steady.
The monetization of infrastructure is the best way.
The countries kind of I can get it done.
Okay. Thank you.
Our next question comes from Bill Katz with Citigroup.
Okay. Thank you very much for the perspectives and taking my question today, just kind of come back maybe a little more tactical in terms of the FRE margin. It looks like it was a very strong number for the fourth quarter as I looked through the disclosure does nothing jumps of the pages unusual of size.
The perhaps you could sort of think through just given the scaling of the flagship funds versus reinvestment versus maybe anything that's sort of.
We're running below trend close of the Covid, how to think through the FRE margin.
The new year.
Yes.
Sure Bill.
Hum.
I don't think the messaging has really changed I think we saw continued strong margins across the business and.
I think on a blended basis, it's strong and we break it out for you by Brookfield and Oaktree in the Oaktree margin was strong.
This quarter is the switched on more fee revenue during the year.
Listen to the perspective is the same and that we are broadening our product offering.
We are the.
The launching new strategies, which will require investment professionals and the.
The ability to service the clients and service them to the highest standard.
There will be leverages the scale up.
But I don't think anything has significantly changed of what we would have guided to the possible based on the growth. We have in front of US maybe we outperformed that slightly but nothing materially has changed as we look forward.
Okay.
Two part follow up and I apologize a bit unrelated it seems to be a little bit of back and forth with investors. We speak to in terms of the economic flow through of B P. Why some of the add on of what you're purchasing of always being made of sort of summarize sort of how you sort of see the interplay between the invested capital versus the FRE give and take.
Then just sort of stepping back and I'm sort of intrigued by your commentary on the residential mortgage side, maybe just an update strategically of had it for the tap into the U S retail market.
And with some of your peers. Thank you.
Yes, sure the economic flow through on BP y.
I think we've discussed and we will have to update this as we work through the process.
Obviously, there is the fee paid out of the business today.
When we announced we announced that we would have partners in the transaction with US as we work this through with our partners. We will firm it up but just know we expect that the <unk> entity continues to pay the fees like it does today.
And as that evolves, we'll confirm but that's our expectation and as the return on invested capital. We expect <unk> to continue to pay a cash distribution to Brookfield, the consistent with what it does today. So that's the basic working assumption.
For now and obviously the business is performing well cash flow is strong and have no reason to change the outlook.
Hey.
As we look forward.
The second the remainder of the second part of the question yes.
So I was such an asset set of questions just sort of curious.
So the translating some of this great performance, great products into potentially tapping of a bit deeper into the U S retail market.
Yes, yes.
What we're doing on the is probably consistent with our peers I think when the partnership.
And that we have with the Oaktree. We now have a really diverse range of products that are appealing to that broader market and we've been leveraging what we have on the Brookfield site and our distribution capabilities and truly trying growth I think about 7% to 8% of our fee bearing capital to the capital to date comes from.
That high net worth retail channel and we will be looking to grow that over time, and we've been developing of thinking about new products that could cater to that market. So I think it will be an important component of the future fundraising.
Thank you.
Our next question comes from Andrew Kuske with Credit Suisse.
Thank you good morning of the question really relates to the velocity of capital flowing through your business and this of the private asset management business and it's really on the raise deploy them monetization cycles and.
If you could give us maybe a quick snapshot on organizationally just the evolution you've seen from where you were 10 years ago.
And where do you think youll be five years from now what would you need work is it on the distribution side is it all of the investment professional side, just give us a bit of color on that that would be helpful.
Yes, and look Andrew I, I'd say, we need help everywhere.
To make it specific.
No one is ever perfect.
But the good news is we've.
We've grown the business methodically over 25 years.
And I and I guess I would just say.
While we need.
To be able to be pay attention to all we're doing I think.
We keep growing methodically each one of the businesses and adding.
Tangential businesses onto it at a pace, where we can handle it.
And both from a capital perspective, and also from a management perspective.
So I look I think we have one of the we are of very if I may two specific comments, we have a very honed.
And refine the investment process.
We've only been and that's been the many many many years.
We've been refining that on the asset.
Asset management distribution side, where 20 years young.
And we can still grow and become more effective at that so I would say if we had one spot where we can be probably do a lot better even though I would say were pretty good.
Is on that side.
Thank you for the comments on it from May ask a follow up then.
But also a little bit of related obviously, your homebuilding business, which of your profile today has evolved over the years and.
What's the next iteration of that homebuilding business is in the past you pads. The other public entity of CHS <unk> might be the best in one, but I think those of the three majors.
How do you how do you think about that business is off the balance sheet at some point either in the public company or a private company and or co investors what are the options for the business.
Yeah look it's a good question and the point I'd make is that we over the years. We found that some businesses are good and the public markets and some not so good and and the housing.
We are of housing business, but the real business, we have of land development and where you make all of the money is land development.
And it's highly profitable, but its highly irregular and because of that it doesn't according to the public markets.
And therefore, it will either be private on our own balance sheet or at some point in time, we may introduce institutional clients into it because they're private and they can understand what I just.
They are willing to deal with what I just described as opposed to the public market. So you will not you will likely not see for us.
I never say never but you will likely not see from us of public.
Entity in land development.
Okay. That's great. Thank you very much.
Our next question comes from Alex <unk> with Goldman Sachs.
Hey, good morning, Thanks, guys for taking the question.
I was hoping you will get spent a couple of minutes.
On the path for management fee growth this year it sounds like the fund raising momentum.
Is going quite quite well we've seen the same from many of your peers. So.
As you work toward the flagship Super cycle, maybe kind of walk us through your management of your thoughts for this year and perhaps next year.
Yes, so I think Alex as we look forward to it can be it can be lumpy right like it's going to be step changes with each fund that comes in which is why we kind of like to look at over over a cycle over a longer period of time and so I think what we're working towards is consistent with what we would of laid out at Investor day, which.
Kind of had our FRE.
If we are able to achieve the fundraising targets that we've laid out without pathway towards doubling of the FRE over the next five years and those step changes will largely come in line with the the closings of those flagship funds and as we said the.
Our opportunity the debt opportunity fund and.
The first closures should have the final close in the coming months, we've launched the next real estate fund transfer.
Transition funds has launched an infrastructure of private equity and I.
I would say within the next 12 months conservatively. So I think that's going to be what's going to lead to the step change in the revenue when you think of it in a five year period, that's what leads to kind of thinking of a doubling.
While at the same time, we continue to grow the other strategies in our perpetual closed end vehicles.
Got it alright.
No.
Got it okay.
My follow up is around <unk> and I think.
You partially answered the question a little bit earlier, but just thinking through the dialogues you guys are having with third party lp's today and of the deal has been out there for a little while what's sort of the appetite may be in the expectation you have for third party capital to participate in the transaction and if you could remind us again your expectations and how.
<unk>.
These deal will ultimately impact FRE for Bam I know Theres, a couple of moving pieces, there, but I think you talked about that being generally neutral in the past I'm just curious to get your updated thoughts. Thanks.
Sure I mean listen the.
I think we've what we've laid out of Alex is that we have a plan to privatize the business I believe the offer out there is a fair offer but that will work its way through the process.
I believe that we can deliver significant value.
For that business and the private form and we kind of late in the latter.
This quarter.
And so I think what youre not.
What we're careful is there.
We have clients that are interested in this portfolio of the recognize that the final units attribute some of it like to invest and we're having those discussions.
We'll give updates on them as the evolve, but we're balancing that against wanting the flexibility to be able to execute our plans. So we have to strike the balance between raising capital and still having the flexibility to execute the the business plans. So as that evolves. We will we will keep you posted all I can say is for some of our.
Strongest clients this transaction has definitely caught.
Victor interest and we will see how those discussions evolve.
On the FRE.
Impact in development again is going to be influenced by how much they're parts of capital we raise now, but I think over time.
We expect to see new fund form creation around some of these assets new strategies and that will bring back some of the FRE and through and probably in higher form and private forum, where fees are based off of NAV and less on the public price and.
Of the has been trading at a discount to NAV. So we think we create.
As higher quality revenue stream over time and that will be very long dated.
Part of potentially perpetual and the one that's based off of true market value, but the exact numbers again will evolve over time and for now we've just been kind of thinking about maintaining the existing fee streams with BP y maintaining its current form of some clients investing into the corporate entity.
Great. Thanks, so much.
Our next question comes from Robert Lee with <unk>.
Okay.
Great. Thanks, Good morning, Thanks for taking my questions maybe.
Maybe first one.
I'm thinking about the cash.
Couple of years ago, you heard too though.
You guys had laid out that you kind of expect them to split that would pretty much doubled over the five year timeframe. So you know.
For the year cash.
Cash flow is strong and it looks pretty good.
No.
You care to venture like.
Should we be thinking of you.
You pretty much set up the kind of.
Net.
Mid teens plus.
Cash flow growth over the next five years.
Any reason that type of debt.
The trajectory.
No I think Rob that would still be the trajectory again consistent I think we laid out in September but that would still be.
The consistent outlook.
Okay, Great and then maybe a little bit of the housekeeping question, just update us on where things stand with the.
<unk>, our stock and the.
The spin out of that.
The shareholders.
Yes.
Listen we're working through the through the process of filing the requisite documentation and working with the regulators so I I expect.
Think of it the first half of this year as the original timeline that we laid out would still be the rough expectation on the spin.
Okay, and then maybe one last question I appreciate the patients. This is just on the Capex.
From a core real estate products.
You mentioned in the.
In the letter that maybe this rub 12 billion of committed capital knows the.
It's a small piece of the puzzle the growing and important.
Sense of kind of what the.
The flows have been or the new commitments to that kind of a steady pace quarter to quarter.
Just trying to get fueled from how much of that maybe growth in the past.
Of course.
So.
It's Bruce.
The perpetual infrastructure and real estate products are income replacements for institutions.
And.
I would say these are these type of products.
Being cash.
High cash return relative to other fixed income and some of appreciation, but very low risk are highly attractive in the world that we are in today and I think they're going to keep growing for us.
For a while.
We have significant money coming into our infrastructure business at the current time real estate just because of the sentiment that's out there we have less capital coming in but I think youre going to see that change.
The market resolves itself over 2021.
But these are these are both highly attractive.
The products for people and I think youll continue to see money flow into them.
Okay. Thank you very much for taking my questions.
Our next question comes from Dean Wilkinson with CIBC.
Thanks, Good morning, everyone.
Next let me just circle back on the BP y conceptually.
If you were to look at.
Doing away with the dividend and not sort of rolling that up to the parent company and keeping it at that Opco level is there is some tax savings and it may be too early to answer that and would that then naturally accrete to the planned value as opposed to an earnings stream and how would you think about that going for.
The word.
Dean I don't think Theres anything material in the I think <unk> is going to continue to generate strong cash flow. It has the reinvestment opportunities consistent with today, but in excess of that I think you should expect to see continued distributions and I don't think theres any.
Ariel and tax analysis really to be done to be done a range that would change our thinking.
Okay, great. That's it from me thanks, guys.
As a reminder, ladies and gentlemen, if you'd like to ask a question at this time. Please press. The Star then the number one key.
Our next question comes from Brian Bedell with Deutsche Bank.
Great. Thanks, good morning folks.
Most of my questions have been asked and answered, but maybe just a couple of more.
Maybe just.
One more on the cadence of the of the fee revenue growth, maybe just some perspective on <unk>.
We will get the step function growth in fees from the new fund launches.
But also on the deployment it sounds like Youre being more patient of that so just wanted to get a sense of that $330 million of committed capital that.
Work its way into fee paying.
AUM.
If you think that sort of is going to move up of maybe roughly around the same pace as the fund raises or would it be.
Sooner or later.
Yes, I think Thats, Brian US divorced from fund raising debt would be capital of this raised and committed.
Today.
A large part of it.
Would be things like the latest distressed debt funds, where capital is paid on invested as opposed to committed but that capital.
Oaktree.
And that fund were seeing very good investment opportunities I believe were over 40% invested or committed not fund.
And despite the broader strength in the public markets are still seeing strong private lending opportunities. So I think we expect to see a decent continued.
The cadence of investing of capital there and the balance would be stuff.
Our funds, where we hold capital back because we of follow on investment opportunities, so not necessarily thinking about new opportunities, but it is about follow on investment opportunities into the assets, we already own our development. We've already committed to so you should expect to see that capital being as steadily invested over the next couple of years.
Okay. That's helpful. And then maybe just the one on the global transition fund, maybe just longer term what do you view as the addressable market for this obviously there is a lot of momentum.
In moving towards net neutrality.
Zero.
And.
Clearly a large market for more assets to be invested but but.
Obviously, the $7 5 billion of the nice.
As of the large funds the start with.
If you can maybe just give you of your thoughts on what do you think the longer term addressable market is.
For these types of investments and whether you think you might be able to actually.
Create more funds without going through the investment period on this one.
On the last point I don't know.
Have to see when we create a fund will invest that capital and then we'll move on to another one how quickly we invest the money will have to see.
As to the addressable market.
We think it's very large and we think that given our.
The position and given what we've done with our business over the years.
As you May know, we were of a very carbon intensive business 25 years ago and today were net zero so it.
Having that pedigree, we think we can assist companies we have the operational.
Ability to do it and what we have is capital.
We have capital to provide two businesses to assist them do this and so we'll have to see how big it is but there is we think theres going to be a lot of opportunity in this transition and it could be it could become a very very large business for us.
That's great perspective, thank you.
That concludes today's question and answer session I'd like to turn the call back to Suzanne Fleming for closing remarks.
Thank you everybody for joining us today and with that we will end the call.
Ladies and gentlemen. This concludes today's conference call. Thank you for participating you for part of you may now disconnect.
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Ladies and gentlemen, thank you for standing by and welcome to today's program entitled Brookfield Asset Management 2020 year end results conference call and webcast.
At this time all participant lines are in listen only mode. So if you require operator assistance. Please press Star then zero.
After the presentation, there will be a question and answer session to ask a question during the session you'll need the press Star then one.
As a reminder, today's program is being recorded.
I would now like to introduce your host for today's program Suzanne Fleming managing partner for field asset management. Please go ahead.
Thank you operator, and good morning, everyone welcome to Brookfield fourth quarter and full year 2020 conference call on the call today are Bruce Flatt, Our Chief Executive Officer, Nick Goodman, Our Chief Financial Officer, and Adrian Foley President of C. O O of out of North America Development group within Brookfield properties.
Bruce will start off by giving a business update followed by NEC, who will discuss our financial and operating results and finally, Adrian will give an update on our residential single family business.
After our formal comments, we'll turn the call over to the operator and take analyst questions.
I'd like to remind you that in today's comments, including in responding to questions and in discussing new initiatives and our financial and operating performance. We may make forward looking statements, including forward looking statements within the meaning of applicable Canadian and U S. Securities laws. These statements reflect predictions of future events and trends and do not relate to historic events. They are subject to.
Known and unknown risks and future events and results may differ materially from materially from such statements from.
Further information on these risks and their potential impact on our company. Please see our filings with the securities regulators in Canada, and the U S and the information available on our website.
And with that I'll turn it over to Bruce.
Thank you Suzanne and good morning, everyone on the call.
Despite the extraordinary circumstances of 2020, we ended the year with our best quarter on record.
For the year, we earned a record level of <unk> and cash available for distribution as well.
All of this was achieved despite roughly 20% of our business is being impacted during the economic shutdown.
I use this point to underscore for you.
One more time, the strength of our capital structure and the long term nature and resiliency of our asset management franchise.
And the businesses that we own.
The environment in 2020 was unusual to say the least.
Just a few points.
We saw GDP drop in almost every country.
Precedented stimulus put in the the economies dramatic increases in unemployment rates and interest rates dropping to effectively zero.
In almost every major market.
As we now look into 2021, we are seeing positive momentum in global markets.
Low borrowing costs the.
The pharmaceutical companies have come through an amazing and amazing time, and the vaccines are now being rolled out.
We expect the economies will normalize at the as the at risk populations are vaccinated.
We are starting to see this happen now although unevenly.
And as governments and people get comfortable enough to resume normal life, we expect to see a strong recovery in economic numbers, starting now and into next year.
We expect interest rates to remain low as there is no meaningful inflation on the horizon.
This low interest rate environment should continue to provide a of.
Very positive backdrop for our asset management business.
And the real assets that we own.
It is worth noting that while our business has been very resilient over the last 12 months. It is and it is built to perform at all points in the cycle.
In general our operations are more geared to economic recovery.
As a result, we should be able to grow the value of our businesses.
Coming out of this recession, even more.
One business that we own that has been very strong as our residential single family business in the United States.
We don't often profile of this vision business, but given what is going on in the residential markets.
We asked Adrian fully to join our call today.
We'll hear from him in a moment.
Looking back on 2020, we raised over $40 billion of capital across a number of diverse strategies.
Of note in the year, we saw strong growth in our perpetual private funds strategies.
We had a successful first close for the flagship distressed fund.
We saw sizable inflows to other credit.
As we look to 2021 and beyond all indications are that the strong momentum is continuing.
We are in the early stages of of fund rate raising super cycle and remain confident in our targets laid out at our Investor day of $100 billion per this round of flagship fund of fundraising.
The size of our flagship fund off rate offerings differentiate us differentiate us in the scale of things that we do.
And the scale in itself creates opportunities. So this is additive to the franchise in many ways.
Specifically, we are now in the market fund raising for our fourth real estate flagship fund.
And with our private equity and infrastructure funds, almost 60% invested or committed in aggregate, we expect them to launch fundraising for their next vintages in the next 12 months.
We also recently laid out for you for new growth areas.
Each which we believe will be meaningful to our long term growth strategy.
These are reinsurance energy transition.
Dairies and technology investing.
Since then we've been working on two reinsurance transactions and are closing in on $15 billion of long dated annuities in that business.
Have made a number of investments and are raising capital for real estate secondaries.
Established the team focused on technology.
And recently launched fundraising for our global transition fund, which we hope to be over seven $5 billion.
We have committed $2 billion ourselves to this strategy.
This fund is focused on high quality sustainable investments that will accelerate the transition of the world two of net zero carbon economy.
As an organization more broadly we are committed to the movement to a net zero carbon economy, and our global transition fund will be supportive of this school.
All around the world, we are seeing countries, making commitments to this effort and in some cases ones who have already done that are accelerating their targets.
As we come out of this health and economic crisis, we expect it to be a good time for companies to reset their strategies and focus on sustainable growth.
We are in an enviable position of being carbon.
Zero across our entire $600 billion asset footprint.
As a result, we are well positioned to assist others with this transition.
To put it very simply all companies that want to be around for the long term will need of net zero strategy.
This is no longer of choice.
Turning to transaction activity. It was obviously slow in the first half of 2020.
But we saw pick up in the second half of the year and a very busy start to 2021, we.
We are very active today with close to $80 billion of capital for deployment.
At the same time selling activity or sales activity out of our funds stopped in 2020.
But started again in the summer and has accelerated into 2021.
Nick will discuss what is going on in more depth.
In his remarks in a moment.
So before I turn it over to him. Thank you for your ongoing support we look forward to reporting on the progress of.
2021 over the year.
Thank you Bruce and good morning, everyone.
So we ended the year with very strong financial results and have an equally positive outlook for the year ahead of our asset management business continues to benefit from long dated predictable revenue streams.
As we execute on our next round of flagship fundraising our.
Scale of our other strategies, we expect to see another step growth in fee revenue.
In the current environment, we expect to be harvesting capital by selling mature assets in the last few months, we of advanced and closed a number of asset sales and we expect that momentum to continue in the coming months.
We also believe our operations are well positioned to deliver growth as we emerge from the current economic recession recession.
Before I get into the financial results for the quarter I want to highlight some of our recent and upcoming capital recycling initiatives.
Across our private funds and directly on our balance sheet, we have many investments where we have executed our business plans.
Created significant value and when I was thinking about monetizing to realized profits return capital to our investors or reinvest the proceeds into the business.
As transaction activity ramped up in the third quarter of last year, we restarted several sales processes that had been postponed from earlier in the year.
We have conviction the our assets having performed well throughout the year it would be very attractive to a broad pool of buyers.
Add to the the factor in the near zero interest rate environment globally, and every major economy has experienced significant stimulus it felt like a very constructive environment to be monetizing investments.
Since that point, we've sold more than $15 billion of assets across our private funds listed affiliate balance sheets and directly held investments crystallizing total gains of approximately $6 billion.
Our $1 5 billion of our share.
Highlights from the fourth quarter include the sale of of real estate sales storage business sale of of Prime office building in Central London, We exited the fund investment in the Port terminal in Australia. So then in interest of our graphite electrode business.
IPO of the leading manufacturer of solar tracking solutions and completed the partial sale of directly held real estate portfolio.
All of these sales were executed at values higher than the <unk> carrying values generate the disposition gains of $810 million and led to the recognition of $434 million of carried interest in the fourth quarter, taking the total for 2000 $20 million to $684 million.
Since the start of the year the pace of activity has accelerated.
We recently announced the sale of of district heating and cooling business called end with crystallizing, a profit of nearly $2 billion.
Which represents the multiple of capital of six times and an IRR of over 30%.
We also recently sold the life Sciences portfolio of two seven times multiple of invested capital of 55% IRR successfully listed our Indian REIT, which was eight times oversubscribed and of these values represents an IRR of over 30% and multiple of capital of roughly three times, we IPO of the technology provider.
To the solar empower storage industry took public one of our ventures investments Covid latch on iPhone to enable locking system for apartments and also participated in a successful spot merger with the multi specialty telehealth platform.
These sales have been executed at a premium to carrying values and of either crystallized carried interest or taken the fund within which they were held significantly closer to the point of carry realization.
Given our outlook on the macro environment on our current pipeline of non realizations.
We anticipate a very active first quarter and believe the 2021 will be a strong year for realized carried interest with up to $1 billion currently anticipated.
We also expect to be able to opportunistic bolt opportunistically bolster bombs liquidity by selling directly held investments into the strong markets.
We recently completed the merger of northward with West Fraser.
Now on 20% of the combined company our investment has doubled in the last six months and we currently own roughly $1 $5 billion worth of shares which are benefiting enormously from one of the hottest with the product markets ever.
Turning to results.
Total funds from operations or <unk> in the fourth quarter was $2 1 billion or $1 34 per share, which was the 74% increase over the prior year quarter.
Our operating <unk>, which excludes the impact of disposition gains and realized carried interest was a record $1 billion in the quarter of 66 of share reflected the growth of our asset management franchise and the resiliency of our underlying businesses.
All of this resulted in income to shareholders in the quarter of $643 million of.
Of 40 on a per share basis.
Our asset management business also had a successful year fever.
Fee bearing capital increased by $22 billion to $312 billion.
At year end, which when combined with a full year's contribution from our credit business led to strong growth in fee related earnings.
The fee related earnings increased to $411 million for the three months period and totaled $1 $4 billion over the year, an increase of 19% from 2019.
We also of a further $33 billion of capital that will become fee bearing when invested and when it does it will generate approximately $330 million of incremental fee revenues annually.
In the quarter, we generated $1 $2 billion of growth carried interest, bringing our unrealized carried interest balanced of four 7 billion.
And this is reflective of value enhancement strategies, we have implemented within our various operating businesses and our credit business.
Turning to invest the capital, including disposition gains asset pool for the quarter was $644 million, an increase of 45% from the prior periods.
The increase was driven by excellent performance within some of our private equity businesses, most notably nor aboard and similar strong performance within our portfolio of financial assets. We also saw contributions to <unk> from newly acquired businesses and same store growth across a number of our segments.
Our strong results in the quarter led to $957 million of cash available for distribution or what we call <unk> during the quarter of 45% increase from the fourth quarter of 2019, when excluding the impact of carried interest.
On a full year basis, we generated a record $3 billion of cash star, which is up 19% from the prior year and highlights our ability to continually generate strong cash returns across the whole market cycle.
This cash flow continues to bolster our liquidity, which is used to redeploy to higher growth opportunities or over time return to shareholders over the past year, we've returned over $1 $1 billion of capital to our shareholders through dividends and share repurchases.
Our liquidity remains very strong in addition to $61 billion of Uncalled fund commitments, we have approximately $16 billion of core liquidity across the group, including over $7 billion directly of bomb for a total of $77 billion of deployable capital.
Our balance sheet continues to remain conservatively capitalized with 94% of our debt having no recourse to the corporation today, our corporate debt to market capitalization ratio was 12% an average remaining term of our corporate debt is 14 years and we have no individual piece of debt maturing before 2023.
Furthermore, our investments continued to remain the source of significant additional flexibility with the mature investments that can quickly be converted the cash often a significant premium to book value in the last quarter alone, we were able to unlock approximately $677 million.
Of added liquidity by Opportunistically selling investments.
And just this morning, we announced that we generated a further $750 million of liquidity from our secondary offering of <unk> C shares.
Finally, I am pleased to confirm the our board of directors has declared the 13th.
Per share dividend payable at the end of March this represents an increase of 8% over the current quarterly dividend rate.
With that I will turn the call over to Adrian fully to provide an update on our north American residential business.
Thank you Nick and good morning.
Today, I am going to talk to you about Brooklyn residential wholly owned North American homebuilder and developer of residential lots.
Just so we're clear on the nomenclature, we currently have three businesses.
Yes.
The new land type of lift.
And the lots to sell the then.
So those lots to someone who built the house.
Second.
Sometimes buy those lots of ourselves and we build houses.
Third.
In our credit business, we use the specialized knowledge, we have to lend on some lots when others want to control of those lots, but not put up the capital.
Brookfield first invested in this business and 1987 and.
And since then it has delivered a gross IRR of invested capital of 22%.
On a compound basis for 35 years, that's an amazing multiple of capital.
Today, our business generates over $600 million and.
Operating and operating cash flow was annually the.
The value of the land, we currently own about seven $5 billion at todays prices on an undisclosed debt basis.
And the majority of these land positions will be converted to cash over the next 10 years.
The current equity value of approximately $3 billion.
And our outlook for the business is very positive.
We believe we are well placed to continue delivering very strong returns on equity.
We operate today of approximately 30 master planned communities and 100 neighborhoods in 12 cities across North America.
Annually, we build on average 4000 homes and sell an additional 4000 lots to other builders.
That's one of the top five residential land owners in North America with.
The control approximately 85000 lots, which equates to just over 10 years' worth of supply in the markets we operate.
We take a disciplined approach.
Kind of proactively manage the land book to deliver consistent returns of at Brookfield.
In addition to this we support our credit group, who lends money to a homebuilder friends producing good returns.
Us.
At a lower risk as we truly understand the value of what we're lending them.
Our long term strong returns can be attributed to a few things.
One leveraging greater Brookfield knowledge, we use a strategic land investment lens to control of assets in the right place at the right time.
Two.
Creating value through thoughtful planning and product segmentation.
And three having a homebuilding business to monetize that land value when third party builders pause I'll step back.
Business of entitlement land development of Master planning is time consuming and requires very specialized skills.
There are a few who do it instead of a small number.
Do it and also have the capital to do it well.
It requires the detailed technical knowledge of the entitlement process.
But acknowledged that maximizes the land values and capital management to invest and absorb land use as efficiently.
When properly executed generates excellent risk adjusted returns and significant cash flows of the long periods of time.
Moving to the current situation, which I'm sure. Many of you are interested in the many reasons.
Over the past 12 months, we have seen the new home market respond positively the structural pent up demand.
The advent of sub 3% mortgage rates greatly increasing consumers buying power coupled with the significant drop in the supply and the use of our market has produced the strong demand for new homes.
Maybe the strongest I've seen in my 30 plus years doing this at least on par with 2005 2006 the.
The difference now on the fundamentals are much much better.
The U S new home industry. So of the 800000, new single family sales in 2020 and.
An increase of approximately 20% from 2019.
And the act of inventory in the market. That's the used homes available for purchase down by 35% at the end of 2020.
Our online sales grew six times from the low point in April through July August and September and this increased demand has continued.
We finished the year with over 3500 sales and 15% increase in year over year performance what are the <unk>.
30% increase when you offset the eight weeks of almost zero sales when the world totally shut down.
We enter 2021 with over 1900 homes in backlog, that's 50% higher than that of 2020 number.
In addition, the strong sales, we've seen home pricing growth by approximately 10% and all of our U S markets and we forecast 2021, and 2022 to have a similar growth trajectory.
Assuming all pro forma costs remain the same about 70%.
The home price appreciation drops to the land.
And therefore, our margins will improve appreciably the res.
All of this generates enormous upward revaluations of land value.
When we look some some years ahead of forecast of demand have you is that the Atlanta housing business is in a strong position the known demographic shifts the driving heavy household formation across many markets.
And we believe there is a strong need for housing and is located in price correctly.
The for sale and for rent.
The past 10 years has seen an average of just over $1 million multifamily and single family housing starts.
Annually, that's well below those demographic drivers.
We believe we will see continued demand in the next decade.
With the lot supply industry, largely unable to keep pace with the formation of households.
The top 10 public builders have grown their market share to approximately 40% of total housing starts.
And the desire to control of lots through land light structures of.
Balance sheet.
This is where it gets exciting as we both sell lots of these homebuilders and sometimes finance the loss there are a few others that compete with us.
We anticipate increasing our land manufacturing to become a supplier of a greater number of lots of public builders. While also looking to grow our own housing business under the land growth umbrella.
This demonstrates the power of the Brookfield business model.
Finding alternative avenues to invest capital, while always being focused on earning excellent returns.
The pandemic has accelerated a series of innovations in the way homebuilders find housing.
Actually sets of viewing purposes conduct their own evaluation of pricing and ultimately purchase homes.
We have spent operationally in the past 12 months.
A series of times repositioning our digital the sales operation and the manner in which we speak to our customer.
Our sales environments are open virtually almost every hour of the day and you can physically access how homes at your leisure from seven to nine PM seven days of week, often without meeting another person.
We provide you with transparency in our pricing and offer our services virtually or in person to bring you closer to the home volume purchase.
You will shortly be able to view design and purchase of home online.
The purchase now option.
If you of a home to sell we will provide you with an avenue to monetize that value.
All while sitting on your sofa at home.
A remarkable step forward in reducing unnecessary friction from the home buying and homeownership process.
I believe the advent of new technologies like this will produce lower of cost of sale moving forward from these advances and operating efficiency will drive increased lot value as the reduction in costs will also flow to the landlord pricing.
In closing the industry has enjoyed considerable tailwind in the last 12 months and we see this continuing during 2021.
We remain excited about the long term prospects of our growth in both of our controlled loan land.
<unk> kind of.
Housing operations.
Thank you and I'd like to hand, the call back to the operator.
Ladies and gentlemen, if you'd like to ask a question at this time. Please press the star and the number one key on your Touchtone telephone.
To withdraw your question press the pound key.
Again that is star then one if you'd like to ask a question.
Our first question comes from the line of Sohrab <unk> with BMO capital markets.
Thank you just had to tweak hopefully quick questions.
Or clarifications.
On the transition from I think you mentioned about $7 of half a billion dollars.
Is that something that would of been contemplated as part of the.
Figure of 100 billion dollar number that was talked about of would that be additive.
The second question.
Is around.
What.
What we're just talking about I wanted to clarify.
Adrian did you say the portfolio of has about $3 billion in equity per generates about $600 million.
Cash flow is annually.
And then the third question.
Yes.
In the sense I got is that it's a very good market for dispositions and realization.
And I wanted to see Nick or Bruce if you could handicap how of that.
Toggles with.
With you being able to deploy debt $33 billion of capital, which can become the fee bearing.
When committed so as we look to 2021 is it going to be more.
The Europe realizations and dispositions or is it going to be.
Or of acquisitions and capital deployment or how should we think about the thank you.
Okay. Thanks tore up so maybe I can go with the first and the third and then the question for aging clarification, we can.
You can jump in at the end so on the transition from Dominion when we laid out the 100 I assume the 100 youre, referring to the next round of flagship fundraising.
Yeah listen when I think when we laid out of that target we would of envisaged the renewable investing would become a larger component in either it would be a part of the next flagship infrastructure fund or we could go about raising.
A new strategy. So I would just think about this.
We used to have before this we would have had four flagship funds being infrastructure private equity real estate and our distressed credit fund I think almost of five flagship funds and then this is just an evolution and complementary to the strategy. So it largely think of it as being helpful towards reaching the target of 100 billion in the next round of flagships.
But then it will probably give us more scale for growth in the future.
That's helpful and then on your third question.
On the interplay of dispositions and putting capital to work obviously, we're in a market right now as we touched on.
The public markets are obviously very strong right now in the private markets are very strong given the abundance of capital on low rates and search for yield and growth. So.
So I think given the quality of our assets is obviously very logical for us to be looking to monetize the value. We've created and we do have a number of funds.
Earlier vintage funds of funds with assets of crystallized or delivered a lot of value and makes sense to leave to crystallize in the short term.
That doesn't mean that we're not going to be able to put capital to work. We will look for ways to find transactions that will probably be away from the mainstream where there is may be a scarcity of capital and we can still put money to work for value.
Although I would say the hot this period of time, we are probably being more patient the pace might be a little bit slower given what's going on in the market, but I think we feel good and the pipeline is a strong enough that we have conviction, we will be able to put the money to work and we'll just do it in a disciplined manner.
And that's sort of the question on the cash flows and the equity.
The equity invested yes, 3 billion and that's an average of the full cost of five year cash flows.
Atlanta of housing.
Thank you.
Our next question comes from Cherilyn Radbourne with TD Securities.
Thanks, very much and good morning.
My first question I think sort of picks up on that last discussion there around capital deployment. It sounds like maybe there's been some change in your thinking interest regarding the timing of investment opportunities that will.
The arise as a result of the pandemic, maybe you could just sort of revisit your thinking on sort of the scale of the investment opportunities that you are expecting.
So look I'll make a couple of comments and then Nick may make some more specific ones but.
I'll, just say that <unk>.
Generally the market changes, we have to change with it and when we started 2020. It was a good market and we are investing broadly across the world. The markets changed in March and we started putting a lot of capital and of the public markets.
And come May June that ended and so.
The first point I'd make is we have to be flexible with our business strategies, and where we invest because of the world changes and we have to change with it. So we're always attuned to that the strength of our organization I think is that we have broad global mandate.
And therefore, we can pick our spots and and the second point I'd make and just as a broad comment.
Is that is that the markets are very strong in many things and therefore, we're selling or monetizing in this environment because they may go higher but it's just a good time to monetize the number of things.
Irrespective of that there still are many countries. Many places many businesses in many things that aren't trading or not trading properly and therefore, we can put capital to work. So we do not worry that we have of lack of places to put money to work on balance, though I would say.
This is not a period, where we're in March you could put.
Enormous amounts of money to work into the public markets at distressed valuations.
Great that's helpful.
And then thank you for the update on the residential business and I apologize if I missed this but can you comment on how that business is carried within your invested capital under <unk> or us and how that carrying value would compare Q intrinsic value of the land holdings and also just the timing of when the strong market dynamics that were.
A reference should start to flow into the SFO.
Yes, cherilyn the snick, so I think on our London housing business on the balance sheets in our.
Correctly held unlisted roughly about $3 billion combined there are some projects within that debt are more of like investment properties of fair value, but most of it is just.
The inventory held that depreciated cost of that value uplift comes through as we look to sell those parcels overtime.
So there could be an uplift on monetization over time from there on the realization into our financial statements of the strong.
Operating performance from backlog that we have and youll start to see that come through in the.
Early part of this year of the first half of this year as we deliver on those laws.
And then crystallize the profit and the earnings into the P&L, we take a more conservative approach the as we deliver the the houses of the law then youll start to see the income flow through so you should see.
A strong pickup in the in the contribution in 2021.
That's my queue. Thank you for the time.
Our next question comes from Ken Worthington with JP Morgan.
Hi, good morning, and thank you taking my questions.
Assuming the <unk> deal closes as expected what do you see as the right balance of selling BP why real estate assets outright versus the sale of these investments to new and existing Brookfield funds.
And then there seems to be of trade up between how quickly Brookfield could sell BP y assets into new Brookfield funds and the price debt Brookfield might get by holding onto these properties for a more lengthy period of time. So this concept of of time versus price.
Do you think there is the right balance when maximizing Brookfield shareholder values between time and price or is it obviously sort of one versus the other.
Hey, Alex it's a good it's a good question, Ken I think of the.
Outright versus going into funds.
We'll have to see how it evolves we have we have a view that we have a portfolio of very very high quality assets that should be attractive to clients and over time, we should be able to create products around these assets that will be attractive, but as you say that will be balanced with some assets that it makes sense just the sellout rate the exact breakdown of that it's hard to say.
It will be case by case, but I think to the second part of your question. It will be disciplined and we will look to do it for value. There are certain parts of the portfolio that even in today's climate the still attract.
The strong valuations, we sold an office building in central London in the fourth quarter and a very strong valuation and there are other markets that are active and then there are markets. The right now are not as active in where you could sell assets would not be attractive so.
I think it will be of balance and I think over time, we hope as we've communicated.
To reduce our exposure to real estate over time, and it will be a combination of outright sale of and creating new products.
But I think it will just be disciplined.
The price versus time.
Is it good question I think the overwriting principle was to be disciplined and crystallize. What we think is a fair value for the assets.
Okay. Thank you and then we just had elections here in the U S. In.
Infrastructure is a priority for the Democrats here in the states can you talk.
And if so how a meaningful increase in U S infrastructure investment could offer Brookfield, both infrastructure investment and infrastructure realization opportunities or maybe it's neither.
Yes.
I would say and maybe as a further backdrop I'll, even make it more broad than that and then specifically comment on the U S. But.
Governments around the world haven't spent slash invested enormous amounts of money to deal with the COVID-19 situation more than they ever expected to spend.
There's only two ways out tax or sell assets and when they say when I say sell assets what that means is sell infrastructure cell infrastructure or fund infrastructure future infrastructure.
Through doing it in a private method.
And.
Our belief is that globally.
Governments will need to do both they will need the tax and they will need to sell infrastructure and that set the very constructive backdrop for both things you said, which is there will be.
Other institutions that will want to buy.
Fully completed infrastructure with long tailed cash flows and the weekend, therefore have a good market to sell into.
And there will be.
Assets, which are less perfect or larger in size or more.
Diverse in nature of that we can participate in and turn them into the first category and so I think it's there is nothing.
But good news on the supply for infrastructure coming over the next 10 years.
And that specifically is in the United States, but also in many other countries in the world.
Great. Thank you.
Our next question comes from Geoff Kwan with RBC capital markets.
Hi, good morning, Bruce.
Do you actually kind of answered a little bit of the question that I was going to ask and just going back to.
Just with governments kind of <unk>.
Spending to try and deal with the pandemic and then how you're kind of fixed assets.
My question is I guess, the little bit more of as is.
Have you.
Have you done much work in terms of trying to figure out kind of targeting preferred assets that you might want to try to invest from various governments globally.
Have you had any discussions of our government is kind of a sector right now are they still kind of in just trying to deal with the pandemic mode and kind of thinking about how the.
Finance debt a bit further down the road.
The answer is I would say, it's still early in the game and these things don't happen overnight its not like.
There isn't going to be of switch one day happened and everyone's going to sell assets, but but every month.
Increasingly for many for a long for a long time more infrastructure has been going into private hands and no. One no. One really sees it of knows about it but every day that is happening. So I think just increasingly more cities more states more countries.
Are going to be facilitating more private funding coming in the infrastructure and the follow on continue so I think it's just.
It's happening every day and and.
And you just don't really see it and the.
Actually I think my comment would be the.
The less drama.
That is.
With respect to it the better it is the.
Because when there are big plans often.
Nothing happens and therefore, adjusted the slow and steady.
The monetization of infrastructure is the best way.
The country's connect I can get it done.
Okay. Thank you.
Our next question comes from Bill Katz with Citigroup.
Okay. Thank you very much for the perspectives and taking my questions today, just kind of come back maybe a little more tactical in terms of the FRE margin. It looks like it was a very strong number for the fourth quarter and as I looked through the disclosure doesn't nothing jumps of the pages unusual of size.
The perhaps you could sort of think through just given the scaling of the flagship funds versus reinvestment versus maybe anything that's sort of.
Running below trend cause of Covid, how the thing through the FRE margin.
The new year.
Yes.
Sure Bill.
I don't think the messaging has really changed I think we saw continued strong margins across the business.
<unk>.
I think on a blended basis is strong and we break it out by Brookfield and Oaktree in the Oaktree margin was strong as.
This quarter is the switched on more fee revenue during the year.
Listen the perspective is the same and that we are broadening our product offering.
We are launch.
Launching new strategies, which will require investment professionals and the.
The ability to service the clients and service them to the highest standard.
Honestly, there will be leverages the scale up.
But I don't think anything has significantly changed of what we would have guided to the past total based on the growth we have in front of US maybe we outperform that slightly but nothing materially has changed as we look forward.
Okay.
Two part follow up and I apologize a bit unrelated the seems to be a little bit of back and forth with investors. We speak to in terms of the economic flow through of the BP Y because of the add on.
On of what you're purchasing almost being maybe the sort of summarize sort of how you sort of see the interplay between the invested capital versus the FRE give and take and then just sort of stepping back and I'm sort of intrigued by your commentary on the residential mortgage side, maybe just an update strategically of had it for the tap into the U S retail market.
And with some of your peers. Thank you.
Yes, sure the economics flow through on BP y.
I think we've discussed and we will have to update this as we work through the process.
Obviously, there is the fee paid out of the business today.
When we announced we announced that we would have partners in the transaction with US as we work this through with our partners. We will from an output to slow we expect that the <unk> entity continues to pay the fees like it does today.
And as that evolves, we'll confirm but that's our expectation and as the return on invested capital. We expect <unk> to continue to pay a cash distribution to Brookfield, the consistent with what it does today. So that's the basic working assumption.
For now and obviously the business is performing well cash flow of strong and have no reason to change the outlook.
As we look forward.
The second the remainder of the second part of the question yes.
So I have of such a message the set of questions just sort of curious.
So the translating some of the great performance, great products into potentially tapping of a bit deeper into the U S retail market.
Yes, yes, I think what we're doing on that is probably consistent with our peers I think when the partnership.
And that we have with the Oaktree. We now have a really diverse range of products that are appealing to the broader market and we've been leveraging what we have on the Brookfield site and our distribution capabilities and to really try and growth I think about 7% to 8% of our fee bearing capital to the capital to day comes from.
That high net worth retail channel and we will be looking to grow that over time, and we've been developing and thinking about new products that could cater to that market. So I think it will be an important component of the future fundraising.
Thank you.
Our next.
<unk> comes from Andrew Kuske with credit Suisse.
Thank you good morning of the question really relates to the velocity of capital flowing through your business in the system.
The private asset management business, and it's really on the raise deploy and monetization cycles and thinking.
If you could give us maybe a quick snapshot on organizationally just the evolution you've seen from where you were 10 years ago.
Where do you think youll be five years from now where do you need work is it on the distribution side is it all of the investment professional side, just give us a bit of color on that that would be helpful.
Yeah, and look Andrew I would say, we need help everywhere.
Make it specific.
No one is ever perfect.
But the good news is we've.
We've grown the business methodically over 25 years.
And I and I guess I would just say.
Well we need.
To be able to be pay attention to all we're doing I think.
We keep growing methodically each one of the businesses and adding.
The 10 gentle businesses onto it at a pace, where we can handle it and both from a capital perspective, and also from a management perspective.
So look I think we have one of the we are of very if I may two specific comments, we have a very honed.
And refined investment process.
We've only been and that's been the many many many years.
We've been refining that on the.
Asset management distribution side, where 20 years young.
And we can still grow and become more effective at that so I would say if we had one spot where we can be probably do a lot better even though I'd say, we're pretty good.
Is on that side.
Thank you for the comments on that from me ask the follow up then thats whats different but also a little bit of related obviously, your homebuilding business, which of your profile per day has evolved over the years.
What's the next iteration of that homebuilding business is in the past few pads. The other public entities DHS ERP be the I might be most of the one but I think those of the three majors.
How do you think about that business is off the balance sheet at some point either in the public company or a private company and or co investors what are the options.
Yeah look it's a good question and the point I'd make is that over the years. We found that some businesses are good and the public markets and some not so good and the housing.
We have of housing business, but the real business. We have is land development and where you make all of the money is land development.
And it's highly profitable, but its highly irregular and because of that it doesn't according to the public markets and therefore, it will either be private on our own balance sheet or at some point in time, we may introduce institutional clients into it because they're private and they can understand what I.
Just the.
They are willing to deal with what I just described as opposed to the public markets. So you will not you will likely not see for us.
I never say never but you will likely not see from us of public.
Entity in land development.
Okay. That's great. Thank you very much.
Our next question comes from Alex <unk> with Goldman Sachs.
Hey, good morning, Thanks, guys for taking the question.
I was hoping it will get spent a couple of minutes.
On the path for management fee growth this year it sounds like the fund raising momentum.
Is going quite quite well we've seen the same for many of your peers. So.
As you work toward the flagship Super cycle, maybe kind of walk us through your management of your thoughts for this year and perhaps next year.
Yes, so I think Alex as we look forward of it can be it can be lumpy right like it's going to be step changes with each fund that comes in which is why we kind of like to look at over over a cycle over a longer period of time and so I think what we're working towards is consistent with what we would of laid out at Investor day, which.
Kind of had our FRE.
If we are able to achieve the fundraising targets that we've laid out without path would lead towards doubling of the FRE over the next five years and most debt changes will largely come in line with the the closings of those flagship funds and as we said the.
Our opportunity the debt opportunity fund.
First closes should have the final close in the coming months, we've launched the next real estate fund.
<unk> transitioned funds has launched an infrastructure of private equity and I.
I would say within the next 12 months.
Conservatively, so I think that's going to be what's going to lead to the step change in the revenue when you think of it in a five year period, that's what leads to kind of thinking of a doubling.
While at the same time, we continue to grow the other strategies in our perpetual closed end vehicles.
Got it alright.
Got it okay.
My follow up is around <unk> and I think.
You, partially answered that question a little bit earlier, but just thinking through the dialogues you guys are having with third party of Lp's today and of the deal has been out there for a little while what's sort of the appetite may be in the expectation you have for third party capital to participate in the transaction and if you could remind us again your expectations and how.
<unk>.
This deal will ultimately impact FRE for Bam I know Theres, a couple of moving pieces, there, but I think you talked about that being generally neutral in the past I'm just curious to get your updated thoughts. Thanks.
Sure I mean listen the.
I think we've what we've laid out Alex is that we have a plan to privatize the business believes the offer out there is a fair offer but that will work its way through the process.
And believe that we can deliver significant value.
For that business and the private forum and we kind of late in the letter.
This quarter.
And so I think what you have.
What we're careful is there.
We have clients that are interested in this portfolio of the recognized its value and its attribute some of it like to invest and we're having those discussions we will give updates on them as the evolve, but we're balancing that against wanting the flexibility to be able to execute our plan. So we have to strike the balance between raising capital and still having the flexibility to X.
The the business plan, so as that evolves. We will we will keep you posted all I can say is for some of our.
The strongest clients this transaction has definitely caught.
The peak their interest and we will see how those discussions evolve.
On the FRE.
Impact in development again, it's going to be influenced by how much they're parts of capital we raise now, but I think overtime.
We expect to see new fund form creation around some of these assets new strategies and that will bring back some of the FRE.
Through and probably in higher form and private form where fees are based off of NAV and less on the public price.
The has been trading at a discount to NAV. So we think we create.
As higher quality revenue stream over time and that will be very long dated.
Or potentially perpetual and the one that's based off of true market value of the exact numbers again will evolve over time and for now we've just been kind of thinking about maintaining the existing fee streams with BP y maintaining its current form of some clients investing into the corporate entity.
Great. Thanks, so much.
Our next question comes from Robert Lee with <unk>.
Okay.
Great. Thanks, Good morning, Thanks for taking my questions maybe.
Maybe first one.
I'm thinking of the cast arm.
A couple of years ago, you heard too though.
You guys had laid out that you kind of expect that understood that would pretty much double over a five year timeframe. So.
For the year cash.
Cash flow is strong that looks pretty good.
No.
You care to venture like.
Should we be thinking of you.
You pretty much set up the kind of.
Net.
Mid teens plus cash.
Cash flow growth over the next five years.
And the reason that type of debt.
The trajectory.
No I think Rob that would still be the trajectory again consistent I think we laid out in September but that would still be.
The consistent outlook.
Okay, Great and then maybe a little bit of the housekeeping question, you just update us on where things stand with the.
The Bam our stock and the.
The spin.
And that of that to the shareholders.
Yes, so listen we're working through the through the process of filing the requisite documentation and working with the regulators so I.
I expect the.
Think of it the first half of this year as the original timeline that we laid out would still be the rough expectation on the spin.
Okay.
And then maybe one last question I appreciate the patients. This is just on the core the perpetual core real estate product I think you mentioned in the.
In the letter that maybe just run the $12 billion of committed capital.
Yes.
It's a small piece of the puzzle book growing and important.
As of kind of what the the.
The flows has been or the new commitments to that kind of the steady pace quarter to quarter.
Just trying to get a feel for how much of that's maybe growth in the past.
Of course.
So.
It's Bruce.
The perpetual infrastructure and real estate products are income replacements for institutions.
And.
I would say these are these type of products.
Being cash.
High cash return relative to other fixed income and some appreciation, but very low risk are highly attractive in the world that we are in today and I think theyre going to keep growing.
For a while.
We have significant money coming into our infrastructure business at the current time real estate just because of the sentiment that's out there we have less capital coming in but I think youre going to see that change.
The market resolves itself over 2021.
But these are these are both highly attractive.
Products for people and I think you'll continue to see money flow into them.
Okay. Thank you very much for taking my question the Sheila.
Our next question comes from Dean Wilkinson with CIBC.
Thanks, Good morning, everyone.
Next let me just circle back on.
Unlike the BP y conceptually.
If you were to look at.
Doing away with the dividend and not sort of rolling that up to the parent company and keeping it at that Opco level is there is some tax savings and it may be too early to answer that and would that then naturally accrete to the planned value as opposed to an earnings stream and how would you think about that going forward.
Dean I don't think Theres anything material.
I think BP Y is going to continue to generate strong cash flow. It has the reinvestment opportunities consistent with today, but in excess of that I think you should expect to see continued distributions and I don't think theres any material tax analysis really can be done to be done a range that that would change our thinking.
Okay, great. That's it from me thanks, guys.
As a reminder, ladies and gentlemen, if you'd like to ask a question at this time. Please press. The Star then the number one key.
Our next question comes from Brian Bedell with Deutsche Bank.
Great. Thanks, good morning folks.
My questions have been asked and answered, but maybe just a couple of more.
Maybe just.
One more on the cadence of the of the fee revenue growth, maybe just some perspective on obviously, we'll get the step function growth in.
Fees from the New fund launches.
But also on the deployment it sounds like Youre being more patient of that so just wanted to get a sense of that $330 million of committed capital that.
Work its way into the paying.
If the.
If you think that sort of is going to move up of maybe roughly around the same pace as the fund raises or would it be sooner.
Sooner or later.
Yes, I think Thats, Brian US divorced from fund raising debt would be capital of this raised and committed.
Today.
A large part of it would be things like the latest distressed debt funds, where capitals paid on invested as opposed to committed but that capital.
Oaktree.
And that fund, we're seeing very good investment opportunities I believe were over 40% invested or committed in over in that fund and despite the broader strength in the public markets are still seeing strong private lending opportunities. So I think we expect to see a decent continued.
Cadence of investing of capital there and the balance would be stuff.
Funds, where we hold capital back because we of follow on investment opportunities, so not necessarily thinking about new opportunities, but it is about follow on investment opportunities into the assets, we already own our development. We have already committed to so you should expect to see that capsule of being as steadily invested over the next couple of years.
Okay. That's helpful. And then maybe just one on the global transition fund, maybe just longer term what do you view of the addressable market for this obviously there is a lot of momentum.
In moving towards net neutrality.
Zero.
And the clear.
Clearly a large market for more assets to be invested but.
Obviously, the $7 five billions of nice the large funds the start with.
If you can maybe just give you of your thoughts on what do you think the longer term addressable market is.
For these types of investments and whether you think you might be able to actually.
Create more funds without going through the investment period on this one.
On the last point I don't know.
Have to see when we create a fund will invest that capital and then we'll move on to another one how quickly we invest the money will have to see as to the addressable market.
We think it's very large and we think that given our.
Position and given what we've done with our business over the years.
As you May know, we were of a very carbon intensive business 25 years ago and today were net zero. So.
Having that pedigree, we think we can assist companies we have the operational.
Ability to do it and what we have is capital.
We have capital to provide two businesses to assist them do this and so we'll have to see how big it is but there is we think theres going to be a lot of opportunity in this transition and it could be it could become a very very large business for us.
Okay.
Great perspective, thank you.
That concludes today's question and answer session I would like to turn the call back to Suzanne Fleming for closing remarks.
Thank you everybody for joining us today and with that we will end the call.
Ladies.
And gentlemen, this concludes today's conference call. Thank you for participating you for part of you may now disconnect.