Mr. Bruce Flatt reports
BROOKFIELD ASSET MANAGEMENT REPORTS FIRST QUARTER 2016 RESULTS
Brookfield Asset Management Inc. has released its financial results for the quarter ended March 31, 2016.
All currency figures in this release are in U.S. dollars.
Bruce Flatt, chief executive officer of Brookfield, stated: "We have closed $25-billion of private fund commitments for our latest round of flagship funds to date, increasing total assets under management to $240-billion. Allocations to all our strategies continue to grow, as evidenced by the recent final close of our $9-billion flagship real estate fund and first close of our infrastructure fund of approximately $12-billion. With over $25-billion of dry powder and balance sheet liquidity, we are very well positioned for future investments."
Fee-bearing capital currently totals $114-billion, up from $104-billion at quarter-end and $99-billion at the start of the year. The company is in the process of raising five private funds targetting an additional $6-billion of capital and always has its open-ended funds available for capital contributions.
The company committed or deployed $18-billion of capital to new investments during the last 12 months. The breadth of the company's operations, both geographically and by asset class, has enabled the company to find attractively valued investment opportunities.
FINANCIAL RESULTS
(In millions, except per-share amounts)
Three months ended Last 12 months ended
March 31, March 31,
2016 2015 2016 2015
Funds from operations (1) (2) $703 $557 $2,705 $2,225
Per Brookfield share (1) (2) 0.69 0.55 2.64 2.18
Net income (3) 636 1,438 3,867 5,804
Per Brookfield share (1) 0.23 0.73 1.77 3.31
Notes
(1) Excludes amounts attributable to non-controlling interests.
(2) See basis of presentation on the company's website.
(3) Consolidated basis -- includes amounts attributable to non-controlling
interests.
The company's financial results benefited from significant increases in fee-related earnings from its asset management activities as well as favourable performance across its operating businesses.
Funds from operations (FFO) increased by 26 per cent to $703-million or 69 cents per share. Strong capital inflows led to a 71-per-cent increase in fee-related earnings to $185-million. FFO from invested capital increased by 7 per cent, benefiting from recently signed leases in the company's property group, rising contractual rates and volumes in the company's infrastructure operations, and the continued expansion of the company's operations through both new investments and internal growth initiatives. Increased water levels in the company's renewable power operations were offset by lower pricing. Property results also benefited from a higher level of disposition gains as the company sold a number of assets at excellent valuations.
Net income totalled $636-million in the first quarter of 2016, or 23 cents per share. Net income benefited from the operational improvements across most of the company's businesses and the contribution from recent acquisitions, capital expansions and development projects. Continued increases in the value of the company's property portfolios gave rise to $352-million of fair value gains, however, the company recorded a higher level of appraisal gains in the 2015 quarter, which is the principal reason for the decline in net income from the $1.4-billion reported in that period.
Operating highlights
The company continues to expand its listed and private funds.
Fee-bearing capital now stands at $114-billion, including $10-billion of commitments raised shortly after the quarter. The company's annualized run rate of total fees and carry exceeds $1.9-billion based on current funds under management, up from $1.6-billion at year-end and $1.3-billion last year.
The company completed fundraising for its $9-billion follow-on global property fund, Brookfield Strategic Real Estate Partners II, and has already invested or committed to invest over 50 per cent of its capital. The company has raised nearly 90 per cent of the $18-billion targets for its two other flagship funds and expects to finalize these funds in coming months. The company also continues to raise three niche private funds with specialized real asset strategies, seeking more than $2-billion of commitments.
Brookfield Business Partners (BBP), the company's fourth listed partnership, is in the process of being listed on the Toronto Stock Exchange and New York Stock Exchange and the company anticipates the successful launch of this public entity in June, 2016. The company believes that BBP will be well received by shareholders, providing the ability to invest directly in the company's private equity operations and enable the company to develop its business at an enhanced rate with both listed and private capital. The listing of BBP also further simplifies the company's operations and provides additional transparency into the company's private equity group, which the company believes should lead to enhanced values over time.
In its public markets business, the company is continuing to align its mandates with its real asset competencies, which have enabled the company to increase this businesses profitability, while eliminating non-core investment products.
The company announced or completed acquisitions that will deploy $18-billion of capital over the last 12 months, including $4-billion in the current quarter. The company also continued to raise capital by selling mature assets.
During the quarter, the company expanded its portfolio by acquiring high-quality real assets at attractive valuations. The company's property group acquired a self-storage business of 108 properties and the company intends to grow this operation. The company acquired office buildings in London, Sydney, Boston and Washington, and multifamily home projects in Texas and California.
The company's renewable power business closed the purchase of a controlling interest in 3,000 megawatts of hydroelectric facilities and development projects in Colombia for approximately $2.4-billion, and the company plans to acquire the remainder of the company, bringing total capital invested to $3.5-billion. The company also moved forward with wind farm developments in Ireland and Scotland and hydroelectric projects in Brazil.
In its infrastructure group, the company agreed along with its partners to acquire an Australian logistics business that consists of container terminals, ports and railways. If it obtains the necessary approvals, the company will own all of the ports services business and 50 per cent of the container terminal operation, while others will purchase the rail assets. The company also moved forward with plans to build a 3,000-kilometre electrical transmission business in Brazil.
The company's private equity business invested more than $250-million in the debt and equity of high-quality companies when the bond markets deteriorated earlier this year. With the values of its purchases the company expects to participate in recapitalizations of these businesses or be paid back at par, realizing excellent returns.
Dividend declaration
The board declared a quarterly dividend of 13 cents per share (representing 52 cents per annum), payable on June 30, 2016, to shareholders of record as at the close of business on May 31, 2016. The board also declared all of the regular monthly and quarterly dividends on its preferred shares.
Information on the company's dividends can be found on the company's website under investors/stock and dividend information.
Additional information
The letter to shareholders and the company's supplemental information for the three months ended March 31, 2016, contain further information on the company's strategy, operations and financial results. Shareholders are encouraged to read these documents, which are available on the company's website.
The statements are based primarily on information that has been extracted from the company's interim financial statements for the three months ended March 31, 2016, which have been prepared using international financial reporting standards, as issued by the International Accounting Standards Board. The amounts have not been audited by Brookfield's external auditor.
Quarterly earnings call details
Investors, analysts and other interested parties can access Brookfield Asset Management's 2016 first quarter results as well as the shareholder letter and supplemental information on Brookfield's website under the investors/financial reports section.
The conference call can be accessed via webcast on May 13, 2016, at 11 a.m. Eastern Time at the company's website or via teleconference at 1-800-319-4610 toll-free in North America. For overseas calls please dial 1-604-638-5340, at approximately 10:50 a.m. Eastern Time. A recording of the teleconference can be accessed at 1-800-319-6413 or 1-604-638-9010 (password 00433 followed by the number sign).
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per-share amounts)
For the three months ended March 31,
2016 2015
Revenues $5,218 $4,396
Direct (costs) (3,648) (3,006)
Other income and gains 35 -
Equity-accounted income 152 267
(Expenses)
Interest (expenses) (767) (701)
Corporate (costs) (23) (29)
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967 927
Fair value changes 352 1,113
Depreciation and amortization (loss) (481) (401)
Income tax (loss) (202) (201)
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Net income 636 1,438
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Net income attributable to
Brookfield shareholders 257 729
Net income attributable to
non-controlling interests 379 709
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636 1,438
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Net income per share
Diluted 0.23 0.73
Basic 0.23 0.75
We seek Safe Harbor.
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