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Brookfield Asset Management Inc
Symbol BAM
Shares Issued 11,982,568
Close 2017-11-08 C$ 24.56
Market Cap C$ 294,291,870
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Brookfield Asset earns $992M (U.S.) in Q3

2017-11-09 08:46 ET - News Release

Mr. Bruce Flatt reports

BROOKFIELD ASSET MANAGEMENT REPORTS THIRD QUARTER 2017 RESULTS

Brookfield Asset Management Inc. has provided its financial results for the quarter ended Sept. 30, 2017.

Bruce Flatt, chief executive officer of Brookfield, stated: "We closed a number of acquisitions during the quarter and have disposed of numerous assets, achieving excellent results. Assets under management increased to over $265-billion and with fundraising advancing on our next real estate opportunity fund we are well positioned for continued growth."

Operating results

Net income and funds from operations (FFO) both grew significantly on a comparable basis as operating results for the third quarter benefited from the continuing expansion of our business through fundraising, acquisitions, development projects and operating improvements.

Net income, prior to tax, was strong compared with last year, at $1.3-billion versus $1.0-billion in 2016, due to the aforementioned operating improvements and increased fair value gains. After including the impact of tax, which reflected a $1.0-billion tax recovery in the prior year quarter, net income was $992-million compared with $2-billion.

FFO from operating activities was $564-million, a 15-per-cent increase from the 2016 quarter. Growth in fee related earnings was 8 per cent due to continued expansion of fee bearing capital, as the company's listed issuers generated strong growth in their capital base, and higher incentive distributions. Invested capital FFO increased by 19 per cent due to contributions from acquisitions, particularly in the company's infrastructure business, higher generation and pricing in its renewable power business and gains on short-term portfolio investments. FFO inclusive of disposition gains and realized carried interest was $809-million, slightly less than last year's amount of $883-million, which included a higher level of disposition gains. Disposition gains in the current quarter included gains on the sales of several office properties as well as the sale of a portion of the company's investment in Norbord.

Dividend declaration

The board declared a quarterly dividend of 14 U.S. cents per share (representing 56 U.S. cents per annum), payable on Dec. 29, 2017, to shareholders of record as at the close of business on Nov. 30, 2017. The board also declared all of the regular monthly and quarterly dividends on its preferred shares.

Highlights

  • The company's fee bearing capital has reached $120-billion, an 8-per-cent increase over September, 2016.
  • The capitalization of the company's listed issuers increased during the quarter as a result of strong market performance and capital deployment. During the quarter, the company did not close any major funds although it is expected the first close of its real estate opportunity fund will occur in the fourth quarter.
  • Following the quarter, the company announced the acquisition of Center Coast Capital, a Houston-based Securities and Exchange Commission-registered investment adviser, focusing on energy infrastructure investments, with over $4-billion in fee bearing capital. This transaction will strengthen and expand the company's public securities investment offerings, and its retail distribution capabilities.
  • The company made progress on several significant transactions during and following the quarter.
  • The company recently completed the acquisition of a 51-per-cent interest in TerraForm Power and continued to advance the 100-per-cent acquisition of TerraForm Global. These transactions will deploy $1.4-billion into a high-quality portfolio of solar and wind generation projects.
  • The company continued to advance its direct corporate credit business and expects to build up this business over time, as it sees direct credit as an area where it can leverage its existing expertise by underwriting investments in businesses that it understands well. During the quarter, the company sourced a $650-million direct loan, of which half was syndicated at closing. The company financed the other half from its balance sheet as a seed asset for its new fund strategies.
  • In addition to deploying capital in new investments, the company has a large capital backlog of over $14-billion of organic growth projects across its various lines of business.
  • In real estate, the company's team is managing a robust $7-billion pipeline of development projects. Within its core office business, the company has 10 million square feet of development under way, including $3-billion of premier office building development continuing in London, as well as $2-billion core office development continuing within North America. The major renovation of the company's 5 Manhattan West office tower was recently completed and is now fully leased. During the current quarter, the company signed a 15-year lease with Amazon to occupy the remaining 360,000 square feet in the building, adding to a marquee group of tenants. The company is also focused on repurposing real estate assets, in particular in the retail sector within its GGP and Rouse portfolios.
  • The company's infrastructure business remains focused on executing on its large backlog, which currently stands at $3.5-billion. Key projects include the company's utility connections in the United Kingdom regulated distribution business, network expansion opportunities in its French communications infrastructure business and progressing several major expansion projects within its Brazilian toll road and electricity transmission operations.
  • Across the company's remaining businesses, it has a pipeline of over 1,000 megawatts being developed in its renewable power business and numerous follow-on capital projects throughout its private equity business. These projects continue to provide it with opportunities to put capital to work at very attractive returns, including in markets or sectors where acquisitions are highly priced.
  • The company made progress on selling several investments and raised significant capital.
  • In the company's real estate operations, it agreed to sell Gazeley, an industrial real estate business in Europe, for 2.4 billion euros, representing a gross multiple of over 4.5 times and 47-per-cent compound internal rate of return (IRR).
  • The company has substantial capital resources at its disposal, consisting of over $17-billion of third party private fund commitments and $9-billion of core liquidity from cash and financial assets and from undrawn committed credit facilities, to pursue further opportunities.
  • During the quarter, three of the company's listed issuers raised additional equity, which it participated in, in order to solidify their liquidity for the next wave of growth. The company also issued $300-million (Canadian) of perpetual preferred shares and $550-million of notes due in 2047.

Basis of presentation

This news release and accompanying financial statements are based on international financial reporting standards (IFRS), as issued by the International Accounting Standards Board (IASB), unless otherwise noted and make reference to funds from operations (FFO).

The company defines FFO as net income attributable to shareholders prior to fair value changes, depreciation and amortization, and deferred income taxes, and include realized disposition gains that are not recorded in net income as determined under IFRS. FFO also includes the company's share of equity accounted investments' FFO on a fully diluted basis. FFO consists of the following components:

  • FFO from operating activities represents the company's share of revenues less direct costs and interest expenses; excludes realized carried interest and disposition gains, fair value changes, depreciation and amortization and deferred income taxes; and includes the company's proportionate share of FFO from operating activities recorded by equity accounted investments on a fully diluted basis. The company presents this measure as it believes it assists in describing its results and variances within FFO.
  • Realized carried interest represents the company's contractual share of investment gains generated within a private fund after considering its clients minimum return requirements. Realized carried interest is determined on third party capital that is no longer subject to future investment performance.
  • Realized disposition gains are included in FFO because the company considers the purchase and sale of assets to be a normal part of the company's business. Realized disposition gains include gains and losses recorded in net income and equity in the current period, and are adjusted to include fair value changes and revaluation surplus balances recorded in prior periods which were not included in prior period FFO.

The company uses FFO to assess its operating results and the value of Brookfield's business and believes that many shareholders and analysts also find this measure of value to them.

The company notes that FFO, its components and its per share equivalent are non-IFRS measures which do not have any standard meaning prescribed by IFRS and therefore may not be comparable with similar measures presented by other companies.

The company provides additional information on the determination of FFO and reconciliation between FFO and net income attributable to Brookfield shareholders in its quarterly supplemental information and filings available at the company's website.

Additional information

The letter to shareholders and the company's supplemental information for the three months ended Sept. 30, 2017, 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 attached statements are based primarily on information that has been extracted from the company's interim financial statements for the three months ended Sept. 30, 2017, which have been prepared using IFRS, as issued by the IASB. The amounts have not been audited by Brookfield's external auditor.

Brookfield's board of directors reviewed and approved this document, including the summarized unaudited consolidated financial statements, prior to its release.

Information on the company's dividends can be found on its website under stock and distributions/distribution history.

Quarterly earnings call details

Investors, analysts and other interested parties can access Brookfield Asset Management's 2017 third quarter results as well as the shareholders' letter and supplemental information on Brookfield's website under the reports and filings section at the company's website.

The conference call can be accessed via webcast on Nov. 9, 2017, 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 1744 (pound sign)).

Brookfield Asset Management is a leading global alternative asset manager with over $265-billion in assets under management. The company has more than a 100-year history of owning and operating assets with a focus on real estate, renewable power, infrastructure and private equity. Brookfield offers a range of public and private investment products and services, and is co-listed on the New York, Toronto and Euronext stock exchanges under the symbol BAM, BAM.A and BAMA, respectively.

Please note that Brookfield's previous audited annual and unaudited quarterly reports have been filed on EDGAR and SEDAR and can also be found in the investor section of its website. Hard copies of the annual and quarterly reports can be obtained free of charge upon request.

                             CONSOLIDATED STATEMENTS OF OPERATIONS
                                     Periods ended Sept. 30
                                 (in millions of U.S. dollars)
 
                                                  Three months ended    Nine months ended
                                                     2017       2016      2017       2016   

Revenues                                         $ 12,276     $6,285   $27,721    $17,476 
Direct costs                                      (10,034)    (4,590)  (21,753)   (12,568)
Other income and gains                                (29)       325       236        391     
Equity accounted income                               505        454     1,090      1,041   
Expenses                                              
Interest                                             (932)      (825)   (2,640)    (2,407)
Corporate costs                                       (24)       (20)      (69)       (68)
                                                    1,762      1,629     4,585      3,865   
Fair value changes                                    132        (59)      141        358     
Depreciation and amortization                        (643)      (541)   (1,755)    (1,538)
Income tax                                           (259)       992      (503)       556     
Net income                                           $992     $2,021    $2,468     $3,241  
                                                      
Net income attributable to
Brookfield shareholders                              $228     $1,036      $416     $1,478  
Non-controlling interests                             764        985     2,052      1,763   
                                                     $992     $2,021    $2,468     $3,241  
                                                     
Net income per share                                 
Diluted                                             $0.20      $1.03     $0.32      $1.41   
Basic                                                0.20       1.05      0.32       1.44    
                                                                                                                       


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