Brookfield Corporation Shareholders, 3rd Quarter, 2024

Brookfield Corporation Shareholders, 3rd Quarter, 2024

2024 Has Been Good – 2025 Should Be Better

We delivered strong financial results in the third quarter, and both the outlook for the balance of the year and 2025 look even more positive. A reduction in short interest rates across the globe, combined with solid growth and resilient employment numbers, is increasing the market’s confidence in pricing risk. This is leading to continued improvements in capital markets and a considerable pick up in transaction activity.

In the past few months, we executed on over $30 billion of financings across the business and advanced over $17 billion of monetizations at attractive returns. We expect this momentum to continue across the franchise, as high-quality, cash flowing businesses with compelling growth profiles are proving to be highly attractive to buyers and lenders alike.

We continue to capture an increasing share of global flows of capital, centered around our deep relationships with institutional, private wealth and retail investors. Having access to the largest pools of capital remains a strong competitive advantage as we continue to invest in the backbone of the global economy. We are actively investing large-scale capital across the business and have committed to approximately $20 billion of investments in recent months.

As the economic tailwinds turn in our favor, and with the foundations we have in place across the business, we are in a strong position to achieve our stated goal of delivering 15%+ total returns on a per share basis to our shareholders over the long term.

Our Operating Results Continue to Get Stronger

Financial Results

Distributable earnings (“DE”) before realizations were a record $1.3 billion or $0.80 per share in the quarter and $4.6 billion or $2.90 per share for the last twelve months. These quarterly earnings represent an increase of 19% over the prior year quarter. DE in total, including realizations, was $1.3 billion or $0.84 per share for the quarter and $6.0 billion or $3.78 per share for the last twelve months.

Asset Management is benefiting from consolidation. Our asset management business generated distributable earnings of $694 million in the quarter and $2.6 billion over the last twelve months. We benefited from recent fundraising momentum across our diversified strategies, notably from our credit funds and insurance inflows. Fee- bearing capital at quarter end was $539 billion, an increase of 23% over the last twelve months, and as a result, fee-related earnings grew by 14% compared to the prior year quarter. Importantly, as the business grows, so too should our margins, as we benefit from the operating leverage in the platform. With the anticipated closes on our latest flagship funds, we expect strong fundraising through the end of the year and into 2025, driving further earnings growth. During the quarter, BAM closed on its previously announced strategic partnership with Castlelake, a global alternative investment manager specializing in asset-based private credit including aviation and specialty finance, with approximately $24 billion of assets under management. We also held an initial close of our Catalytic Transition Fund for $2.4 billion, marking a significant milestone towards the target of raising up to $5 billion to invest in emerging market clean energy and transition assets.

Wealth Solutions is growing fast. Our wealth solutions business generated distributable operating earnings of $364 million in the quarter and $1.2 billion over the last twelve months, due to continued growth in our annuity platform and the strength of our investment performance. During the quarter, we generated approximately $4.5 billion of organic inflows, primarily driven by retail and institutional annuity sales. Our insurance assets ended the quarter at over $115 billion. By leveraging our investment origination capabilities, we were able to generate an average investment portfolio yield of 5.4% — 1.8% higher than our average cost of capital. Annualized earnings for the business are approximately $1.5 billion today and are poised to grow to $2 billion in the near term as we continue to reposition the investment portfolio. Through our combined wealth solutions platforms, we are raising close to $2 billion of retail capital per month, which includes approximately $450 million a month from our private wealth channel.

Operating Businesses were very resilient. Our operating businesses continue to deliver resilient and growing cash flows, generating distributable earnings of $356 million in the quarter and $1.5 billion over the last twelve months. Cash distributions from our renewable power and transition, infrastructure and private equity businesses are supported by their strong underlying fundamentals and growth in their operating earnings. Our core real estate portfolio continues to deliver growth in same-store net operating income (“NOI”), with a 4% increase over the prior year quarter. During the quarter, we signed close to 6 million square feet of office and retail leases, and rents on the newly signed leases were approximately 10% higher compared to those leases expiring. With interest rates having peaked and capital markets opening up, we expect a strong recovery across real estate markets over the next couple of years.

Monetizations are picking up. With the level of transaction activity picking up, we were able to close or advance over $17 billion of asset sales across the business in recent months.

A few notable deals during and subsequent to the quarter include the following:

• In our real estate business, we closed on the sale of nine retail parks in the U.K. for approximately $800 million. Over the three-year hold period, we enhanced cash flows by increasing occupancy rates through expanding key tenant relationships. The sale of this portfolio generates an approximately 30% IRR and 2.2x multiple of capital.
• We advanced the sale of the PGA National Resort, a luxury resort in Palm Beach, Florida for over $400 million. During our ownership, we successfully executed the comprehensive renovation plan and increased average daily rates, doubling NOI over the hold period. This transaction is a testament to the strong demand for high- quality hospitality assets in good markets.
• We closed on the sale of a retail property in Brazil; a group of logistics assets in the U.S.; our luxury hotel in South Korea; an office asset and a multifamily asset in Washington, DC; and a portfolio of U.S. manufactured housing assets. We also signed agreements to sell an office asset in Sydney, Australia for approximately $315 million, as well as a portfolio of manufactured housing assets in the U.S. for approximately $570 million. Property transaction markets are recovering.
• Our renewable power and transition group recently signed four transactions with excellent outcomes: we agreed to sell Saeta, a portfolio of predominantly wind assets in Spain, for an enterprise value of $1.4 billion. Since acquiring the business in 2018, we successfully executed a business plan focused on divesting non- core assets, optimizing capital structure, and positioning the company for sustainable long-term growth. We announced the sale of our stake in a critical electricity generation and storage facility in the U.K., and a 50% interest in a portfolio of wind assets in the U.S. In addition, we agreed to sell a portfolio of wind and solar assets in India, realizing our first full cycle investment in the country. To date this year, our renewable power and transition business has generated over $2.3 billion of proceeds from asset monetizations, delivering an IRR of approximately 25% and a multiple of capital of 2.5x.
• Our private equity business closed the previously announced sale of our North American and European road fuels operation, and we agreed to sell a business unit within our offshore oil services operation for $1.9 billion.
• In our infrastructure business, we agreed to sell our Mexican regulated natural gas transmission business for approximately $500 million. This generated a 22% IRR and 2.2x multiple of capital, as a result of value enhancement initiatives achieved earlier than planned.

At the end of the quarter, accumulated unrealized carried interest was $11.5 billion, representing a 17% increase over the last twelve months. We recognized $295 million of net realized carried interest into income to date this year, and we expect to realize additional carried interest through the end of the year.

Our Balance Sheet and Liquidity Are Robust

We continue to differentiate our business through our access to large-scale capital. The combination of our perpetual capital base and over $150 billion of deployable capital sets us up well to capitalize on investment opportunities through market cycles and protect against downside risks.

With interest rates now coming down, liquidity continues to return to the capital markets. In the past few months, we have closed or executed on over $30 billion of financings. A few highlights include:

• The CMBS markets for retail and industrial assets remain very active. We recently refinanced an $850 million loan on a high-quality mall in Las Vegas with a new five-year term at a fixed rate, which is substantially more favorable than a year ago. We also executed on an approximately $600 million loan for the acquisition of an industrial portfolio at a spread of 210 bps.
• We financed office properties for approximately £465 million in the U.K. and over $400 million in India. Financing for high-quality office property is also coming back.
• We completed an inaugural $900 million asset-backed security issuance at our U.S. retail colocation data center operation, extending the maturity of the debt, and closed a $1.25 billion term loan for our North American gas storage platform.
• We issued $600 million of investment grade, 5-year bonds at a subsidiary of Brookfield Wealth Solutions, which was our inaugural financing for this entity.
• We executed on over $2.5 billion of financings for two recent acquisitions in our infrastructure and private equity businesses, and we repriced over $5 billion of financings across four portfolio companies, reducing the credit spreads by 45 bps on average.

During the quarter, we reinvested our excess cash flow back into our business and returned $203 million to shareholders through regular dividends and share repurchases. Over the last twelve months, we repurchased approximately $1 billion of shares in the open market, adding approximately 80 cents of value to each remaining share based on our plan value as at quarter end. We expect to continue to allocate capital to share repurchases.

Thank You for Attending Our Annual Investor Day

For those who were unable to attend, the webcast and materials are available on our website. Our day started with a description of how we are continuing to scale a leading global investment firm focused on building long- term wealth. While the past is no guarantee of the future, over the past 30 years we have generated approximately $225 billion of gains for investors and clients, and the shares of Brookfield Corporation have delivered 19% compound annualized returns to owners. Highlights include the following:

• Despite market volatility, we have grown earnings from our base businesses over the past five years by almost 20% annualized. Today we have one of the largest pools of capital in the world through our perpetual capital base, our wealth solutions business, and our Manager—and this, combined with our investing and operating capabilities, sets us up well to compound our capital at an annual rate of 15%+ per share over the long term.
• Our core principles regarding the compounding of wealth over the long term are very simple: invest in good businesses, run them well, allocate excess free cash flow wisely, align everyone with long-term objectives, and evolve with the world around us. These principles have been foundational to our success and will continue to be going forward.
• In addition, tailwinds are turning in our favor as interest rates come down, liquidity is returning to the capital markets and transaction activity is picking up. We are well positioned to drive further earnings growth and value creation; over the next five years, our plan is to grow distributable earnings by 20%+ annually and deliver 15%+ total returns, both on a per share basis.
• We also expect to generate $47 billion of cash earnings on a cumulative basis over the next five years. Our focus at the Corporation is to allocate and deploy these cash flows to maximize the Net Asset Value of the company. The wise investment of this cash should add meaningfully to our earnings over time.

We focused much of our time at Investor Day on the earnings profile and intrinsic value of our private holdings, which are comprised of our wealth solutions business, real estate, and carried interest.

Wealth Solutions

As our wealth solutions business continues to grow, our primary focus remains to deliver 15%+ returns on our equity, while taking modest risk with predictable and long-dated liabilities.

Our origination capabilities, combined with the sourcing advantage of our asset management franchise, set us up well to increase our insurance assets to approximately $300 billion and triple the earnings over the next five years. This business will continue to deliver high-quality earnings and contribute significantly to the growth in the Corporation’s value over the long term.

Real Estate

On our balance sheet, we own a world-class real estate portfolio backed by our perpetual equity capital. It includes some of the highest-quality office, retail and residential properties globally. During a volatile period in the markets, the business proved resilient, benefiting from the flight to quality of the broader market which has led to strong tenant demand and resilient operating results.

Our business plan focuses on growing the cash flows of our Core portfolio and implementing the value creation strategies within our Transitional & Development portfolio. Once we complete plans for our development portfolio, we will monetize those assets and recycle the capital within the broader organization. The Core portfolio has generated strong inflation protected, risk adjusted returns for decades—and we expect it will continue to do so.

Carried Interest

Carried interest is expected to contribute meaningfully to the cash flows of the Corporation over the next five years.

The Corporation directly owns all the carried interest earned on funds raised prior to the spin-off of our asset management business and a gross 33% of those raised after the spin-off. The balance is owned by BAM. As monetization activity picks up, we expect to realize significant carried interest that is diversified across asset classes, risk profiles and strategies, reducing the volatility of carry realizations and stabilizing the amount over the long term.

Over the next 10 years, we expect to realize $25 billion of net carried interest direct to the Corporation. This will be invested into our businesses or returned to owners.

Private Wealth Is Growing Fast – Yet Still in the Early Stages

Over the past couple of decades, we have built one of the largest pools of discretionary capital globally. This is underpinned by our strong balance sheet and access to multiple layers of scale capital. With the size of the alternatives market set to more than double over the next decade, demand from institutional investors continues to accelerate. At the same time, we are seeing a similar trend from high-net-worth and retail investors.

Today, it is estimated that 2% or less of individual investment portfolios are allocated to alternatives, and it is expected that this number will increase significantly over time. In addition, there is a $7 trillion shortfall in retirement savings in the U.S., and as the population gets older, the retirement deficit will only compound.

In the last four years, we have expanded our service capabilities and product offerings to capture demand from private wealth and retail channels. Our success in designing bespoke retail products, which include private funds and annuities, is now resulting in close to $2 billion of retail inflows per month, but we are still only in the early stages.

Through Brookfield Wealth Solutions, we are building a differentiated retail distribution network. To date, we have established a top-tier annuity writing platform in the U.S., with capabilities to originate over $20 billion of policies annually. We are primarily focused on long-duration, low risk annuity products, guaranteeing a fixed rate of return to policyholders for a predictable number of years through our established brands of American Equity Life, American National and Eagle Life. Each has strong brand recognition and diversified distribution capabilities with long-standing relationships across our in-house agents, independent insurance agents, bank channels, and broker dealers. Through this platform, we average 7–10-year duration on our annuity policies, which have an average value of approximately $150,000.

We also continue to develop new products and grow our fundraising capabilities through our private wealth platform, which partners with financial advisors to bring institutional-caliber alternative solutions to individual investors. This platform has a dedicated team of 150 professionals in 10 global markets, with over 160 wealth management relationships. With our leading position in the fastest growing sectors of the alternatives market, demand for our retail products continues to increase. Our investment capabilities in renewable power and transition, infrastructure, private equity, real estate and credit give us an advantage with private wealth investors worldwide. As an example, Brookfield Infrastructure Income Fund, an open-ended, semi-liquid private infrastructure product, has launched in Asia, Europe and the U.S., and it is currently raising over $200 million a month.

Looking ahead, we continue to focus on deepening our distribution capabilities, expanding into new markets, and evolving our product offerings to meet the needs of our clients and policyholders. Given the large and growing retirement deficit in the U.S. and significant under-allocation to alternatives by individuals, we anticipate tremendous growth in our retail platforms and broader fundraising capabilities catered to high-net-worth investors.

Given this, we expect to scale our private wealth and retail fundraising to nearly $40 billion a year in the next five years. As the Corporation sits at the center of everything we do at Brookfield, we capture all the inflows across the business, further adding to our pool of discretionary capital. At the same time, BAM continues to benefit, as it manages most of the capital raised from our broader distribution capabilities across the franchise. This allows our Manager to grow its established product offerings and strategies for private wealth and retail investors, which should drive significant earnings and cash flow generation for years to come.

The Secret to Long-Term Wealth Is Compound Returns

Long-term wealth is created by investing in good businesses, running them well, and building them over decades or more. The value of long-term investing is often underappreciated by investors as it is often exhilarating to buy and sell things; a short-term gain always feels like one has been successful. However, the constant churn of assets causes tax friction and can sometimes result in an investment in a business that is in fact inferior to the one you had.

Of course, the proviso on the above is that the management team allocating your capital is making smart capital allocation decisions. This is one of the most important elements in business, as what you own today will likely be something very different 20 years from now, as the cash flow reinvestment is usually equally, or in some instances, more valuable than the actual assets you own today.

With respect to Brookfield Corporation, our long-term compound annualized return has been 19% for 30 years. That is a 16,400% return over the past 30 years. The key has been to make sound strategic, investment and business decisions over long periods of time, resulting in strong long-term wealth creation.

Several unique factors today set us up for similar—or possibly even better—returns in the next 10 years. The first is that we recently spun off our asset management business to shareholders and are in the midst of positioning it for inclusion in U.S. equity indices. This should enable it the freedom to grow and further drive value creation as the business continues to utilize its competitive advantages. To date, this has surfaced significant value for our shareholders with a market capitalization of approximately $85 billion. It takes time for investors to absorb that scale of value enhancement in a company, but it is clear now to investors that we own one of the pre-eminent alternative asset management franchises globally.

The second is that many of our assets are interest rate sensitive, and the rate increases over the past few years resulted in negative sentiment towards assets such as ours in general. That is over and those headwinds are now turning to tailwinds. This should be helpful in a number of ways – including increased transaction activity, lower borrowing costs, and lower capitalization rates leading to higher asset values.

The third is that amidst the chaos of the last four years we made a strategic decision to build a wealth solutions business focused on low-risk annuities and pension risk transfer when interest rates were zero, and the risk of not being able to outearn the cost of the liabilities was being questioned—understanding that the odds were that interest rates would not stay at zero forever. This led us to acquire three insurance companies and re-allocate a large portion of our excess cash for the last four years to back our wealth solutions platform. It turns out this was well-timed, and today our wealth solutions business is heading towards $2 billion of annual cash profits. As important, we are now a top-tier underwriter of annuities in the U.S. market; next up is the U.K. pension risk transfer markets, followed by Asia, armed with the knowledge and skills that we have built in the U.S.

All told, these few strategic decisions have added over $50 billion of value to shareholders in the last four years, which is an approximately 60% return over that period on Net Asset Value. The easy part should now be to have the share price of Brookfield Corporation reflect that for you in the market, or return it to you, as with the nearly $40 per share in cash or securities we have returned to you over the past 30 years in the form of cash dividends and tax deferred spin-offs. These have diversified some owners’ interests and created liquidity for others.

Of course, all remaining shareholders benefit from all of the above, and rest assured that management has your interests in mind every day. That is because we care a lot, and also because we own close to 20% of the overall shares in the company. We are very strongly aligned with you in every decision we make.

With that in mind, we often consider how to grow and evolve the business, including spinning off parts (we do acknowledge, however, that we have heard from some of you that we maybe do that a little too often) and all the value-surfacing steps that a company should consider. But take comfort that for the time being, as our various components work extremely well together, we think that the highest value will continue to be created with our structure the way it is. Rest assured that we are always open, though, to suggestions and welcome any that are value-enhancing in the long term.

Closing

We remain committed to investing capital for you in high-quality assets that earn solid cash returns on equity, while emphasizing downside protection for the capital employed. The primary objective of the company continues to be generating increased cash flows on a per-share basis and, as a result, higher intrinsic value per share over the longer term.

Thank you for your interest in Brookfield, and please do not hesitate to contact any of us should you have suggestions, questions, comments, or ideas you wish to share.

Sincerely,

Bruce Flatt

Chief Executive Officer

November 14, 2024

Warren Buffett's Best Guidelines for Value Investing in the AI Era

Warren Buffett's Best Guidelines for Value Investing in the AI Era

Tony Daltorio - Barchart - Thu Oct 17, 2:05PM CDT Contributor Content  Follow this Author + Follow

There is little doubt that the Mount Rushmore of investing greats would contain a likeness of Warren Buffett. From 1965 to 2023, his Berkshire Hathaway (BRK.A) stock appreciated at a compound annual growth rate of 19.8%. That’s nearly double the S&P 500 Index's ($SPX) annualized return of 10.2% over the same period.

www.barchart.com

Buffett built an unparalleled reputation over the years through his unwavering commitment to value investing, which has almost become a lost art.

He studied economics and finance at the University of Nebraska and the University of Pennsylvania’s Wharton School, and then went on to study at Columbia University. That’s where Buffett was introduced to the value investing philosophy of Benjamin Graham, widely considered to be the father of value investing.

Graham’s book, The Intelligent Investor, first published in 1949, provides all of the information needed to become a successful value investor. He also taught a course in security analysis that Buffett attended. Needless to say, Buffett was impressed by Graham’s approach, and has credited his former mentor with providing the framework for his own investment philosophy.

Buffett is also known for making long-term investments, holding onto companies for years or even decades, and avoiding frequent trading. This approach allowed him to take advantage of the power of compound interest, and gives the companies he invests into the time needed to grow and generate substantial returns.

His shift towards a more long-term approach, centered around finding great companies at a fair price, was influenced by his partnership with Charlie Munger.

With Munger’s push, Buffett began focusing on companies with a durable competitive advantage and a strong brand, or what he called a “moat.” Today, Buffett continues to apply this “great company at a fair price” approach to his investments, focusing on companies with strong growth potential and a durable competitive advantage.

A Value Investing Bear Market

Despite Buffett’s undeniable success, many investors today think value investing is dead. At the very least, it is wildly unpopular in today's artificial intelligence (AI)-fueled era, with the market dominated by the “Magnificent Seven” technology stocks.

However, there is reason to hope for a renaissance in value investing, according to Rob Arnott in a recent Financial Times article.

If you compare the ratio of the stock price to the book value of the cheapest 30% of stocks around the world stock market with the most expensive 30%, value is normally about 25% as expensive as growth.

Arnott said that, in the 2005 to 2007 period, value was expensive by historical standards, with that relative valuation level hovering near 40%. But by the summer of 2020, value stocks were left for dead, as cheap relative to growth stocks as they were at the peak of the dotcom bubble. Even now, value stocks are a mere one-eighth as expensive as growth stocks - a main reason for Arnott’s bullishness on value.

I often think - if I were still an advisor, how would I guide my clients in this current climate? 

Well, who better to turn to than Warren Buffett for advice? Here are some of his guidelines that I’ve always followed…

Buffett’s Investing Guidelines

“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

This first quote from Buffett highlights his focus on quality over price. He believes that it is better to invest in a company with a proven track record of success, a durable competitive advantage, and strong growth potential. However, Buffett is a true value investor. Buying great companies cheap is what value investing is all about.

This brings us to another Buffett quote…

“Price is what you pay, value is what you get.”

Buffett believes that it is more important to focus on the value a company provides, rather than simply its stock price. He looks for companies with strong fundamentals, durable competitive advantages, and a history of growth, and he is willing to pay a fair price for these companies, knowing that their value will increase over time.

Pay less attention to earnings per share, which can be “massaged” by management. Look for solid return on equity, high operating margins and low debt. In addition, look for companies that generate lots of cash and have a consistent operating history during the past 10 years.

Buffett likes buying companies with an “economic moat,” which gives a company barriers or protection from its competition. Examples of competitive advantages include high capital costs for rival companies to enter a business, a strong brand identity, or patent protection.

“Be fearful when others are greedy and greedy when others are fearful.”

This is actually my favorite Buffett quote, as it highlights his contrarian approach to investing, which is also mine.

Buffett often takes advantage of market panics to buy companies at a discount, knowing that their value will eventually recover. He also avoids overpriced companies, even if everyone else is investing in them, knowing that their value is likely to decrease over time.

I’ve found that going against the crowd can be an effective way to make a lot of money.

Another well-known investor, Jim Rogers, nicely described the art of patience and being a contrarian investor in a quote: "I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime."

Rogers' quote suggests that investors should wait for an opportunity to present itself and then pounce, rather than chasing the latest hot trend.

No one else can be Warren Buffett, but we can all incorporate some of his methods to become better investors.

-------------------------

Source

https://www.barchart.com/story/news/29091638/warren-buffett-s-best-guidelines-for-value-investing-in-the-ai-era

BIP - Q3 2024 Letter to Unitholders

BIP - Q3 2024 Letter to Unitholders

Overview

Brookfield Infrastructure is pleased to report strong third quarter operating and financial results. Funds from operations (FFO) is 7% higher compared to last year and we have advanced many of our strategic initiatives. Our focus during the quarter was on advancing our record capital backlog, which now totals $8 billion, and delivering on our capital recycling objectives. We also remained active in the capital markets, completing financing activities totaling $3 billion, which included a sizable recapitalization at our North American gas storage platform. Proceeds from this financing, combined with the exit of our Mexican regulated natural gas transmission business and several smaller asset sales, resulted in total capital recycling proceeds of approximately $600 million. We have now secured proceeds of $2 billion from capital recycling activities and have achieved our target for the year.

Our growth profile continues to accelerate, focused around decarbonization and digitalization investment themes. We are also seeing more opportunities for value creation within our existing business and our new investments pipeline. Most notable are the tailwinds created by artificial intelligence (AI) and associated power demand. Our existing platform spans many of the sectors directly benefiting, including our natural gas and midstream infrastructure to our data center, fiber and telecom platforms. We have seen this translate into a 20% increase in our capital backlog in the last twelve months, while providing very attractive project level returns.

This year has been notable for the number of elections, with more than 3.7 billion people eligible to vote across 72 countries. While election outcomes can result in policy changes, we believe that we are largely insulated from volatility due to the quality of the countries we invest in and our focus in areas of the economy that garner broad political support. The global economy is in the early innings of a massive investment cycle caused by energy transition and AI innovation, two areas that we are a leader in. With our unparalleled access to scaled capital, we expect to put significant capital to work as we seek to expand our ‘partner-of-choice’ reputation.

Operating Results

FFO was $599 million, which is 7% above the comparable period. On a per unit basis, FFO was $0.76, which represents a 4% increase after considering the increased share count associated with the privatization of the global intermodal logistics operation last September. We experienced strong contributions from the new investments completed last year, as well as the initial contribution from three accretive tuck-in acquisitions that closed this year. Results also benefited from organic growth at the midpoint of our target range, capturing annual rate increases from inflation indexation, stronger transportation volumes and the commissioning of over $1 billion from our capital backlog. This result was partially offset by the impact of higher borrowing costs and foreign exchange, most notably the depreciation of the Brazilian real. When normalizing only for the impacts of foreign exchange, FFO per unit growth was 10%, which is in-line with our target and better reflects the current operational performance of our businesses.

Utilities

The utilities segment generated FFO of $188 million, an increase of 9% on a comparable basis. In total, the amount was higher last year as we sold our interest in an Australian regulated utility business and completed a recapitalization at our Brazilian regulated gas transmission business in the first quarter. Organic growth for the segment was driven by the continued benefit of inflation indexation and the commissioning of over $450 million of capital into the rate base over the last twelve months.

Our U.K. regulated distribution business completed the build out of the first community centralized heat hub network, with homeowners currently taking possession. The networked air source heat pump solution facilitates the U.K.’s transition away from natural gas for new build homes. It lowers residential energy bills by up to 20% using reduced electric grid capacity and provides a lower cost alternative for housing developers. Since the initial launch in 2022, the business has built up a pipeline of 7,000 units and has completed two large scale networks comprising 2,000 units that are scheduled to come online beginning in the fourth quarter.

Within our residential infrastructure business, in Europe, we onboarded three tuck-in acquisitions focused on rolling out our rental product offering and increasing our market penetration in strategic markets such as Germany and Spain. In total we have completed £130 million of tuck-in acquisitions to drive growth in key markets since our initial acquisition of HomeServe in 2023. In Canada, we successfully completed a billing migration for 100% of our customers to an in-house platform from the local utility bill. We expect the new billing platform will provide better customer connectivity and improved opportunities to sell additional services and decarbonization products, allowing us to grow our annuity asset base with existing customers.

Transport

The transport segment generated FFO of $308 million, which represents a 50% increase over the same period in the prior year. The increase is primarily attributable to the acquisition of our global intermodal logistics operation that closed at the end of the third quarter last year and an incremental 10% stake in our Brazilian integrated rail and logistics operation that was completed this year. The remaining businesses performed well, with strong volumes across our networks and average rate increases of 7% across our rail networks and 5% across our toll road portfolio.

As part of its modernization and decarbonization plan, our U.K. port operations took delivery of an innovative hybrid dredger that can be powered by electricity or renewable fuel sources. The £23 million investment supports our strategy of renewing end-of-life assets, reducing future maintenance costs and advancing our decarbonization initiatives, while fulfilling obligations as the statutory harbor authority.

We reached a major construction milestone at our Brazilian toll road business with the completion of the Florianopolis Ring Road in July. This project was one of the largest road infrastructure initiatives in Brazil, spanning over 50 kilometers, including 8 tunnels and 21 bridges. It not only enhances the movement of people and goods across the State of Santa Catarina, Brazil’s third largest state on a GDP per capita basis, but also diverts vehicle traffic away from urban areas. Looking ahead, a combination of tariff rebalancing in 2025 and continued traffic growth is expected to drive strong same-store growth.

At our Australian Rail Network, revenues were approximately 3% lower compared to the prior year as lower commodity prices reduced customer activity levels across our network. We expect revenues to improve in the coming quarters following the execution of a multi-year contract with a new customer to rail over one million tonnes on the network per year that commenced in September. The new contract is expected to provide an approximate 4% uplift to the business’s annual EBITDA once fully contributing in 2025.

Midstream

The midstream segment generated FFO of $147 million, compared to $163 million in the same period last year. The decline is primarily attributable to capital recycling activities completed last year at our U.S. gas pipeline and higher interest costs across the portfolio from new financing initiatives. The underlying businesses are performing well in the current environment following continued demand for long-term services supported by robust customer activity levels across our critical midstream assets, particularly at our North American gas storage business.

Our Western Canadian natural gas gathering and processing operation continues to add long-term contracts across its asset footprint, including at its largest facility. During the quarter, the business entered into a new firm processing agreement representing over 10% of the facility’s capacity. This contract firms up prior spot volumes and secures incremental capacity above current contract levels. We expect the new agreement will result in approximately C$7 million of incremental annual EBITDA on a 100% basis.

During July, our diversified Canadian midstream operation recontracted legacy commercial processing arrangements at one of its key central Alberta processing facilities into long term arrangements that will result in the business retaining an estimated incremental C$70 million in EBITDA commencing in 2027. Also in July, the business completed the addition of a new feedstock cavern to support the facilities business, which will generate an additional C$4 million of annual EBITDA on average on a 100% basis.

Our U.S. gas pipeline continues to perform well with throughput increasing 7% versus the comparative period. In response to increased customer demand and a shortage of critical natural gas infrastructure, our business is expanding its Gulf Coast storage capacity by an incremental 10 billion cubic feet. The expansion is underpinned by take-or-pay contracts for 100% of the capacity, with a 12-year weighted average term. The project is expected to generate annualized EBITDA of approximately $15 million with a net investment of approximately $70 million on a 100% basis. There are strong demand-pull signals for new transport capacity to service gas-fired power generation, which we are actively working to commercially secure.

Data

The data segment generated FFO of $85 million, representing a 29% increase over the same period last year. The step change is attributable to strong underlying performance and several new investments completed over the last twelve months. The most impactful was the tuck-in acquisition of a portfolio of retail colocation data centers completed in the first quarter. Our global data center platform continues to execute its development plans to drive growth, with an additional 70 MW commissioned during the quarter bringing our total installed data center capacity to over 900 MW.

In July, our European hyperscale data center platform successfully commissioned 10 MW in Milan increasing the total operating capacity to approximately 160 MW and is progressing on the build out of an additional 80 MW of capacity planned to be delivered next year across a number of key European markets.

Leasing activity in the U.S. remains very strong. Subsequent to quarter end we signed an agreement to provide over 100 MW of capacity for a hyperscale customer at our Phoenix data center campus, which is now fully leased. Construction at our under-development sites is advancing well, including the on-time and on-budget delivery of 50 MW in Dallas and Phoenix during the quarter.

Strategic Initiatives

On September 12th we closed the tuck-in acquisition of 76,000 telecom tower sites in India. We are now the largest telecom tower operator in India and second largest globally, with over 250,000 tower sites. This acquisition is highly complementary to our existing operations, increasing and diversifying our tenancies from the country’s second and third largest mobile network operators, while offering significant operating synergies. The scale and benefits of the combined platform were all achieved at a value-based entry point below 6x EBITDA. Our total equity commitment was $140 million, and we expect the business to generate a strong going-in FFO yield. Concurrent with the acquisition we completed a rebranding of the business, to Altius, which brings together the three acquisitions we have made in the Indian telecommunications space.

During the quarter we secured approximately $600 million of capital recycling proceeds, for a total of approximately $2 billion for the year, successfully achieving our capital recycling target. We agreed on terms to sell our Mexican regulated natural gas transmission business for net proceeds of approximately $500 million ($125 million net to BIP), crystallizing an IRR of 22% and a multiple of capital of 2.2x. The business is mature and derisked, having achieved its value creation plan, most recently securing an average regulatory tariff increase of over 25% that was effective June 1, 2023. The sale is expected to close in the first quarter of 2025, subject to satisfying customary closing conditions.

We also completed the recapitalization of our North American gas storage platform, raising $1.25 billion that enabled a $770 million distribution ($305 million net to BIP) in advance of a sale process. This financing alone returned more capital than we had initially invested and increased the investment’s realized multiple of capital to 2.5x. This is an extremely attractive result, given we still own a business that generates approximately $330 million in annual EBITDA. The remaining sale proceeds secured during the quarter were generated from the sale of several financial assets. We remain on track to close the sale of our fiber platform within our French Telecom Infrastructure business in the fourth quarter, generating $100 million in proceeds and an IRR of 17%.

Balance Sheet and Liquidity

The capital markets remain highly attractive for debt issuances, and we have been purposeful in capitalizing on lender demand. During the quarter, we completed $3 billion of non-recourse financings at our share, with the goal of efficiently financing our businesses, extending maturities and reducing our cost of capital. Some notable achievements include:

• Our North American hyperscale data center platform continues to successfully access the capital markets as the first AAA-rated data center ABS issuer. In the quarter, the business raised $370 million in the ABS market across three tranches. Combined with its issuance earlier this year, the business has raised $1.1 billion of total proceeds, enabling us to secure competitively priced capital to fund the continued build out of our backlog of hyperscale data centers.
• At our U.S. retail colocation data center business, we completed an inaugural $900 million ABS issuance in early October, with proceeds used to partially repay our acquisition financing. This financing not only allowed us to extend the maturity of the debt, but it also reduces the company’s annual interest expense by approximately $20 million.
• Following a credit rating upgrade at our Western Canadian natural gas gathering and processing operation, we successfully completed a repricing of an $800 million term loan that reduced credit spreads by 25 basis points. This transaction was the second repricing for the year, which allowed us to reduce the cost of the loan by an aggregate of 75 basis points, representing interest savings of $6 million annually.

We continue to maintain a conservatively capitalized balance sheet, with no corporate maturities until 2027 and only 1% of our asset level debt maturing over the next 12 months. We ended the quarter with $4.6 billion of total liquidity, which includes $1.6 billion of corporate liquidity and over $1.4 billion of cash across our businesses that positions us well to pursue our growth initiatives.

2024 Investor Day Recap

At our Investor Day in September, we reminded investors of the significant value creation we have delivered over many years. Since inception we have compounded unitholder returns by 15% annually and have distributed over $10 billion of cash to investors. To contextualize this, we illustrated that an investment in BIP on spin-off would have resulted in a combination of stock and cash valued at almost 7x their initial investment or approximately 9x if the distributions were reinvested.

While this history lesson helped set the stage, the primary focus of the event was on the future and how we are creating value through optimizing capital structures and capturing the tailwinds from digitalization.

1. Creating value through our differentiated access to capital markets: Our capital structure reflects the diversification provided by our underlying business. We strategically tailor each financing to the specific investment, selecting the financing market that balances cost, execution and flexibility, while also meeting our risk management objectives. As a result of this strategy, the staggering of our maturity profile and proactive approach to refinancing maturities, we can avoid accessing the market during periods of volatility. Today we have a weighted average debt maturity of 8 years and 80% of our debt is fixed rate.
2. Capitalizing on the themes of AI and digitalization: We’ve been experiencing a remarkable domino effect sparked by increasing digitalization and data demand, which is driving interconnected growth across multiple parts of our business. The first domino in this sequence is power. As the demand for AI utilization surges, so does the power demand, with AI chips requiring up to five times the power of standard chips. In the U.S., data center power demand growth driven by the exponential increase in AI workloads and the construction of new data centers is expected to rely heavily on natural gas power. This creates significant demand across many of our assets, including our pipelines, processing facilities and LNG assets that are part of the energy value chain. The resulting power then travels through our transmission and utility networks to data centers, where it supports the transfer of data across our fiber optic lines and towers to end users. This domino effect ties together assets across all of these core sectors, which collectively generate over 60% of BIP’s FFO.
   
   We have always invested in the backbone of the global economy. AI infrastructure is emerging as a new digitalization-themed asset class encompassing semiconductor manufacturing, compute-as-a-service, energy management, autonomous transportation, robotics and more. Combined, this represents a potential market opportunity of more than $8 trillion over the next three to five years. We are strongly positioned to be the leader in digitalization and AI Infrastructure, which is a natural evolution of our investment perimeter, while retaining our consistent and disciplined investment criteria.

In the next 15 years, we believe the world needs approximately $100 trillion to maintain, upgrade and build infrastructure and we will invest our appropriate share. Embedded within our business is a record backlog of organic growth projects of nearly $8 billion. We additionally have over $4 billion of incremental organic growth projects that our platform businesses are advancing, which comprise our “shadow backlog” and represent projects that have not yet reached final investment decision or are expected to be developed over the next three-to-five years. This is the highest level of investment activity seen within our businesses, and we expect it to accelerate.

Outlook

The economic backdrop for infrastructure investing has improved significantly, broadly speaking, with short-term interest rates moving lower, inflationary pressures easing and liquidity steadily returning to institutional investors. These developments bode well for our business strategy, and we are confident they will create an even more favorable landscape for both asset sales and new investments.

On the capital recycling front, we are seeing elevated demand for high quality infrastructure assets, and we expect to realize considerable benefits from asset rotation. In the next two years, we expect to generate $5 to $6 billion of proceeds from capital recycling initiatives to crystallize the value we have created within our mature and de-risked businesses. These asset sales are expected to generate returns well in excess of our targets. From a deployment perspective, the growth outlook for our business is strong. Industry trends are better than ever, with digitalization, decarbonization and deglobalization driving the massive infrastructure super cycle. Our investment pipeline is as big as it’s been in two years, and it continues to grow.

We often characterize BIP as the investment for all seasons and cycles because independent of the economic cycle, election outcomes or the direction of interest rates, Brookfield Infrastructure provides investors an attractive mix of downside protection and upside growth potential that outpaces many of our pure-play sector peers. We believe this is more relevant today than it has ever been. The business is resilient due to the high degree of long-term contracted or regulated cash flow, with significant protection from inflation. Our business is also more diversified than at any point during our history. This combination gives us the confidence to believe that our portfolio can meaningfully increase cash flows in the years ahead.

On behalf of the Board and management, thank you to our unitholders and shareholders for their ongoing support.

Sincerely,

Sam Pollock
Chief Executive Officer
November 6, 2024

Brookfield Asset Management Shareholders, 3rd Quarter, 2024

Brookfield Asset Management Shareholders, 3rd Quarter, 2024

Overview

We generated record results in the third quarter. Fee-bearing capital grew to $539 billion, an increase of nearly $100 billion or 23% year-over-year, which benefitted from $135 billion of inflows over the last 12 months, growth in our public affiliates, and the acquisition of partnership stakes in leading partner managers.

Growth is being generated in all our business groups, with tailwinds provided by our global leadership position in energy transition, AI infrastructure and credit. We invested early into sectors which, today, are very much in favor – renewable power, nuclear energy, data centers and semiconductor manufacturing, all of which are experiencing multi-decade investment growth cycles.

On the back of this growth, we generated a record $644 million of fee-related earnings (FRE) and a record $619 million of distributable earnings (DE) in the quarter, increases of 14% and 9%, respectively, over the prior year quarter. The operating leverage inherent in our business has enabled us to expand margins to 58% in the third quarter, a greater than 200-basis point increase from the second quarter. Over the coming quarters, we expect to see further earnings growth over the coming quarters given the success we are having with our fundraising efforts for our flagship and complementary strategies.

Growing Market Tailwinds Enabling Monetization of High-Quality Assets

While global economies and capital markets were more volatile over the past few years, our franchise excelled, with both strong deployment and fundraising. Market conditions are increasingly more constructive. Inflation has eased in most regions, central banks have begun to lower rates, and liquidity is returning to the markets. Since late 2023, the cost of borrowing has declined over 150 to 200 basis points, creating greater confidence among market participants and increasing transaction activity.

We are seeing greater monetization activity, leading to more capital returning to clients and providing for a more constructive fundraising environment across the industry. Given the high quality of our underlying portfolio, we have benefitted disproportionately from this trend and expect it to continue.

Within our portfolio, we have started to see this impact, demonstrated by more than $17 billion of asset sales that we have signed or closed in recent months. With a strong pipeline of further asset sales, we expect this activity to continue. Some notable announcements include:

• In Real Estate, new supply is low across most sectors, financing markets have been steadily improving throughout the year, and underlying fundamentals remain strong, creating an attractive market for high- quality assets. We sold a total of $5.4 billion of real estate assets in the past few months. These include our UK Retail Parks Portfolio, a US Manufactured Home portfolio and the Conrad hotel in Seoul, Korea, which generated blended annualized returns of 28% and a multiple of capital of 2.5x.
• In Renewable Power, there is significant demand for stabilized, cash-generative businesses, particularly those that have a growth angle. We announced a total of $3.2 billion of asset sales in our renewable power and transition portfolio in recent months. The largest of these sales include Saeta Yield, a leading independent developer, owner and operator of renewable power assets in Spain and Portugal; our stake in First Hydro, a critical electricity generation and storage facility in the United Kingdom; and a 50% stake in our Shepherds Flat onshore wind portfolio in Oregon, which generated blended annualized returns of 27% and multiple of capital of 2.5x.
• In Infrastructure, demand is growing for stabilized, income yielding assets. We have announced a total of $2.6 billion of infrastructure asset sales in recent months. This includes separate agreements to sell two Mexican regulated natural gas transmission pipelines, which generated an annualized return of 22% and a multiple of capital of 2.2x.

Broader market stability should enhance our path forward by supporting ongoing growth and value creation across our business, while lower interest rates are supporting a recovery in yield-focused public stocks, including our Infrastructure and Renewable Power publicly listed affiliates. The management agreement with our affiliates is linked to their share prices, aligning our interests with their shareholders. As yield stocks continue to regain public favor, and with strong underlying business performance, our earnings should increasingly benefit from this tailwind.

Business Group Updates

We saw strong growth across all our platforms, especially within Credit, which accounted for more than half of the $21 billion raised in the quarter. We continue to see strong demand from clients increasing their capital allocations to credit strategies, particularly from the insurance sector.

In addition to successfully monetizing numerous mature assets, we have been actively deploying capital, with $20 billion invested or committed during the quarter. We also expect the coming year to be a good period for capital investment.

Highlights of our fundraising and deployment activity during the third quarter include:

Renewable Power & Transition

• Fundraising: We raised $2.2 billion of capital within the quarter, including:
  • An initial close of our Catalytic Transition Fund for $2.4 billion, of which $1.4 billion was raised in the quarter. This new capital is in addition to the $1 billion anchor investment from ALTÉRRA announced previously at COP28.
• Deployment: Subsequent to the end of the quarter, we announced a new partnership agreement with Ørsted to acquire a $2.3 billion stake in a premium portfolio of 3.5 GW of contracted operating offshore wind assets in the United Kingdom with a strong operating history.

Infrastructure

• Fundraising: We raised $1.4 billion of capital within the quarter.
  • With lower interest rates and clients returning to cash yielding investments, we raised over $500 million within our open-ended supercore infrastructure strategy, surpassing the capital raised for this strategy last quarter and making it our strongest quarter for fundraising in this strategy in over two years. We also raised nearly $800 million for our private wealth infrastructure fund.
• Deployment: We completed the acquisition of a portfolio of 76,000 telecom sites in India from American Tower Corp for $800 million of equity capital ($2.2 billion of enterprise value) in the fourth vintage of our flagship infrastructure fund.

Private Equity

• Fundraising: We raised $2.0 billion in the quarter, and last week announced two strategic commitments for our Middle East Partners fund.
• Deployment: We completed the acquisition of Network International for $2.0 billion of equity capital through the sixth vintage of our flagship fund and our middle east fund. Post-acquisition, we intend to combine Network with Magnati, our UAE payment processing business, to create a leading payments platform in the Middle East that will benefit from secular tailwinds and significantly expand our presence in the region.

Real Estate

• Fundraising: We raised $1.6 billion of capital within the quarter.
• Deployment: We deployed $1.5 billion, including:
  • Over $500 million into numerous logistics portfolios across North America and Europe in our opportunistic flagship strategy.
  • Subsequent to the end of the quarter, we made an offer to acquire Tritax EuroBox, a publicly traded European logistics REIT, for approximately $730 million.

Credit

• Fundraising: We raised approximately $14 billion of capital within the quarter, including:
  • $6.4 billion across Oaktree funds and strategies, including $1.5 billion in the twelfth vintage of our flagship opportunistic credit fund.
  • $1 billion raised across our partner managers – Castlelake, Primary Wave, and LCM.
  • Inflows of $4.5 billion of capital from Brookfield Wealth Solutions, driven largely by institutional and retail annuity sales. We also raised $1 billion of third-party SMA capital from a large U.S. life insurance company. We are targeting $50 billion for similar SMAs over the next five years.

Increased Liquidity and Expanded Capabilities with New Partner Managers

Our balance sheet is very strong. We have significant cash on hand, zero debt, and are fully undrawn on our newly established $750 million corporate revolver.

Our balance sheet is used for seeding new strategies that meet the objectives of our clients to drive management fee growth and investing in partner managers that are complementary to our existing business and can strategically expand our product offering.

We partner with managers that are leaders in their space and that can help accelerate our origination capabilities and broaden our investment strategies. Further, we look for partner managers that can benefit from our collaboration and can accelerate their growth as part of our Brookfield Ecosystem.

During the quarter, we closed on a few strategic transactions, including:

• Castlelake: Castlelake is a market-leading, $24 billion AUM alternative asset manager specializing in asset-based private credit including aviation and specialty finance. We acquired a 51% non-controlling stake in the manager and its fee-related earnings as well as a small stake in its carried interest and principal investments. Additionally, Brookfield plans to allocate over $1 billion of capital under management to Castlelake strategies, enabling them to scale their funds and expand their strategies.
• SVB Capital: We completed our acquisition of SVB Capital through Pinegrove Venture Partners, our venture investment platform formed with Sequoia Heritage, which now manages approximately $10 billion in assets. SVB Capital’s 25-year track record in funds, private credit, and co-investments, alongside Pinegrove's existing expertise in venture secondaries and liquidity solutions creates a cohesive and dynamic venture platform that provides access to the innovation economy, designed to deliver tailored solutions for fund managers, founders, and limited partners in the venture capital ecosystem.

At our proportionate share, these two transactions have added approximately $7 billion of fee-bearing capital to our business and will contribute approximately $40 million of fee-related earnings on an annual basis. We are assisting both firms in accelerating their growth trajectories through our client relationships and access to scale capital.

Investor Day Summary

We hosted our Investor Day in September in New York. For those who were unable to attend, the webcast and presentation materials are available on our website.

In summary, our heritage as an owner-operator and 25-year track record of being a best-in-class alternative asset manager has enabled us to reach $1 trillion of AUM. Significant long-term macro tailwinds continue to drive the industry, with global alternative assets under management expected to more than double to $60 trillion in less than 10 years. We are positioned to capture this growth, which should allow us to double the size of our business over the next five years. Some of the topics we covered can be summarized as follows:

Expanding Client Capabilities to Meet Growing Demand Drivers

As the alternatives industry continues to grow, clients are increasingly demanding more from their managers— including global capabilities across a broad set of asset classes at scale, with products across the risk spectrum, and the opportunity for partnerships, SMAs and co-investments. We are using our scale to deepen our relationships with the largest institutional investors, while expanding our footprint into middle-market and family offices. As our strategic relationship with Brookfield Wealth Solutions continues to grow, we are developing more capabilities that we can draw upon to serve third-party insurance companies as well. Additionally, as we broaden our private wealth platform by targeting new investor segments and developing new products specific to our client base, this should drive further growth.

Brookfield Credit Will be our Fastest Growing Business

Earlier this year, we announced the formation of Brookfield Credit, which combined all of our credit capabilities across all our business and partner managers under one group. Today, our credit business represents nearly $245 billion of fee-bearing capital, with plans to grow to nearly $600 billion over the next five years. This growth will come through multiple avenues, which include expanding our flagship and complementary fund offerings and further building out solutions to meet the growing needs of our clients.

Growth Plans to Double the Size of our Business Over the Next Five Years

Our plan is to grow fee-bearing capital to more than $1 trillion over the next five years, doubling the size of our business. This generates 15%+ annual growth in earnings and dividends from continuing to scale our flagship funds, expanding our complementary strategies, and further building out our Credit Group. Growth in our capital base and expansion of our margins should accelerate our earnings, with expected fee-related earnings growing to $5.0 billion. Our earnings should become increasingly stable, with our long-term and permanent or perpetual capital base expected to represent over 90% of our total capital in five years’ time.

Further upside to our stable earnings base is our carried interest potential – this is our second leg of growth. While BAM can expect to realize approximately $2 billion of gross carry by 2029, this base has the potential to grow to $7 billion by 2034, proving to be a significant catalyst for distributable earnings growth in the years to come.

Enhancing Our Corporate Structure and Positioning Ourselves for Broader Index Inclusion

We continue to broaden our shareholder base and our access to the deepest pools of capital for our BAM shares.

Our public listing in December 2022 established us as one of the pre-eminent, pure-play, publicly-listed asset managers. Since then, we have received positive feedback from investors, with a significant increase in our U.S. investor base.

Our business fundamentals—including our stable, predictable earnings, an asset-light balance sheet, and strong growth prospects—make us an attractive investment. While we are pleased with our progress, there is still more we can do. One common theme we have heard has been the importance of broader index inclusion.

To that end, we are taking a few actions with the goal of positioning ourselves for broader index inclusion, and eventually to be eligible for the most followed, large cap U.S. indices.

The steps we are pursuing are as follows:

1. Changed Our Head Office to New York

   We have been operating as a U.S. company for twenty years. Our largest share of revenues, assets under management, and employees are based in the U.S., as well as the majority of our institutional shareholders are U.S. investors and the majority of our shares are traded on the New York Stock Exchange. This quarter, we changed our head office to New York—already our largest office—and starting with our 2024 annual report, our financial reports filed with the SEC will be identical in form to those filed by other U.S. domestic issuers.

2. Simplifying Our Corporate Structure

   The second step involves simplifying our corporate structure. As a reminder, we originally spun off our asset management business as a privately held company with two shareholders: Brookfield Corporation, which privately holds 73%, and publicly traded Brookfield Asset Management Ltd (NYSE/TSX: BAM), which currently owns the remaining 27% (these are the shares you own).

   Brookfield Corporation will now exchange its private interest in our asset management business for public shares of BAM, on a one-for-one basis. This will significantly simplify our structure – publicly-traded BAM will then own 100% of the asset management business, allowing the market cap to accurately reflect the total market value of our asset management business, something closer to approximately $85 billion today.

   Though this second step will not have an impact on shareholders or operations, it will require shareholder approval because we will be issuing approximately 1.2 billion shares of BAM to Brookfield Corporation in exchange for an equivalent number of privately owned shares of our asset management business, representing their 73% interest. As such, you will be receiving proxy materials over the next few weeks, and we will be holding a special meeting of shareholders to vote on this matter on December 20, 2024. We expect to close the transaction early in 2025, subject to regulatory and other customary approvals.

We are excited about both these initiatives, which we believe will deliver great value to our shareholders. Simplifying the corporate structure of the asset management business should make it easier for investors to understand and accurately value our security. In addition, broader index inclusion should drive increased ownership among passive institutional investors and attract a broader base of active investors who benchmark against these indices. This increased recognition in the market should ultimately lead to a broader shareholder base.

These efforts are aimed at ensuring our company can reach the broadest set of potential investors while having no impact to our operations, strategic plans or the tax profile of our dividends.

Closing

We remain committed to being a world-class asset manager by investing our capital in high-quality assets that earn solid returns, while emphasizing downside protection. The primary objective of the company continues to be to generate increasing cash flows on a per-share basis, and to distribute that cash to you by dividend or share repurchases.

Thank you for your interest in Brookfield, and please do not hesitate to contact any of us should you have suggestions, questions, comments, or ideas you wish to share.

Sincerely,

Bruce Flatt
Chief Executive Officer

Connor Teskey
President

November 4, 2024