Bruce J. Flatt "Durable Principles for Real Asset Investing" | Talks at Google

Bruce J. Flatt

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Thank. You for Nash and thank. You everyone for joining today, I, was. Given the task of trying, to. Give. An overview of the investment, principles, for real asset investing, that we follow. Within Brookfield, and, I. Would, just say that over. The years, we. Didn't have any secret, sauce, and we, had no. Strategy. Really, when we started I would say it was based on a value, thesis. And. Over, the years we've tried to learn and develop. A strategy that, worked for us and maybe, the number one thing. That I would say to. Anyone, that. Is investing, is that there's no there's never a right, strategy, it's whatever strategy, fits. Yourself. And what you want to do so. I'd start off with that for. Us though we. Generally, have. Always operated in, a. Methodology. Where we're trying to walk away from the cliff and. We. Keep this this. Slide in the office. And. Many, of the offices in the world to really indicate, and remind all of our people, that. One. Should always look, for opportunity. Away. From where the crowd is going and not. Go with the crowd and in. Real asset, investing. That's. A, very. Important, lesson to learn. 15. Or 20 years ago we wrote down the, investment, guidelines that. We had for, the company, ever. So, slightly, over, the years, those have changed but largely, they. Are the same the. First one is to identify places where we have a competitive, advantage and, in and invest, in those areas. Second. Always try, to. Invest. On a value, basis, so go away from where the people are going and invest where other capital, not and, we found that very important, to investing, in real assets, third. What we're looking to do is to buy, assets, or find assets, that that have cash, flow inherent, in them or. We. Can build the cash flows within the business so, they may not have cash flow day one you may have an office building and you may just have a piece of land but. Inherently it's in a good place where you can build it to generate, cash flow and it's similar, to many things in. The world and. Lastly. I guess we've always tried to adhere to the strategy, that being. Contrarian, and not, being where the crowd is going. Is. Hard. To do but the most lucrative if, accomplished. Measuring. Your success is, always important, and there's. I guess four things that we've tried to do to measure the success we always look, at success, on a, total. Capital. Basis, over, the long term and really that that gets, you staying, away from short term objectives within, a company which is often. Where companies make mistakes. Second. We always try to encourage all of our people to take, calculated. Risks. But. Compare, that risk with the return that one might get out of the investment. Third. We always, look for the return over the longer term as opposed to the short term. And will sacrifice long. Term return, to. Achieve a, short-term, return to achieve long term success.

And, Lastly. And I'll come to this later in the presentation but, we we. Seek profitability. Rather, than growth. Because. Growth doesn't. Necessarily. In what we do add value. Sometimes. It does but it doesn't necessarily add. Value, and. Is. To business, philosophy. We've. Tried to build the business across everything, that we do, and. The, relationships, we have based on integrity because if you're going to undo doer over very, long periods of, time you, need to have strong relationships. Both outside. The company and within the. People within your business. And we try to make everyone within the business. Think. And act like owners and there's many. Many ways you can do that but we try to accomplish everyone. Thinking, and acting like your owners and often. That comes with how you the. Incentive programs, you have in place but. There are many other ways to do that, out. There and lastly I guess. The ethos, within the company is to treat everyone's, money like it's your own and, we. Try to accomplish, that again, in many ways across the company. But. The business, model, of our company. And and. What we've tried to do with the business is is try, to make it very simple, and. It. Really just boils down to five things we try, to use the global, reach we have, to. Acquire real. Assets, on a value. Basis, once. We buy them these. Are assets that can be easily, financed. With long-term. Capital. That. Doesn't, participate, in the equity and therefore, the leverage, to, the return, to the common equity equity, owner is, significant. As long. As you do it properly. Third. We then try to take the people that we have in the business and. Enhance. The cash flows through. Using all those people in the operating platforms, we have to grow them. The. Equity, we find we. Get from our institutional, and other. Clients. Globally, and we. Look. To continue to grow and buy real estate and infrastructure, assets, with that capital, and then. We just do this over and over again and generally, we're very long-term in nature and, often owned assets, much, longer, than other people and. But. There were all the assets we own and buy or of similar cash flow characteristics. But. We try to use the advantages. That we have in, everything. That. We, do and there's really four, that. I'd like to highlight you to, you and. When. You think about real estate or infrastructure, investing, these are really four. Characteristics. We think can be very helpful as I. Said size does, not necessarily. Generate. Profitability. But. Given, the scale that we have, we've. Been able to use, size as, a, differentiator. And today. Given the size of the organization, that we have and the size of capital, that we have to put the work there. Are often, only one. Or two other people in the world that, someone, can bring a transaction, to that. Gives us a competitive, advantage and, if we can use the other advantages, we have it. Differentiates, our money versus, others. Second. Over. The last 20, years we, built a global business, very. Few other investors. Like us have, as large, of global, business as we have and that's allowed, us to move capital to. Where we can. Best. Find the opportunities, two. Years ago that was in Brazil. Recently. It's been in India in, 2009. As Pradesh. Mentioned. Earlier it's was. In the United States but. That global, platform, allows us to take ideas. And. Turn them. Into actionable. Opportunities, if you. Don't have a global platform you, can't do that, three. Most. Of the capital we have has, limited. Restrictions. On it therefore we can invest we're, agnostic to, the. Opportunity. Type. The. Form. Of investment. Whether. It's a public company a private investment. Or some. Other a convertible. Debentures or common equity, we're. Agnostic to that often, people have restrictions, on the way they invest and if you can be more, agnostic. To, that it's. Helpful, to the long term returns and, lastly. Our operating, businesses, give us a strategic. Advantage. To, be able to run. The businesses, and operate the things once, we're there. This, generally. Nabel's, one to find. Value, investments, no matter what the environment is, and, often. In countries and for, example in the United States say stock markets are at their high bond markets are at their high and often.

One Would say, it's. Tough to find opportunity. Within that environment and to. Some degree that's true but. If you can use your, advantages. To. Be able to find. Opportunities, within that sector you should be able to continue invest despite, the environment, in a country and, there's. A few reasons for that, often. Our investments. Are longer-term. And, are more liquid, than others so, our, advantage, is that we're willing to be longer term investor, and we're willing to have something that's a liquid versus. What others might accept. Often. They're larger, in size and that's not attainable, by others often. They're, not easily acquired, it's. Tough work to do it, syndicated. Or operated. By people, we. Bought a pipeline, in Brazil, two. And a half years ago that. Pipeline. Is a, major, infrastructure. Asset in the country not everyone, can run a large, pipeline in Brazil, often. These investments. Are seen. As risky. If you're. Not intimately, involved, in them which. Is a strategic, advantage if you do, operate, the type of assets they. Require skilled, people to operate, them and most. Of the time when, we're making investments, they're. Not it's not fashionable. Most. Investors. Follow. Fashion. If you. Cannot, follow fashion, and follow value. The. Returns will be much greater over, the longer term. It. Helps though for our business, that we've been in the front of a strong, trend, in the institutional, market over the years because. Sometimes. You can have capital, and you think it's a good opportunity if you can't find equity. To, be able to invest it's often difficult to do. And, part. Of that or the biggest part of that is that these real, assets, being real estate and infrastructure, have, a strong. Return. Profile, for people to invest into and there's, just. A few reasons for that one they generally, earn good, cash on cash yields, or ultimately, will once, a. Program. For them is put into place, -, they generally, can be contracted. For. Long durations, so you have security of cash flow and off it increases, over, time. Sometimes. That by inflation. And sometimes it's by other means, forth. Often, these assets. Are scarce. And as, many of you know from. Living in cities. The, world is urbanizing, and what it means is the value, of real estate in city, centers is getting more valuable every day and and that means assets, appreciate, in value the. Private, nature of them for. Pension, plans institutional, investors, allows. The volatility, to be low so they're not looking at the stock, market return. In their portfolio, going to up and down every day and the. Returns are, generally. Far, greater. Than. Other options available to investors, and I'll cover, that in a second. This. Slide just shows the. Institutional. Capital. In the world and, it's. Growing exponentially. Back in 2008, it was 23. Trillion, dollars. Today. It's estimated, in the range of the last number that we had was 2016. It's estimated just over 40 trillion and it.

Should Be over 80. Trillion, dollars, at by, 2025. So there's very, substantial. Amounts of money that's going into real estate or. Into these sovereign. Plans, and for. Us and who we invest, for those. The, the, most important, things that happening, is that the institutional. Plans are putting more of that, 23. Trillion 43. Trillion, 80 trillion, into real. Assets. Real. Estate and infrastructure, and alternatives, and if, you look back to 2000. The, percentage in their portfolios, in general, was 5%, today. It's 25%. And, we think that number, will be 40%, by, 2030. And what's. Happening. With that there's, this therefore. An exponential. Increase of. Money. Being. Taken out of equities and bonds going into these type of real assets really. Because they're they. They fit the profile, of their. Portfolio. And, and, it simply, comes down to this. One. Simple. Mathematical. Exercise. Bonds. Yield one to three percent if you're in Japan it's zero, if you're. Zero. Out to 30 years if you're. In Germany, it's 40, basis points at, ten years it's negative, 60 basis points, on. The cash rate and then, the unite in the United States we're pushing, three percent today. Equities. Generally. If you bought an index fund you probably. Will learn six to eight percent over, the next 10. To. 20 years if you stayed in and didn't, trade, and. Real. Asset yields can offer 6 to 20 percent so if you buy real estate or, infrastructure, and you do it right you can earn between 6 or 20 percent depending, on the type of thing, you do where you do it how you do it and those, type of things and that's really why. Significant. Capital is moving. Into these sectors and, we. Think that will stay, because we think that we're, in a continued. Range. Of lowish. Interest. Rates and that doesn't, mean they're going to be 3, percent on a 10-year. Treasury in the US but what is happening is that global, rates are very, low and, that's. Continue to keep the, the. 10 year rate in the United States low despite, the cash rate being, being. Pushed up. And. If you take all of that I guess, we've we've, tried to operate, with some guiding, principles of. What you should do when you're investing, in real estate and infrastructure, and we've tried to use those, as guiding, principles. For how you. Invest, into these. Type of assets for all our people and when. We started, the business 30, years ago and it was very small. You, could talk. To a few people in the office but, today with 1600, people in our investment, manager, and 75 thousand people in the company it's, important, to have those guiding principles, and, we. Have eight and I'll, go through those. Principles, and a few examples as. I'll. Talk through the. First one is if. If, we can find great, assets. We. Should always buy, great assets, and if. One, has to pay a little, more for great, assets. That's. Ok but make sure you buy quality now. Don't. Do it at any price because, price is always important, as I, stated earlier, go. Away from the trend and try. To buy value, but, if you can buy value, if you can buy great assets, especially. During distressed, times buy. Great things. Just. A short example in, 1996. We bought an office, building on Park Avenue we paid four hundred and thirty two million, dollars for it we've been through four cycles, since, then, of. Which. Included, 9/11, and the financial, collapse of 2008. We, sold this asset, for, 2.2, billion dollars last, year so we held it for 21 years for ten, years we've had had no money in it meaning we financed, all our capital out in the end we had a nine hundred million dollar mortgage on it so we had financed out our original investment plus, another five hundred million dollars, but.

This Is was an asset on Park, Avenue, which. Was in the center, of Manhattan and no matter what was happening in the world as long, as in the fullness of time as, long as you kept that great asset, it, was going to be worth more and there, were times when it was tough to own it and cash. Flows didn't look so good, but, a great. Asset in a city, could. Be paid up for a little, bit during. A period of stress, which we bought it during a period of stress in 1996. Second. We try to invest. Assuming. That we're going to own the assets, forever, now. That last asset I showed you we, own for 21 years from. In most people's, investing, principles. That is forever. But. We try to buy. Everything, that we'll own it forever and that the the, most, important, point there is if you're. Buying it and gonna own it forever, you. Look at it with the long-term, fundamentals. Involved. Not, what's, gonna happen, to it next month or whether it will trade up in the stock market, it's, that you would you may you, may have, to own it forever and. And. Even, though even though we may not own it forever. An. Example, just we. Bought this, incredible. Picture actually it's a it's, a pumped storage facility. So we own. Water. We. Run. It down we, generate, electricity and, at nighttime with. Electricity. Cost lower we pump the water back up to the top of the hill and put. It in this bathtub and it's. An incredible, asset and, and. When. We looked at it we bought it from bankruptcy, in. 2004. And, we. Didn't know what we were going, to be able to do it what, we'd be able to do with the asset I had no no, income, on it but we knew is a great asset and we. Underwrote it that we would be able to hold it, to. Hold it forever. 3. In the things that we do and this isn't relevant to every business but in the things that we do in real estate and infrastructure, the number one thing. That. Drives. Value. Within, an investment, is is upfront if, you can, invest. In something, in a great spot and if you can buy it at less and replacement, cost and if, you can it most. Often indicates. Value, because the competitive. Product, that will ultimately compete. Against you, will. Cost more than what you paid so. You should, be able to either earn a higher return or out price your competition. During the investment, and that's, probably the number one thing which is why you're always in the, in our. Business, what you're always trying to do is to. Move. Your capital, to the places where others, are not. We. Bought this. Company called terraform power in, 2017. It's a solar and wind business, it's, across has. A large. Business in the United States we had never. Been. Within in the solar business before. Largely. Because everyone, was building it and the, stock markets were trading at above replacement, cost but it got into financial trouble and we, were able to buy it at 60. Or 70% of, replacement. Cost and with that we. Think the returns going forward will, be, significant. In. 2014. We. Bought a number of office, parks in India, after having, been in India for a lot of years. Observing. What, went on and not making any investments, and, these. Office parks we bought probably. At 40, to 50, percent of, replacement. Cost. Which. Only. Because, of the structure, and the. Scarcity. Of capital it, was in the country at, that point in time. Fourth. The. Greatest mistakes, as opposed. To the greatest opportunities. The greatest, mistakes, in, real, asset investing, in. Particular, in real estate and infrastructure, have, been made by. Those that, miss finance their assets. Leverage. Is a, phenomenal. Thing because these type of assets are easily, financed. With two-thirds, of the capital which means you have a hundred percent of an asset working for you and only 33. Percent or, 40 percent of, the equity, invested. That's. An amazing. There. Are very few things in the world that you can leverage in that fashion prudently. But. One must do it prudently, with, term financing, and ensure. That you can survive the, market downturns. Many. Many people bought great assets, and lost them. Due to that which. I'll give, you an example here, we bought, General. Growth Properties in. 2009. Out of bankruptcy. We, bought some more in 2014. And we just are in the midst of, hoping. To take it private, next month. The. Instructive, point here is and in 2009. This company, was one, of the great retail, mall companies, in America, and it was miss financed, and the only reason. The opportunity, was available to us to buy it at that point in time is because the former, owners, miss. Financed the business it otherwise, would never have been available and in, fact no other company in the US has, been had been available before that for 15 years and probably won't be now for another 15 years.

The. Greatest, thing. That, indicates. To us it's. The time to buy assets, that we buy is that, when capital, is scarce, it, generally. Indicates. The, time it's. The right time to buy, so we, we. Look around the world trying, to find, the, opportunities. Where capital, is scarce, capital. Is runaway and we, have people, that can, enable. Us to action, opportunities. In. 2016. We bought a. Graphite. Electrode. Company, in the. United States out of bankruptcy it has plants all over the world and this. Company makes a. Mencia. Bowl to melt, steel. In. The United States and at, that time the, steel market was incredibly, under stress and. But. We were able to purchase, it and it, was really only because there was nobody else in the market that would put capital, into the steel industry at that point in time subsequent. To this, we. Reorganized. The business we've now taken it public at eight. Times the price that we paid and. It trades it's. Listed in. New, York today. We. Try with, all of this never, to be too positive or, too, negative, and I. Would just say the. News. Media. And stories. Always. Project. In our. View information. To. The positive, to positive and, to the negative, to negative so. When one reads those papers, and the. Information. On the. Internet. You. Have to be able to distill. That and what we try to do is never be too positive or too negative, and I'll, just use a small. Example. We. Bought this, metallurgical. Coal facility. In. 2009. In a bankruptcy, it's an amazing. Facility, it's it shipped 85, million tons which i think is the largest facility in the world of metallurgical, coal for steelmaking, to. Korea. Japan. India. China it's. In it's in Northeast Australia, and. Two. Years before, the. Company that owned it before we, bought it paid one, and a half times. Its replacement cost we bought it for 0.75. Replacement, cost the, fact is the only thing, that changed, is that they, were too positive at the time they bought it about what was going on and we. Were. Able to buy it because we weren't too negative, about. What was happening when we made the investment, so.

That's Always, what. We're trying to balance when we're looking at investments, and lastly. I just say that what we've, what. The rest is is just, execution. Execution, and, execution. And. These. Are these. Are difficult businesses. To operate but. Generally. It if. You work, hard you can earn decent, returns, we. Just bought a business in, the United States out, of. Out. Of bankruptcy. Called. Westinghouse, it services, nuclear, plants around the world and. The. Whole story, here will be how do we remake. The business. Over, the next three, to five years and it, will be it will be about execution. So. Often, we get asked that sounds like positive story what about what's, hard and I, would just say we. Make many mistakes it's, not possible, in an investing, not, to make mistakes so. Everyone. At, Google should. Remember that every. Mistake. Will. Be you. Just have to keep making them so we try to limit the amount of mistakes or the we try to not limit the amount of mistakes we try to limit the. The. Effect, of what the mistakes we make are and, and. Some, of those things are you, know that we've done that are are wrong. Sometimes. We've, got seduced. To by a bad, business, cheaply. That's. A mistake in what we do sometimes. We, started, too large in, a, new business or a market, sometimes. We, got the compensation. And centum plans wrong sometimes. We. Weren't as strict, on the financial, covenants in an up market because. What happens in an up market and the things that we do is everyone, wants to lend you money and. And. They'll lend it to you with covenants, which are freely. Available and you, need to be very careful, with that and lastly. Sometimes, we've taken on. Undue. Development, risk in new jurisdictions. Or unstable, ones and, I. Just, say those, those, are the things we've made, our mistakes. None, of them have been damaged. And damaging, enough to. The problem to the company but. We, and we've tried we try to learn from those all, the time. And. I'd say the world in what we do is always changing, as it is for everyone here and. I like, to use this slide, this is Dubai in. 1991. Which I did happen to go to and. It. Looked like that and, this.

Is Dubai as you all know in, 2018. And the little, slide, in the bottom right is ICD. Brookfield place so we're actually building a large office. Complex. They're an amazing, office complex. But. It's amazing, what changes. In the world and I like to look, at those two slides every once in a while and it just tells, you that the world continues to, grow. And evolve and. What. We like to focus on is. That change brings. Opportunity, and I'll mention, four related, to our business. There. Are significant. Retail. We. Believe retail real estate opportunities. And the, integration, with retail. And the, internet, and. Because. Of that it's. One of the the most, hated. Industries. Today and we think that there will be a significant, opportunity over the next 10, to 15 years because. Of that second. Were a participant, in the renewable power industry. With. With. Scaling. Up a production capacity the. Industry has changed dramatically. Over the past. 10. Years and. We. Think as one, of the leading players in industry we can capitalize on that in a significant, way third. Natural. Gas because, of technology. And fracking. Became. Very cheap, in particular, in the United in North America, and as. A result of that it has totally. Changed industries. It's brought chemicals, back to. America. It, has reversed. Pipelines. From, that. Used to go we reversed a pipeline, that went from south to north is, now going north to south, so. It's and it's changed, industries. Across. North. America and that's going to continue. Globally. And lastly. We think there are a number of and. You're experts, at. This here but we think there's a number of realize that technologies, that we can deploy. Within, our economy of Brookfield, to. Be able to make. Operational. Improvements, and enhancements within. The business. So. To sum up I'll leave. You with. Six. Points, of. Just where we're, where. We were thinking. As. A summary, but we. Think generally. As. You and as you put this into your thinking on investing. We think that interest rates are going, to stay in a low ish band that doesn't mean they're staying the same it, means they're staying in a lowish. Band. Of rates, with. - we think that institutional. Funds will continue, to, grow. And that that capital, will be available, for. Further. Privatizations. In the stock market. And. Investing, globally, and that will continue to. Drive. Business. Investment. Around the world, these. Capitals, are heading. To north, of 80. Trillion, dollars which is, very. Very sizable, amounts of money. Our. Suggestion, to, anybody, that's investing, is to stay, is to invest long term and try to capitalize, on. The. Fact that most, people don't invest. Long-term. And, often. Want liquidity. Within their assets, that they invest, in and there. Should be a premium, for. That if you can capture it. Fifth. Opportunity. Clearly. Lies in, our view where the sheep, are not going, so try, to be where, others, are not and, it. Doesn't, feel, good often. Especially sometimes, for long periods of time but in the end it's, often, extremely. Lucrative and. Last. The. Wealth that can, be. Generated. Through. Compounding. Of returns, is. Significant. And I I'm. Going to end on this. Slide, for. The presentation. And, I, just say the, most amazing. Thing. That the. That, the investment, world has is the compounding. Of return. And that's. And. When, I say that it's. Arithmetic. Aliy the compounding, of interest returns is whatever understands. But the compounding, of returns with businesses, if you can do it exponential. Numbers. Or. At larger, numbers that the numbers go exponential. As all, you mathematicians. Know. It's. Amazing what it accomplishes, if you can not make mistakes, too. Many mistakes or lose capital, on the way through and you just keep compounding, a return and. It. Really is an amazing, concept. In the world of investing, and not that many people pay. Attention to, it so I would suggest. For, you is to continue to buy. Great investments, and hold them and compound, don't pay taxes, when. By selling, them and, don't. Look for fashion, when. You make them so with that I, would. I'd. Be pleased to take any questions if, there are any. Thank. You, thank. You Bruce for that wonderful, wonderful presentation. Um so I had a few people. Email me in questions who. Are in different parts of Google and I thought we could run through, some of these and then take questions from the audience. The. First one is really about your journey I think we've heard mister. Bruce, flat CEO Brookfield but, what about mr., Bruce plaid the person right so you started off as an accountant. From Manitoba, and Forbes. Recently called you the. Toll, collector of the 21st century so, from, your personal viewpoint what are some events.

That, Have shaped your. Career. First. A trash can and then later at Brookfield. Look. I would just say. The. You. Make you either get lucky or you make your own luck, during. Your life I got, lucky in that I I. Met. Some. People, at, the original the predecessor, to Brookfield, we. Had a small company. We. Started, the business and, and. Thirty. Years later we've. Been doing, exactly what we. Started. 30 years ago and. So. I, if. You, can find I think, the greatest success, with, people is if you can find. Something. That you do, which. You're passionate about. You. Will be successful, and. And. I. Was passionate, about building, the business we. Had at Brookfield, and. Therefore, we've been relatively, successful over, the 30 years and we've had a lot of fun doing it so. I would, just as. A. This. Is to. Talk. About how, you how. You invest in the strategy for investing, and I think probably the number one is just, do. Things that you're passionate about and find businesses, you're passionate about and and. So that's really been my my, story. So. If we could go back from rainy giant book for you say in 1990, as. Baskin, and. With what you know today what, is one. Mistake, just one that. You wish you could go back and correct. Or fix if there, is one. There's. Many there isn't just one you, know I would, say. Look. We. Sitting. Here at Google and after having spent, the morning with you and your and and. Your colleagues I think. 2530, years ago we probably should, have paid. More attention to, what was going on in technology. And. Not because we're look, we think what we the business we have is phenomenal. But. I, think. We could have been more aware and, built. Other. Things, within the business if we were more more where technology. We should have if we would have bought had more businesses, in in San, Francisco probably. You know where our office business is very broad across the United States. We. Would have been here and we would have done more and we're. Doing it today and we're learning but. I'd. Say that's the one thing we probably, should, have been more aware thirty years ago now. Maybe lots, of people say that but. We had that we had the capacity to, do it and didn't, do it. So. I think in your presentation, there were three themes that shown one. Was value and buying value, the other was incentives, and. The last was patience, and I think I want to just focus, on that last part a little bit your. Investment, team is over, a thousand people and. You've. Had offices, and countries where you've not done a single deal for over a decade. How. Do you inculcate and incentivize. Patience, in your. Investment. Managers across the world and how do you think about it personally. Yeah. So it's look. It's difficult, the most the most difficult, thing about all, businesses, is people, and the, second. Thing. Is about people, and. Getting. Compensation. And incentives, right are a very. Important. Thing out of all of that and it doesn't mean everything in fact it's not everything if you don't have a great company to work at and people aren't passionate about what they do and where. The company's going. Conversation. Generally doesn't matter having. Said that if you, get. Compensation. Not. Done correctly, then.

Then. It can, be a problem and, so. We've, we. Try to make, sure that if we have new regions. That people are compensated, across the broader. Organization so. That they're not forced, to do transactions. And in, general that's how we operate our whole business and we, have four. Main sectors. Property. Infrastructure renewables, private equity, but. There are 10 businesses. Or. 15, businesses, within those. Entities. And, and. We're in 30 different countries so you can move, capital different, places and you have to make we have to make sure that people aren't incentive to do dumb things, because. They were compensated. That way so we spend a lot of time to make sure we get the alignment correctly. Another. Writing question that I had from, a few people was about, what. Advice you would have for them in. Residential. Or, multifamily. Small real estate real, estate that individuals, could go purchase, maybe with some debt and. Broadly. You know the questions are, all along themes of, where. Are places you would, recommend. Currently in the US what. What kind of debt financing would you would. You be looking at if you're doing this individually, right. And, the third is what. Does forever mean. Okay. Those are tough questions. So. Here's, what I would say there's, one thing and, I'll make, it just a broader observation. The one thing that we see everywhere, in the world and, this relates to. So. It covers, most of the things you just mentioned. Is. That there's a massive. 50. Year urbanization. Going on in the planet and we're, seeing it everywhere, and this is not just happening in China and India, it's, happening, everywhere, in the world. Vacancy. In, downtown. Sydney, is 1%. Today, and the. Reason it's 1% is. Because. Any. Tertiary. Class B. Bad. Hotel. Or office. Building is being torn down and, being. Built as residential, so. The, vacancy, is 1% in office, space because. People. Are coming downtown young. People. Don't. Want to live in the suburbs they want to live downtown so. What's happening is there's this massive, urbanization. Going. On so, I I, would just say that, for. People buying. Residential.

Real Estate go. Back to the principles, of real asset investing, buy great real estate in. Cities. Which are going to be part, of the 21st century. 22nd. Century and. And. Will grow over time and where young people want to live and, if. You do that over. The in the fullness of time I don't think you can go wrong. It. People. Get so. To your question on patience. Often. People are. Buying and selling things and the, problem with real, estate and the problem with real assets, is that these. Things, don't. Go like this they go like this and, often. When, it's time to buy and people get excited about buying it's the wrong time to buy. It. Will be fine in the fullness of time because. If you're in st. downtown San Francisco I'm, quite positive that 10, years from now 20 years from now 30 years from now those values, are going up but, there may be periods, of time where. You, have to sell and on, on the financing, point I just say, make. Sure that whatever, financing. You put in place. Can. Be serviced, that's that you're never forced, to be able to sell. That property at, the time when you don't want, to sell it and that's. Other. Than that leveraged debt, financing, is a phenomenal. Thing, and. And, leverages, these type of assets, and leverages. It prudently they're very few assets you can go to a bank and get two-thirds financed, on it's. Not easily, done with many other things especially individuals. Just, make, sure that you don't people, don't get themselves into, trouble that way, and. Before I open it up for the audience one final question that we ask all our guests what. Advice would you give, the. Young person, who's was probably listening to this right here today in the room or on YouTube, across the world to, get the. Magic of compounding working for them. Brook, Phil's ticker symbol, is the. Look. I would, just say that. The. Miracle. Of compounding, can. Be found almost in any of it can be found in index funds you're. Not going to compound, to the highest return if you buy an index fund but if you buy an index fund you're just buying the stock market of America, you. Will learn 7%. Over the longer term the, problem. Is most people invest. This. Month and then, they decide well it went down I should sell and. And. If it went up normally, they say wow this is exciting I made some money and they, keep it and they. Sell it the wrong times. So. The. Miracle of compounding, is just sticking, with it it's almost like anything in life it's like business, it's like your. Individual. Relationships. It's. It's. Like anything you just have to stick with it and it's, it's. It's, it's, patience. And sticking, with things so, I would just you, know I really think that's probably. The most important, thing of making sure compounding, works. Thank. You so much mr. flag questions. From the audience you can line up in front of the yellow mic have. Question, on, buying. Properties, and I, mean when you buy property you intend, to operate, in, a manner that's better than the original owner right, so. If, you buy property from a, mom and pop shop and, obviously. You can bring a lot of expertise, in there but. If you buy something. From like I say you acquire ggp right what. Kind of values you can bring to the properties that GTV. You cannot, do. It today. Yeah. So our, suare. Strat our. General. Strategy is, to, either buy, for. Value, when. Other, people, aren't going to that, investment, I'd say the you know the number one thing today, with, respect to retail, is that retail is one.

Of The more hated sectors, in investing. Today in the world everyone, thinks that everything. Will be sold online and street, retail won't be the. Place so the one. One, of the reasons we're buying it is that. Second. We often. Try to operate. Things better, than others with, respect to ggp I'm not sure that's the case they have a first class, operating. Platform, in fact we be adopting, that platform, but. The real value that. We see in that is something that can't be done within a retail. Real estate company, and that's. That these, are what. It owns is one hundred twenty-five. Hundred. Acre parcels. Of land in the middle of each of the cities in. The. United States in. Major cities in the United States and those. A. Courage's. Can be developed into many many other things and we have the skills to be able to add, multifamily. Apartments. And condominiums and. Storage, and industrial, and other uses. To those sites which couldn't, be done within ggp and we do all those other things so, that's really with a value, add that we'll bring to this acquisition. Thanks. Thank. You Bruce thanks. For the insightful, discussion. Today I work. For Google's data centers and, I. Wanted to congratulate. You for the, AT&T, data data, center deal a few, weeks back. My question, is over, the past two years what. We have seen is data. Centers have, really become an asset, class in itself within the TMT space. But. Brookfield, is a little late to the party I believe. What. Do you think. Is. The. Hypothesis. For data centers being an asset class in itself and what. Would be some of the risks, that you, think, in in, in acquiring, a data center like an AT&T data center. Ok. So first the I'm, sorry this is an amateur talking, to an expert about, data centers but so I'm not sure what advice. I, can give you but I would say back, to the question on what what. Mistakes, did we have over the years not getting, into technology we're, the largest real estate owner in the planet.

We. Don't own data centers and we probably should have been in data centers before and if we had focused more on technology it would have been there look, I don't I guess what I would say broadly, is we, think the. Sector. Of delivery. Of data infrastructure. To. People, is not, we're, not late this. Is this. Is going to be the, growth, of the data infrastructure. Sector over the next 15. 20 years as more and more data is delivered. Is. Going to be very significant, in between fiber-to-the-home. Data. Centers. And. All of that that whole sector we think there's a there's enormous. Amounts of capital that. Need to be deployed in there and and so. We're just we're getting smarter. Within, those sectors. Hi. I'm Metta thank. You for the talk. What, are your views on investing. In Bitcoin. So. I. Don't. Really have any comments, on it I don't understand. It and we. Would never invest, in it and I actually don't think it's. An investment I think. It's, it's. A product that. Delivers. Money from one place, to another it's. An alternative to cash some. People may want to use it I don't. Think it it doesn't fit in our realm of investing. It doesn't. It's. Not considered. An investable, it wouldn't be considered an investable, asset. But. Good. Luck to those who are investing. Into it, thank. You. What's. Your thesis with regard. To active, management of. Acquisitions. Be it real, estate. Or. To, the asset management of it yeah, so like when you purchase, General. Growth when you purchase or build a mall are you coming in and kind of taking a very active approach, to the management of those of, those assets or, you kind of know. What your thought process, within that, yeah. So our. Business. Is we, have. 1,500. Investment. People but then there's 80 75. 80,000 people down below that operate, the assets so most of the things we do we actively, operate. And we're. We're. Building. We're doing things with all those people once we buy an asset sometimes, we adopt the people and we're integrating. Them into our business. Once. In a while were, just a financial investor, into, something, because somebody brought us in and the reason for us to come in was that we could provide them capital, but, most things we do are quite active and, we think the.

The Lion's, share of the return we get isn't from a financial, return it's from. An asset, intensive. Return by operating. The assets better. Yeah. My, my, question is regarding the, the real estate opportunities, in. The Silicon Valley area where. We have, a huge demand of residential. And, not as much investment, I think what. You see as future, opportunities. Going. Back to my comment, on general. Residential. I would say. This. Is the center of technology, Silicon. Valley and, as. A result of that this market, I think, in the longer term will. Be extremely, good. There. May be times. 2009. Would have been the better time to buy a house in California than. It is today that's. Not to say that values. Won't be a lot higher ten years from now now there will be there. Are always ups and downs and. At. This time I don't think real estate is, going to cause the, next recession and therefore I don't think we're going to see the same mess in housing. In America that we saw, last. Cycle, two thousand eight thousand, nine but that's, not to say that housing, can't, go down in every market what, this. Micro. Market, has going, for it is a lot of, well-paying. Jobs. Which, will be an underpinning of the residential market for a long period of time and I don't think they're going anywhere. What. A delightful, talk and presentation, thank you so much mr.. You. You.

2018-09-11 02:13

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@16:54 the building in Manhattan bought for 432M$ in 1996 and sold for 2200M$ in 2017, that's exactly an 8% a year CAGR (Compounded Annual Growth Rate) over a 21 years period. The Dow Jones in the same period did 9% CAGR (dividend reinvested) So I don't know why he glorifies an investment that did worse than the equity market as a whole. And thank God he says they bought it in a stressed period and it was located in Park Avenue.

what is the name of the picture with the sheep at the beginning?

Fantastic video. Thanks for sharing these talks with the world

Best wishes to Brookfield's Westinghouse investment

Love Bruce Flatt. Highly ethical and outstanding CEO

Great video! Flatt is so humble and focused. Good points about paying attention to technology.

Kinda sounds like advertisement

like google?

Do you really know what BAM does and its historical return? This gent doesn't need to advertize and only takes in big institutional investors not individuals.

speed x1,5

Minute 2:37; less than 15 people in the room watching an outstanding CEO. What a pitty...

Just saw. Sad! (As the great, Donald J. Trump would say.)


I admire Bruce Flatt and he is a top CEO and a top speaker. I wish I could have been there to watch him live. But is a pitty that less than 15 people are watching live a 2B dollar man with so much knowledge speaking while millions of people are looking trash TV.

Yes but 11.6k views and counting. Youtube is the platform that matters in this case.

How does an amount doubling in about 8 years make the growth exponent.. just over 10% pa


Brilliant. Far too few people there. Hardcore educational for the aspiring asset manager.

If you guys are looking for a copy of the PDF there's one on my blog.

What a seller. You value investor suckers beware of these presentations.

Such a sucker, if i was the presenter i would have left.

Shame on Google. Such a great speaker and there are only few people in the room... He shares the important knowledge free of charge and only few came to listen...

One of the most undervalued value investors out there!

20:39 Those few people attending the talk, are a testimony to his philosophy, that most people skip the ordinary. Yet the few who carry on despite the odds, make it big one day

Great education for me ! Through books things are too dry for me to grasp the essence

Thankfully it's on youtube so we can all watch him and learn!! Will see him tomorrow LIVE in NYC.

I'm sure Brookfield will make highlights available from its Annual Investors Day, tomorrow (26 September) in NYC

I think I have had Brookfield stock for over 30 years back when it was Edper, Hees, Brascan, Coscan. It used to have a very complicated owner ship structure. Anyway I made money by doing what Brookfield was doing. It sold Brookfield Homes , I sold, when they starting buying I bought , when they bought the Brookfield Homes convertible pref so did I. There were so few owners of that issue it couldn't trade.

Seller? He literally does like 2 public appearances per year, except for their investor day. He is one of the least promotional CEOs out there.

Has many great quotes! Memorize his words no matter what you invest!

View on investing in bitcoin? are you kidding me google? This is who you have working with you? Such an amazing CEO. Would have loved to be there.

Thanks for inviting Bruce.

his primary thesis is wrong - asset centered is not the future, the future is asset-light, non-real asset businesses that produce profits.

Thanks google

Really few people have listening ears.

Brilliant‼️ Bruce, thank you so much for your great explanation.

Probably one of the most under valued investors in the world. More people should know who Bruce Flatt is.

Great CEO that definitely should have gotten more respect from Google!

I live two blocks from Google. When there are empty seats, can I come? This is an incredible opportunity regardless of what industry you’re in and I love stuff like this.

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