Brookfield Asset Management

Brookfield Asset Management Inc. (BAM-a.TO) and institutional partners recently announced their proposal to acquire 100% of the units of Brookfield Property Partners L.P. (BPY-UN.TO) not owned by Brookfield for $5.9B.

I want to increase my exposure to the BAM group of companies. Since I am of the opinion the real estate aspect of BAM's business will recover at some stage in the future, I have decided to sell currently held BPY units and to acquire additional BAM shares since the terms of the proposed exchange offer do not appeal to me.

On January 4th, Brookfield Asset Management Inc. (BAM-a.TO) and institutional partners announced their proposal to acquire 100% of the units of Brookfield Property Partners L.P. (BPY-UN.TO) not owned by Brookfield for $5.9B. Following this announcement, BPY's unit price jumped from CDN $18.40 and currently sits at CDN $21.35 as I compose this article. Meanwhile, BAM-a's share price has dropped from its CDN $52.62 close on December 31st to the current ~ CDN$49.42.

BPY has certainly been hit hard by COVID-19 but in the Q3 2020 Letter to Unitholders, BPY's CEO indicated that an improvement in business conditions is being witnessed.

Looking at BPY's September 24, 2020 Investor Day presentation, Q3 2020 Core Operations Additional Information, and Q3 2020 Supplemental Information, we see that BPY has an attractive real estate portfolio. Parting ways with my exposure to these properties at the least opportune time does not sit well with me, and therefore, upon learning of the proposed transaction I decided to retain my exposure to the real estate component of BAM's business by acquiring additional BAM shares.

I did not want to receive cash nor BPY Class A Cumulative Redeemable Perpetual Preferred Units so my plan upon learning of this exchange offer was to liquidate my BPY units and to acquire BAM shares. I was unable to do this until I received the additional BPY units which were to be purchased via the automatic reinvestment of BPY's December 31st distribution; an additional 13 units were acquired at $19.01/unit and deposited to the account on January 7th.

In yesterday's article I disclosed the purchase of additional BAM shares through an account for which I do not disclose details; the purchase price was $49.23. Today I have acquired another 402 BAM shares @ $49.42/share in one of the FFJ Portfolio's Side Accounts. Proceeds for this purchase came from the sale of 605 BPY units @ $21.37/share plus cash which was in the account.

Final Thoughts

I like BAM's long-term prospects given that as at FYE2019 (December 31, 2019) this leading global alternative asset manager had in excess of $540B of assets under management including $290B in fee-bearing capital. In this October interview, Bruce Flatt (BAM's CEO) indicated BAM will very likely have ~$1T of assets come 2025. Even if BAM falls slightly short of this ambitious target I am extremely confident BAM will be far larger and far more profitable in the future.

Given my long-term outlook on BAM, the fact I do not want to exit my exposure to the real estate aspect of the BAM conglomerate, and the proposed alternates presented in exchange for each BPY unit do not appeal to me, I think the outright sale of BPY units and the purchase of BAM shares is my best solution.

Stay safe!

I wish you much success on your journey to financial freedom.

Thanks for reading!

Note: I sincerely appreciate the time you took to read this article. Please send any feedback, corrections, or questions to [email protected].

Disclaimer: I have no knowledge of your individual circumstances and am not providing individualized advice or recommendations. I encourage you not to make any investment decision without conducting your own research and due diligence. You should also consult your financial advisor about your specific situation.

Disclosure: I am long BAM-a.

I wrote this article myself and it expresses my own opinions. I am not receiving compensation for it and have no business relationship with any company whose stock is mentioned in this article.