A Different Kind of Buyout Firm by Michael Santoli
Summary: Canadian Investment firm Brookfield Asset Management (BAM) focuses on real estate, hydro-electric plants ($5 billion worth), 2 million—and counting acres of timberland, power plants in emerging economies like Chile, and the traditional specialty finance fare. To grow operating cash flow per share by 35% in 2006, 45% in 2005, double its share price since 2004 to $55, and obtain a $20b market value from $70b in assets under management, BAM used a Buffett-like business model: 1) Strict value investment. 2) Contrarianism. 3) High quality long-term asset purchases after extensive research. 4) Taking small positions in new markets to learn the business. 5) Retaining good management. Assets are deemed investment-worthy by requiring minimal ongoing capital investment, steady, growing cash flows, and requiring reasonable debt for purchases. BAM recently profitably walked away from a bidding war over Mills Corp. (MLS) with Simon Property (SPG), in order to stay within its return-on-value guidelines. BAM's next focus is on infrastructure such as ports, pipelines and railroads. Rivals like Goldman Sachs (GS) are following suit, which BAM CEO Bruce Flatt says could pressure prices in the short-term, but in the long-term will create new markets. Barron's Bottom line: BAM's Buffett-like investments could yield more Buffett-like profits, sending shares to $70.