We published our evaluation of Bill Ackman's demands for General Growth Properties (GGP) to sell itself back in September. We're still glad that GGP rejected Ackman's demands to put itself up for sale because we believe that the company is making steady steps in order to improve its fund flows from operations. We were also pleased that GGP was able to ensure that Brookfield Asset Management (BAM) was unable to take over GGP without a deal that will enrich Pershing. Ackman was also able to cash out a portion of Pershing's stake in GGP by selling warrants to Brookfield at a $4.25/unit premium and secured an agreement that limited BAM's stake in GGP to 45%. At the same time, we wonder if GGP's operating performance will catch up to what its largest rival Simon Property Group (SPG) is achieving.

(Click to enlarge)

Source: Morningstar Direct

Another reason why

Top Stories
AT&T reportedly thwarted in Telefonica bid. AT&T (T) has reportedly been thwarted in a €70B bid to acquire Telefonica (TEF) by Spain's government, which has the power to stop the sale of any company that is deemed strategic. The U.S. carrier told state representatives that it would take on the Spanish operator's €52B of debt as part of any transaction. Telefonica said it hasn't "received any approach or...indication of interest," from AT&T. The Spanish company's shares were +3.1% at midday in Madrid.

Kabel Deutschland sees Vodafone deal at €11B. Kabel Deutschland (KBDHY.OB) reportedly wants Vodafone (VOD) to pay over €8B in cash to acquire the German cable operator and assume nearly €3B in debt. The cash component would represent a premium of around 10% on Kabel's Friday close in Frankfurt and and an 11%+ premium on the €7.2B that Vodafone has already reportedly offered.

Boeing,

Brookfield Property Partners (BPY) is just another case of a recent spin-off, which is trading at attractive valuations and has meaningful upside potential in the medium term. This investment note discusses Brookfield from a fundamental perspective with analysis of its long-term investments to conclude on the bright outlook for the entity.

Company Overview

Brookfield is an owner, operator and investor in commercial property primarily in the United States, Europe, Australia, Canada and Brazil. The company was established by Brookfield Asset Management (BAM) as its primary vehicle to own and operate commercial property operations, including office, retail, multi-family and industrial assets. After the spin-off Brookfield acquired from Brookfield Asset Management substantially all of its commercial property operations. The chart below gives the current organization structure for the parent company and its stake in Brookfield.

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Sector Investment Overview

In terms of investment, the company's primary objective is to

© Elliott R. Morss All Rights Reserved

Introduction

For the last six months, I have recommended investments in US real estate and in commodities. I still believe both remain attractive investment vehicles. In this, the first of a two-part series on investments, US real estate is examined. The second piece will focus on commodities and ask whether the commodity-rich countries of Sub Saharan Africa deserve a closer look.

The Real Estate Cycle

The reasoning for real estate investments is that real estate runs in cycles that take years to complete. That means that once things start going in a certain direction, momentum will build and the direction (up or down) will continue for a number of years. The blue line in Figure 1 provides data on residential prices adjusted for inflation from 1890 to 2013. Note just how dramatic the upturn in prices was before the global collapse. The

Shares of KapStone Paper and Packaging (KS) spiked upwards in Monday's trading session following the announcement of the acquisition of Longview Fibre Paper and Packaging.

After shares have more than doubled over the past year, and shareholders have fully priced in the benefits from the announced deal with Longview, there is not much upside potential left.

The Deal

KapStone announced that is has signed an agreement under which it will acquire Longview Fibre Paper. KapStone will pay $1.025 billion in cash to Longview's previous owner, Brookfield Capital Partners II, a private equity fund managed by Brookfield Asset Management (BAM).

Longview is manufacturing high quality containerboards as well as lightweight high performance multiwall paper and specialty Kraft papers. The deal increases the exposure to the highly desirable containerboard segment and boosts the performance of the multiwall paper industry, a segment growing at 4% per year.

Chairman and CEO

May 09, 2013 10:00 am ET

Executives

Frank J. McKenna - Chairman and Chairman of Governance & Nominating Committee

Katherine C. Vyse - Senior Vice President of Investor Relations

James Bruce Flatt - Chief Executive Officer, President, Senior Managing Partner, and Director

Presentation

Frank J. McKenna

Good morning, ladies and gentlemen. It's now 10:00 a.m. and time to begin the annual meeting of shareholders of Brookfield Asset Management Inc. My name is Frank McKenna, and as chair of the corporation, it's my pleasure to chair today's meeting. On behalf of the board and my colleagues, I'd like to extend a warm welcome to everyone here today, including those joining us through webcast. We know your time is precious. We know that the day is inclement and we particularly appreciate people making the effort to come here and join us today in person. I will now

Q1 2013 Earnings Call

May 09, 2013 1:00 pm ET

Executives

Katherine C. Vyse - Senior Vice President of Investor Relations

Brian D. Lawson - Senior Managing Partner and Chief Financial Officer

James Bruce Flatt - Chief Executive Officer, President, Senior Managing Partner, and Director

Analysts

Bert Powell - BMO Capital Markets Canada

Brendan Maiorana - Wells Fargo Securities, LLC, Research Division

Alex Avery - CIBC World Markets Inc., Research Division

Andrew M. Kuske - Crédit Suisse AG, Research Division

Michael Goldberg - Desjardins Securities Inc., Research Division

Cherilyn Radbourne - TD Securities Equity Research

Presentation

Operator

Hello. This is the Chorus Call conference operator. Welcome to the Brookfield Asset Management 2013 First Quarter Results Conference Call and Webcast. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Katherine Vyse, Senior Vice President, Investor

Consumer Staples Are Overbought

The market as a whole is showing signs of being overbought. Specifically, dividend-paying consumer defensive names like Altria (MO) and Proctor & Gamble (PG) are priced for growth that simply isn't there. Part of this overvaluation likely lies with the current ultra-low interest rate environment, which has investors chasing after yield. And of course, part of this overvaluation likely lies with a psychological flight to safety after the great recession. After all, these are superior companies that can act as a safe haven in tough economic times.

Don't get me wrong. I'm not talking about shorting the most dependable dividend-paying stalwarts of all time. There is a huge difference between not buying Hershey (HSY) at close to 30 times earnings and actually selling a proven wide moat name like Coke-Cola (KO) at 21 times earnings. I think it makes perfect sense to hold most of these

I recently read a quarterly newsletter by Brookfield Timberlands Management LP, a wholly owned subsidiary of Brookfield Asset Management Inc. (BAM). In it, they discussed the NCREIF (National Council of Real Estate Investment Fiduciaries) Timberland Index results for 2012. NCREIF is an appraisal-based index. It included both third-party independent appraisals as well as internal appraisals of timberlands purchased for investments. Its members are generally the TIMO (Timberland Investment Management Organizations) community. TIMOs manage privately owned timberland investments. However, the results would also reflect on the value of the timberlands owned by the publicly traded timber REITs, Weyerhaeuser (WY), Plum Creek (PCL), Rayonier (RYN) and Potlatch (PCH). Timberland properties are routinely bought and sold by the TIMOs and timber REITs to and from each other.

For 2012, the total return from timberland investments in the index was 7.76%. This is broken down between EBITDDA returns and appreciation returns. Total EBITDDA returns

Yes, you can beat the market, but is it worth your time? Investors who consider the value of their labor and opportunity costs when calculating returns on investment may find that beating the market doesn't pay as much as they had hoped.

There is a widely read case study by the hedge fund AQR entitled, "Buffett's Alpha" that simply states that combining a low beta portfolio with leverage could replicate Warren Buffett's outperformance. The case study also revealed that over the 20 year period from 1991 to 2011 Mr. Buffett outperformed the S&P index by 2.4% annualized.

This begs an obvious question: if the greatest investor of all time can only produce a few extra percentage points of total return over a decades long time horizon using leverage, why bother?

Let's not fool ourselves here. Those small percentage advantages add up to huge sums of money over time,

In a recent article here at SeekingAlpha, I laid out an investment thesis for Brookfield Asset Management (BAM) focusing on the qualitative aspects of the business. Now I would like to lay out the investment thesis focusing on the quantitative aspects.

Brookfield is objectively cheap based on a sum of parts valuation. The company is comprised of a sprawling portfolio of investments of which 12 are currently publicly traded entities, one more which will be public shortly, and the actual asset management business.

If you add up BAM's ownership interests in the publicly traded holdings, the combined market value is around $22 Billion, compared to the holding company's current market cap of about $22 Billion. Which still leaves the rest of the company. So what else does owning BAM buy you? The two parts will we look into are the soon to be spun-off Brookfield Property Partners (BPY) and

Do you consider yourself a value investor? Are you a student of the investment practices of Warren Buffett?

If your answer is yes to those two questions then I bet you are familiar with Canadian company Brookfield Asset Management (BAM).

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Brookfield along with companies like Markel Corporation (MKL) and Fairfax Financial (FRFHF.PK) are companies that embrace the Warren Buffett culture of value investing. These companies focus on effective capital allocation and wealth preservation.

The people that run these companies are "value investors" and their results over the long term speak for themselves.

Brookfield lists its "Investment Principles" as follows:

Investment Guidelines

· Invest where we possess competitive advantages.

· Acquire assets on a value basis with a goal of maximizing return on capital.

· Build sustainable cash flows to provide certainty, reduce risk and lower the cost of capital.

· Recognize that superior returns often require

Enter the name of Toronto-based public company Brookfield Asset Management (BAM) into a search engine and it delivers more than 1 million results. The global conglomerate, whose annual sales exceed $18 billion, controls ports in England, owns Manhattan's prestigious World Financial Center and sells Chicago a fair measure of its electricity. Yet the massive enterprise is better known for what it owns than how it operates.

The Southern Investigative Reporting Foundation began a full-time investigation into Brookfield's far-flung operations in late fall. Our reporting and research uncovered a series of earnings quality problems, the presence of a mostly hidden ownership group that effectively controls Brookfield's governance and corporate structure, and a business model that involves heavy reliance on related-party transactions with its subsidiaries.

Few companies bear a structure as complex as Brookfield's: Analyzing the company's organizational tree and its web of entities, stakes, partnerships and operating companies is to behold

Legendary investor Marty Whitman of Third Avenue Value uses the term "wealth creation companies" to describe companies whose purpose is to create or compound wealth. While this may seem too axiomatic and pertain to all businesses, most companies only provide one specific product or service. For example Coke (KO) sells soft drinks and Nike (NKE) sells shoes. Successful companies do so profitably and the most successful ones grow over time, but their focus is quite specific. The focus of these conventional companies is sales and revenue growth, margins, competitive advantages and so forth.

Wealth creation companies are focused on asset allocation rather than current operations. Warren Buffett's Berkshire Hathaway (BRK.B) is the most famous example of this concept, and currently sells everything from electric cars to candy bars. The focus for this type of company is on the management team and their capabilities. Analysis of such companies is far more

Q4 2012 Earnings Call

February 15, 2013, 11:00 am ET

Executives

Katherine Vyse - SVP, Investor Relations

Bruce Flatt - CEO

Brian Lawson - CFO

Analysts

Bert Powell - BMO Capital Markets

Brendan Maiorana - Wells Fargo

Michael Goldberg - Desjardins Securities

Mario Saric - Scotia Bank

Andrew Kuske - Credit Suisse

Cherilyn Radbourne - TD Securities

Michael Smith - Macquarie Securities

Presentation

Operator

Hello, this is the Chorus Call conference operator. Welcome to the Brookfield Asset Management 2012 Year-End Results Conference Call and Webcast. As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. (Operator Instructions)

At this time, I would like to turn the conference over to Katherine Vyse, Senior Vice President, Investor Relations for Brookfield Asset Management. Please go ahead.

Katherine Vyse

Thank you Saatchi

2013 may not be the year of the mall. Large domestic shopping mall owners, including General Growth Properties (GGP), Kimco (KIM) and Simon Property Group (SPG), performed well since the market bottomed out in 2008 and 2009, even forcing GGP to seek bankruptcy protection. Nonetheless, these companies may have appreciated too quickly, especially considering the continued weakness seen in many geographic areas and the potential for high unemployment for several years to come.

In 2012, the REIT sub-group of domestic mall landlords appreciated by about 25 percent despite elevated delinquency rates within malls throughout the past few years. As a result of poor performing retailers and regions, both retailers and mall operators have been concentrating on the most profitable markets and limiting, and in some cases abandoning, endeavors in lower income areas.

This may be an indication of a need for several malls to be removed from the marketplace, and

During the entire "Cliff" debate, I focused on one thing only: Will the politicians be foolish enough to imperil the slow and fragile recovery taking place in the U.S.? And on this issue, merely avoiding the Cliff was not enough; the government deficit stimulus had to be large enough to keep the recovery going.

Austerity Concerns

The Republicans remind me of the German political leaders: Oblivious to the dangers of "imposing austerity" too soon, the Germans have demanded that Greece, Portugal and Spain tighten their belts by reducing their government deficits. The result? Greece and Spain have unemployment rates of 26%, with Portugal not far behind at 16%. As I have written, these rates are politically unsustainable time bombs.

The U.S. Situation

The employment numbers appearing in the following table are all that matter: 3.8 million jobs lost in 2008 and another 5 million in 2009 - 8.8 million

My favorite place to look for investment ideas is in the portfolios of legendary value investors. I figure if a stock has made it through the vetting process of an investor with decades of experience and an outstanding track record then it is worth my time to look at that stock as well.

One of the greatest investors of the last half century is a man who has racked up an incredible record investing in equities at Berkshire Hathaway (BRK.A). No, not Warren Buffett. I'm referring to Lou Simpson, former portfolio manager for Berkshire subsidiary Geico.

Simpson retired from Berkshire Hathaway in 2010 and Buffett had some kind words for his departing employee:

Last summer, Lou Simpson told me he wished to retire. Since Lou was a mere 74 - an age Charlie and I regard as appropriate only for trainees at Berkshire - his call was a surprise.

In a recent piece, I described the evolution of investment opportunities in the U.S.: real estate, savings accounts, stocks/bonds/mutual funds, pensions, insurance, and on to ETFs, hedge and private equity funds. What will happen in China? Will investment opportunities follow the same pattern or in some other? And are there going to be special vehicles developed in China?

I put these questions to Gregory Wang. Gregory has worked as an investment banker in both the U.S. and China. After going to college in the U.S., he took assignments in both The Philippines and China. He then got an MBA from Columbia and returned to China as an investment banker. He is now the CEO of Newstar Investment, a family office representing Chinese investors that make investments in China and the U.S.

My questions/comments will be identified by EM and Gregory's by GW.

EM: You have seen