A luxury shopping mall in Shanghai, China. The former World Financial Center in New York. Hydro plants and toll roads in Brazil. Railways. Ports. Warehouses. Wind farms. Timberland.
These are just some of the holdings of Toronto-based Brookfield Asset Management Inc., which describes itself as a global alternative asset manager with more than $175-billion (U.S.) in assets under management.
Brookfield rose from the ashes of the former Edper Enterprises Ltd., which fell on hard times in the 1990s. Some of Brookfield's most prized properties once belonged to real estate developers Olympia & York and Trizec.
That's past now and Brookfield has established itself as a well-managed company with a global vision and enviable prospects, a stock that analysts see as a core holding.
"It should be a core part of anybody's portfolio," says Paul Harris, portfolio manager at Avenue Investment Management Inc. in Toronto, which owns the stock. "They have great management, great assets, good growth ahead, and a nice dividend, which is expected to increase over time."
Mr. Harris finds Brookfield appealing because of its infrastructure, renewable power and real estate holdings.
"From that perspective, I'd rather hold the holding company than the parts," he says.
The "parts" – three limited partnerships – are Brookfield Property Partners, Brookfield Renewable Energy Partners and Brookfield Infrastructure Partners. Units of all three are designed to appeal to the yield-hungry.
"We also like that it has real assets – property, infrastructure, power dams. "They've been in business a long time. They know how to buy things cheaply and they know how to run them," Mr. Harris says. Brookfield also runs a number of private equity funds for institutional investors that generate substantial fee income for the parent.
BAM stock, at about $40, is not expensive, Mr. Harris says.
"We value the company at $48 or $50, so there's a lot more upside." The dividend yield, at 1.6 per cent, is forecast to grow over time. As well, the company has been buying back its shares, which should give the stock price a boost.
In a recent investor presentation, Brookfield made the case that investors around the world are shifting away from stocks and bonds to real assets. This will only increase when inflation returns, it says. As well, cash-strapped governments will be having to sell off infrastructure projects. "Brookfield is a natural buyer," Mr. Harris says.
"There are good opportunities globally for this company," he adds. "If things work out, they may grow more aggressively than some people think."
If BAM has good prospects for capital gain, the limited partnerships will appeal more to investors seeking yield, says Nick Majendie, senior portfolio manager at ScotiaMcLeod in Vancouver.
"The growth in dividends is what I find attractive," Mr. Majendie says. All three are set up to be global companies. "They're a way to invest globally through a Canadian vehicle."
Income is not taxed at the partnership level but rather flows through to be taxed in the hands of unit holders, in much the same way as a real estate investment trust.
Brookfield Infrastructure units yield 5.17 per cent (at press time), Brookfield Renewable Energy, 5.63 per cent and Brookfield Property 5.02 per cent. Growth in distributions is strongest at Brookfield Infrastructure, Mr. Majendie said.
"They appeal to different investors. If you want capital gains, you buy BAM. If you want dividends, and dividend growth, you buy the subsidiaries."
For all three of the partnerships, he forecasts a total return of 15 per cent a year (dividends and capital gains) over five years.
Brookfield Renewable Energy has targeted growth in cash flow of 5 per cent to 7 per cent a year. "I think it's going to be 8 per cent or 9 per cent," Mr. Majendie says.
Brookfield Infrastructure is targeting cash flow growth of 10 per cent.
"I think it will be at least that, if not more," he said. "The company has demonstrated good success in meeting its targets." Earlier this month, it raised its distribution by 12 per cent.
Both the renewable power and infrastructure units stand to benefit from economic problems in Europe, South America and the emerging markets, Mr. Majendie said.
"European banks are having balance sheet problems and are having to divest assets. Brookfield has the capital to buy these assets at a discounted price."
On the real estate side, Brookfield Property is bidding to absorb its publicly traded, 51-per-cent owned subsidiary, Brookfield Office Properties Inc., in a deal that would make Brookfield Property one of the largest commercial real estate companies in the world. The purchase would let Brookfield Property tap the office subsidiary's cash flow.
Whichever way you invest in Brookfield – through the parent or the units – just tuck it away in your portfolio and forget about it, Mr. Majendie says.
"Don't think about them for the next five years." Your investment will grow slowly and steadily, "like watching grass grow."