Mario Saric

Mario Saric asked about the timeline to reach the 200 basis point net investment yield spread target for the Wealth Solutions business and the expected evolution of gross versus net insurance flows. He also inquired about the finalized composition of the Oaktree acquisition purchase price and its impact on BN share repurchases.

Answer

President and CFO Nick Goodman stated that the 200 basis point spread is a medium-to-long-term target, taking time due to disciplined deployment, with a focus on 15%+ ROE. Net flows are expected to stabilize at about one-third outflows versus inflows. Regarding Oaktree, Goodman confirmed roughly $250 million of BN shares were elected, with the balance in cash, and almost 100% of BAM consideration in cash, noting it will have zero impact on the broader buyback strategy.

Mario Saric asked about the expected timeline for the Wealth Solutions business to achieve its approximate 200 basis point target net investment yield spread. He also inquired about the anticipated evolution of gross versus net insurance flows, noting that net flows were about 40% of gross in the current quarter.

Answer

Nick Goodman, President of Brookfield Corporation, stated that the 200 basis point target is a medium to long-term goal, requiring time for disciplined capital deployment. He emphasized that the company prioritizes a 15%+ return on equity (ROE) over short-term spread targets. For gross to net flows, Mr. Goodman expects stabilization at approximately one-third outflows versus inflows moving forward. Regarding the Oaktree acquisition, he confirmed that roughly $250 million of BN shares were elected, with the balance in cash, and that the transaction would have no impact on Brookfield's broader share buyback strategy.

Mario Saric of Scotiabank questioned the long-term implications for Brookfield's corporate structure and ownership of its listed vehicles, given the strategic evolution towards backing its growing insurance operations with the balance sheet.

Answer

Nicholas Goodman, President & CFO, responded that the insurance business is becoming more integrated and foundational to Brookfield, not just a discrete investment. He emphasized that this shift creates a more efficient capital structure to enhance returns and serves as a growth engine for the asset manager (BAM), but does not change the firm's core investing skill.

Mario Saric of Scotiabank questioned the long-term implications for Brookfield's corporate structure, given the strategic shift to focus the balance sheet on growing the insurance operations.

Answer

Nicholas Goodman, President & CFO, clarified that the insurance business is becoming more foundational and integrated into the overall Brookfield strategy. He highlighted that this evolution creates a more efficient capital structure, enhances returns, serves as a growth engine for the asset manager (BAM), and provides powerful access to pension markets, while the firm's core investing skill remains central.

Mario Saric inquired about the potential to exceed the 25% five-year distributable earnings CAGR target in the near term. He also asked about the 2025 share buyback outlook and which part of the business offers the most underappreciated near-term growth.

Answer

President Nick Goodman clarified that the 17% DE growth from the existing platform is the core target, with the 25% headline figure achievable through monetizations and reinvestment. He confirmed Brookfield will remain opportunistic with buybacks due to the persistent discount to intrinsic value. For growth, he pointed to broad-based strength, highlighting the Wealth Solutions and Asset Management businesses.

Mario Saric asked about Brookfield's capital allocation strategy, questioning if a change in supplemental disclosure from 'distributions' to 'capital return' signals that share repurchases will become a structurally larger component. He also inquired about the timeline for the Wealth Solutions business to achieve its target 200 basis point investment spread.

Answer

President Nick Goodman clarified that the disclosure change was merely for better illustration and not a signal of a structural shift, although buybacks will continue while a value disconnect exists. Regarding the Wealth Solutions business, he stated a conservative estimate for reaching the 200 basis point spread target is within the next 12 months as the portfolio is gradually repositioned.

Mario Saric of Scotiabank inquired about the individual investor opportunity, asking how its demand ramp-up compares to the historical institutional trend and how much of it is already factored into the company's five-year Investor Day growth forecasts.

Answer

President Connor Teskey described the individual investor opportunity as "incredibly significant" but emphasized it will be an incremental ramp-up over many years, unlike the more established institutional channel, which he noted is also still growing. He framed it as a long-term growth driver that will build over time.

Mario Saric inquired about LP sentiment toward U.S. commitments amid tariff volatility and asked for a reasonable range of annual co-investment capital required from BAM for new complementary funds over the next 3-5 years.

Answer

An Unknown Executive stated that tariff volatility is not expected to change their fundraising trajectory, as the environment reinforces secular trends like onshoring and energy security, creating larger opportunities. CFO Hadley Peer Marshall clarified that BAM primarily seeds equity strategies and estimated the annual co-investment need at a 'handful of $100 million,' or $500 million or less, as the number of strategies grows.

Mario Saric of Scotiabank asked about the sustainability of the Q4 compensation and benefits expense level. He also inquired about the likely use of the balance sheet for external growth, specifically the focus between add-on GP expertise and other investments.

Answer

CEO James Flatt indicated that while costs will grow with the business, the growth rate of compensation expense is expected to be much lower than revenue growth, leading to continued margin improvement. President Connor Teskey clarified that the balance sheet will be used opportunistically for two main purposes: programmatic buyouts of partner managers and providing seed capital for new, scalable strategies to drive organic FRE growth.

Mario Saric asked about the expiration risk associated with uncalled capital commitments and how the expected acceleration in monetizations in 2025 might affect net fundraising inflows.

Answer

President Connor Teskey stated the expiration risk on uncalled capital is 'incredibly modest,' as nearly 90% of it doesn't expire until after 2028 and is concentrated in actively deploying credit strategies. He framed the strong monetization environment as a net positive, creating a 'virtuous cycle' where returning capital at attractive multiples fuels new, larger fund commitments, leading to positive net inflows for 2025.

In a follow-up, Mario Saric of Scotiabank inquired about the long-term office occupancy target of 94-95% and the reason for the large increase in straight-line rent in the core retail segment.

Answer

CEO Brian Kingston reaffirmed the 94-95% office occupancy target as the normalized level, though the timeline to achieve it is likely pushed out by 1-2 years. CFO Bryan Davis explained the retail straight-line rent increase was driven by the amortization of agreed-upon rent abatements, which will continue at a similar quarterly rate for the next ~3 years.

Mario Saric of Scotiabank inquired about BPY's potential involvement in the JCPenney transaction, the scope of the Q3 retail portfolio fair value write-down, and the strategy for upcoming retail debt maturities, including potentially handing assets back to lenders. He also followed up for specifics on the value of assets with debt comparable to their IFRS value and the core retail rent collection rates for Q3 and October.

Answer

CEO Brian Kingston clarified that Brookfield Asset Management, not BPY, is investing in the JCPenney deal, though BPY benefits as a landlord to 99 locations. CFO Bryan Davis explained the retail write-down was confined to a small group of assets impacted by recent bankruptcies. Regarding debt, Kingston described a case-by-case approach, confirming they would hand back assets where equity is impaired. Davis estimated the gross value of these impaired assets at $2-$2.5 billion, with Kingston adding their net equity value is near zero. Kingston also stated that Q3 retail rent collection averaged 70-75% and was trending significantly higher heading into Q4.

Mario Saric from Scotiabank asked about the reasons for the $1.2 billion decline in liquidity, the company's minimum liquidity target, the drivers behind the office portfolio's NOI decline, the potential for converting fixed retail rents to percentage-based rents, and the future capital allocation strategy between direct investments and private funds like BSREP.

Answer

CFO Bryan Davis attributed the liquidity decline to funding operating costs amid lower rent collections and continued investment in growth CapEx. He stated the current $6 billion liquidity level is 'more than adequate' without providing a specific minimum target. Davis also broke down the office NOI decline, citing lower parking revenue as the primary driver, followed by retail-related impacts and a hotel closure. Regarding rent structures, CEO of retail real estate Jared Chupaila noted that while there is some tenant interest in sales-based rent, it remains a minor part of the portfolio. Davis clarified that future direct investments would be 'tuck-ins' for core assets, while opportunistic deals would go through private funds.

Mario Saric from Scotiabank asked for the percentage of unpaid April rent from tenants with the ability to pay, details on BPY's capital commitment to the new retail fund, the IFRS valuation methodology for the retail portfolio, and the definition of a 'prolonged economic contraction' that would impact the distribution. He also inquired about the long-term outlook for office demand considering work-from-home trends.

Answer

CEO Brian Kingston estimated that over half of unpaid rent was from large tenants with the ability to pay. He clarified BPY's investment in the new retail fund would be minimal and flow through its existing 7% commitment to the BSREP fund. Regarding the dividend, he stated that a prolonged downturn or a second wave of closures could alter their positive outlook. He also argued that the need for lower office density would likely offset increased work-from-home trends. CFO Bryan Davis explained that the Q1 valuation focused on sensitizing near-term cash flows without adjusting discount rates due to a lack of market transactions.