Brookfield Asset Management's 2008 letter to shareholders

About this letter

J. Bruce Flatt, senior managing partner and chief executive of Brookfield Asset Management, signed this letter to shareholders on 13 February 2009, and Brookfield filed it with the SEC the same day. He calls 2008 one of the most challenging years ever to be in the investment business, but reports cash flow from operations of $1.4 billion, or $2.33 per share, which he credits to long-duration hard assets and an investment grade capital structure.

Flatt acknowledges that the share price ended the year down 53%, its worst performance in 20 years, while arguing that asset values had fallen far less than the market. The letter sets out six operating priorities, Brookfield's reading of the market environment, the strengths of its platform, from about $20 billion of permanent capital to its renewable power and office portfolios, the capital it raised and invested in 2008, and its goal of 12% annual growth in cash flow per share.

What to notice

1. 1

   Flatt explains Brookfield's financing: asset-specific mortgages averaging about 50% loan to value, with recourse only to the asset, and argues that a loan's duration and covenants matter as much as the amount of leverage.

“the duration and covenants of the loan are as important as the amount of leverage itself”