Some thoughts.....1. I think BAM is over-leveraged and that increased credit costs, costs of capital, lower loan to values, could start stressing BAM. 2. BAM has quite a few Joint Ventures or minority interests. On projects they have co-investors. Both Co-Investor and BAM commit capital. I would watch if JV's start failing to meet capital contribution requirements. 3. Incestual sales and potentially unusual uses of related parties. 4. Potential slowdown in Alberta CN real estate. (BPO) 5. High occupancy rates in metro areas, possibly deteriorating because of reliance on financial service industry as well as potentially unusually high. 6. Recent exotic financings. One would be 1 Liberty Plaza NYC. I think the whole loan is $850M (350 + 500), 6.139% interest, Interest only till 7/2011 and then amorts over 360M, no prepayments until 4/2017 and maturity date is 8/2017. If I amortized correctly pay off balance on 8/2017 will be $777M. Certainly BAM received a lot of dollars, and via near interest only, BAM certainly has the lowest maximum payment at 6.139% for 10 years (2017). Then they balloon. 7. Industry credit tightness, and BAM's high leverage, could cause stress. Noting that $14 - $18B comes due on or before 2011. BAM has $33B of total debt. It seems as though a key thesis for a BAM long has been that the BAM investor thinks BAM has availability of low cost credit and on top of that has current debt that is very manageable because of thinking the debt with BAM and subsidiaries is one of operationally long-term in nature and primarily fixed rate financing. Historically that has been the case with BAM. It is my contention that this alleged long term fixed rate financing with ample liquidity for further leverage or refinancing is no longer as easy as it was. THE FOLLOWING IS AN IMPORTANT CONCEPT (IMO)BAM has total debt of $33B. On or before 2011, BAM has $14B - $18B of debt coming due. Included in the $33B is $1.6B due March 2009 for the purchase of Multiplex. BAM claims the debt has a LTV of less than 55%. One would wonder if other entities would question that LTV. An asset bought and negotiated from say March 2007 till October 2007 may have lost a bit of value. Has Multiplex lost any value, and if so, is that loss of value included in their estimation of LTV? If you look at the Multiplex Funds www.brookfieldmultiplexcapital.comYou can see how something has happened to values in Australia. I do not know if Multiplex has followed the same path downwards, but one needs to really consider whether values have decreased for BAM and if so, will refinancing of $1.6B be difficult. Maybe not, but certainly something to watch. Look at chart at end of page 1. Looks like price peaked when brookfield took over. I wonder if the price on this fund and other brookfield multiplex funds are just market driven. if so, I wonder if multiplex investment has gone down in value. If so, I wonder if financing needed will become at all difficult. I think there is one obvious thing that is going on in the markets. I also don't recall as many extensions on debt as opposed to recasting debt. That has been a trend on the street. Brookfield Properties has $6B coming due on or before 2011. This is included in the total BAM debt I referred to above. They have extended $89M this year, as opposed to refinanced. The extended is included in the $6B mentioned above. I did not include the debt due on discontinued operations. I do NOT consider $6B coming due on or before 2011 to be "long-term fixed-rate financing?" Much of the debt is interest only or with minor amortizations. No argument, all of their financings have been very preferential. Yet, we are in a different time now. Here is a collection of notes and links I put together http://www.rbcpa.com/companies/BAM.htmlI would be happy to debate and discuss BAM.
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