BROOKFIELD ASSET MANAGEMENT LTD (BAM) 2004 Q1 法說會逐字稿

Good afternoon and welcome to the Brascan Corporation 2004 first-quarter conference call for April 30th, 2004. Your first host for today's call will be Mr. Bob Harding. Mr. Harding, please go ahead.

Thanks very much, operator and good afternoon everyone.

Welcome to our first-quarter 2004 quarterly conference call. Joining me on the call as usual is Bruce Flatt, our President and Chief Executive Officer, Brian Lawson, Chief Financial Officer, and Katherine Vyse, our Senior Vice President Investor Relations.

We just had our annual meeting this morning which was also webcast and I think a lot of the presentation materials as well as the questions and comments from shareholders are recorded on that, which is on our website. And covers a lot of the material we would normally cover at this time in our call. As a result of that, we thought we would keep our comments a little shorter than usual today and following that would as always be welcome to respond to any questions you may have.

At this point I'd like to turn the call over to Bruce Flatt.

Good afternoon.

And I guess I'll just discover a few of the operating results first and then Brian Lawson will take us through our financial numbers and then as Bob said we'll take some questions.

We had a good quarter in the first three months of this year, which should enable us to report strong results for the balance and we expect to report strong results in the balance of the year and we should be able to achieve our targets for 2004. With respect to Canary Wharf, which we made some comments on at the annual meeting, I guess the only thing I'll say is really three things, our tender offer is currently outstanding, it expires May 21, 2004, as does the Morgan Stanley offer. There are three alternatives that can happen.

One, we will be successful, two, Morgan Stanley will be successful, or, three, neither of us will be successful in buying the company because each of them is structured as a tender offer. And I guess we'll see what happens over the next month and we'll report to shareholders as events transpire over that time.

Moving on after Canary Wharf, I guess specifically to our operations. In our real estate business we had a positive quarter and Brian will talk about that. Some note worthy things is that we did lease almost two million square feet of space, continued our forward leasing of space within the portfolio far in excess of what is actually expiring, this included two leases in New York, a major lease with Price Waterhouse for 800,000 square feet, almost 500,000 feet with a law firm that's been in downtown for a long period of time called Cadwalleder. And a number of other leases in Toronto, Minneapolis and in some of our smaller markets.

So we had a very positive leasing quarter. Results were also affected by a few acquisitions and we did enter Washington, D.C. for the first time. In the power business, we had an exceptionally strong quarter based on generation of electricity, despite prices being down from last year in the first quarter we recorded record results in our first quarter. And we did acquire -- we did bring online a couple of plants within the business.

In our home-building operations we've had exceptionally strong results in the first three months. And to put it all into context, we are 70% sold for the balance of the year and as a result of that, you know, we should be able -- it's really just an execution game from here going forward to deliver the results for 2004.

We continue to do a number of things on the asset management side, which included continuing to build our mezzanine business in New York and we've -- I think found a niche for ourselves in the mezzanine lending business in -- headquartered in New York and it continues to be quite positive for us.

On our real Real Estate Opportunity Fund, we are looking at a number of things and we did close our first acquisition in the first quarter and look to a number of other things during the balance of the year and I'd say overall those operations are still in their infancy and we continue to build the businesses and probably the biggest thing we'll spend time on this year is investing the capital of our own and we've raised from others within the -- within the opportunity -- within the operations.

With respect to Noranda, the first quarter was significantly positive. We continue to look at our options for that investment with a backdrop of very positive fundamentals and very positive results coming out of the company. And obviously with that, there are a number of things that we can -- we can benefit from. So we continue to look at that.

Next for, which most of you would be aware of, but we took a significant step this quarter, and really because -- and as a result of the fact that OSB prices have been at probably the highest levels ever seen. In fact, they went through $500 per board foot in the first quarter. And as a result of that, the debt to capitalization levels have been coming down dramatically, which allowed us to really something we've been wanting to do for a long time, but split the paper business from the OSB business.

So they announced at the end of February a distribution of the paper business from the OSB company. We'll end up being 43% shareholders of both entities. And I guess to hopefully repeat the success we had with our split last year of our commercial and residential operations, um, we hope to be able to split the two apart and have the capital allocation decisions be made effective -- be made much more effectively because they trade on their own.

So in general, I'd say we had on an operations side a good quarter, we continue to look at a number of acquisition opportunities within our businesses. We continue to build out things that we have in the platform we have and the fundamentals are very good -- are very positive for most of our businesses. In fact, you know, they continue to be very strong in -- in most areas. And as a result of that, you know, our results have been quite strong.

Brian will talk about that and I think I'll just turn it over to him now.

Great. Okay, thanks, Bruce.

So turning to our first quarter results we are obviously pleased with how they turned out. Cash flow increased by 12%, $146 million or 74 cents per share, and net income increased nearly threefold to $147 million and that compares with $56 million in the same quarter last year.

The cash flow growth came significant amount of it from our power generation operations due primarily to better than average water flows and real estate operations also demonstrated solid growth, both in our commercial and residential property businesses. A substantial growth in net income is due not only to the growth in casual but also in large measure to a dramatic turnaround in the results in our investments in Noranda and Nexfor.

Noranda recorded its best results in a decade and Nexfor's also recorded record results. Both these companies are benefiting from very strong prices for their major products. Net operating income increased by nearly $60 million to $360 million for the quarter.

The -- as I mentioned, the Power Generation was a significant contributor to that. They had water flows substantially above average. They also benefited from increased capacity due to acquisition and development activities over the past years. -- year. Now, the law of averages will tell us that we can't expect to record this kind of performance indefinitely but it does appear that we'll continue to benefit from strong flows in the second quarter as well. So we're set up for a good year in that front.

As I mentioned previously, real estate activities also performed strongly and were the other source of major growth in the quarter. Commercial property, net operating income increased to $182 million from $155 million, and that was due principally to the acquisition of properties in Washington and the completion of our 300 Madison Avenue property in mid-town Manhattan.

Residential properties contributed $29 million compared with $18 million last quarter, and as we continue to see very strong performance in our markets. The 2003 results included a $17 million gain on the sale of excess lots in the residential business and while we did not complete any such sales in the first quarter of 2004, we do continue to pursue opportunities of this nature and may well record gains like this later on in the year.

Our funds management growth was modest, although that was in part because of the first quarter of 2003 included particularly strong performance from our high-yield fund. We've made good progress with a number of the new funds launched over the past few years and expect this contribution to increase over the course of the year.

Expenses were pretty much in line with our expectations, minority interest expense increased and that reflects the interest of other shareholders in the growth of our commercial and residential property results. And operating expenses increased largely due to the inclusion of the cash taxes paid by our U.S. home building operations, which has continued to be exceptionally profitable.

Depreciation and amortization increased quarter-over-quarter due in large measure to the adoption of straightline tea appreciation for our commercial properties. This amendment was required under industry-wide changes to accounting guidelines. The increase in non-cash taxes reflects the increased net income generated by the company, including our resource investments, although actual cash taxes paid remained quite modest.

The final component as I mentioned before in determining our net income is the equity accounted earnings from our investments in Noranda and Nexfor which increased to $96 million for the quarter compared with a loss of $18 million last year. Stronger prices for most of the products but also due to the result of the operational and financial restructuring in growth initiatives executed by the management teams of these companies over the past several years. Though all in all it was a very strong quarter for us, positions us very well for the balance of the year.

We also announced changes to our dividend policy today, these changes reflect the previously announced three for two share split that will occur on June 1st and as well will conform to U.S. dollars, which is our functional reporting currency.

The board declared a dividend of 14 cents U.S. per share payable on August 31st, 2004 to shareholders of record on August 1st. This amount is similar to the current 27 cents Canadian per share dividend after adjusting for the share split and converting into U.S. dollars. The dividend will be paid in U.S. dollars, which shareholders domiciled in Canada receiving the payment in the Canadian dollar equivalent unless they elect otherwise.

And that concludes my remarks.

Thanks, Bruce and Brian. Operator, with that we'd like to open it up for questions and comments.

To place yourself in the question queue, please press star one on your touch-tone phone. And if using a speaker phone, please pick up your hand set and then press star one. To withdraw your request, press star two. Please go ahead if you have any questions.

Your first question comes from Horst Hueniken, please go ahead.

Good afternoon, gentlemen. I have two questions.

You indicate in your supplementary information package that you're targeting 12% to 15% cash flow growth per share. In a scenario whereby you are successful in acquiring Canary Wharf and are subsequently successful in improving Canary Wharf's return on capital employ to 20% say over a five-year period I calculate that Brascan's overall cash flow growth rate would rise by an incremental 3%.

My question is this: Does your current guidance about the level of cash flow growth exclude any potential benefit from Canary Wharf and if so, is it reasonable for analysts to anticipate an upward revision of the growth rate expectation in the event that Brascan succeeds in acquiring Canary Wharf on May 21st?

You know, hoarse, it's Bruce speaking and I'll maybe make a general comment.

We look at our business and the type of assets that we can -- we can buy over time and the assets that we have in the company and we look at the returns that we think we can generate off of those and we think that we can over time earn a 12% to 15% growth rate on our cash flow as part of that. And we don't have any -- I don't -- we don't have any specific numbers here, but part of that is based off of the fact that we have a number of assets within the company today which are invested and earning a very low cash-on-cash yield. And if we could redeploy those assets earning a higher yield, clearly that's going to increase the numbers significantly over time.

We don't incorporate buying Canary Wharf into our numbers specifically, although over time, obviously as you generate $700 million of free cash every year and you have cash being generated out of other assets which you're selling, plus we have significant liquidity already on the balance sheet, if it sits on your -- in your coffers earning 1% or 2% LIBOR, then your growth rate will go down over time. If you can find higher return opportunities, obviously it's going to go up.

So, you know, in general, I'd say the answer is no. We don't incorporate that in, but I'd just -- to give you a little bit of framework around how we think.

That's helpful. Thanks. My second question might be directed at Brian. It relates to your real estate business.

It's disclosed in your financial statements that the level of working capital in the real estate segment rose to $517 million over the last three months, that's a 38% increase since December 31. Can you explain what caused this rapid increase? I'm trying to assess whether it's a temporary or permanent increase.

Sure. A lot of that stems from the real estate -- residential side of the business, which historically has a big buildout in the first quarter of the year and that's when they book a lot of their -- a lot of their sales for the balance of the year and as you know the activity there's been very strong. And a lot of that does unwind over the balance of the year.

Okay. So mainly a -- mainly a seasonal effect as opposed to you're changing the way your -- the way the business is -- is functioning.

Correct. It's probably, Horst, even more correctly, it's a seasonal effect and right now because the business is so positive it's even a greater seasonal effect.

That's right.

Understood. That's all for me, thank you.

Thank you.

Your next question comes from Rossa O'Riley, please go ahead.

Thanks very much. In the first quarter, power production was about 2,157 gigawatt hours across the portfolio you mentioned and of course that was up dramatically from the year-earlier period. What would be a normalized average rate to assume on an ongoing basis?

Well, we -- the annualized capacity for these plants, in terms of just long-term average, is around 7,000 gigawatt hours over the course of the year. Does that help you?

Great. Thank you. And then secondly, the --

That --

At the annual meeting today you mentioned that you had a gain of $100 million on your investment in Canary Wharf and based on your costs, which as I believe was about $136 million U.S., it would seem to me that your gain was about $140 million. Is the difference expenses and taxes?

One, we're being generally conservative probably in quoting our number but, two, there's an awful lot of expenses we paid so far to effect what we've done over the past year, Rossa, so some of that -- a significant amount of that is the -- is the expenses over the period.

And you've been capitalizing that to your investment.

That's correct.

And the -- will there be any tax liability in the event that you end up selling?

In an outright sale, there would be a very modest tax -- tax effect.

And would that be cash tax, or just deferred tax?

I would suspect that we could well have some deferred tax element to it, just based on the accounting rules. But it would be a very modest single-digit percentage type cash tax.

I see.

And then thirdly, the -- through the net-asset value calculation, which you've detailed in the supplementary package, the -- the appraisal surpluses of course relate to all of the assets in the sectors of -- various sectors of reporting. Some of which, in some sectors, are Brazilian assets and I wondered how much of the appraisal surplus over book values in aggregate relates to Brazilian assets?

I would say there's around a couple hundred million dollars.

U.S.

Yes.

In aggregate. And that would be of course partly real estate, partly resource -- other resources, the ticket business and so on.

In fact, most of it would be our real estate business, Rossa. As you know, the largest business we have down there and most of the -- we have in the real estate business. So most of it is real estate backed.

Thanks very much.

You're welcome.

Your next question comes from Bill Conly, please go ahead.

My question I think was partly answered there. I was wondering where you would stand to gain if you have to tender your shares in Canary Wharf.

Thanks very much, Bill.

Your next question comes from Andrew Kuske. Please go ahead.

Thank you, good afternoon. If we could just focus on Canary Wharf, firstly and you might not be able to answer this because you're on the offer period. But if we look at just remedies of descent or oppression, those types of remedies, if you could just give us a little bit of context of are those available to you under UK property law and are -- or are they just very similar to what we see in North America.

In fact, I'm probably not, Andrew, it's Bruce speaking and Jeff [LIDNER] who's been looking after this for us is probably the right guy to go through the legal characteristics of it. But in essence, the rights of appeal are set out in the securities legislation over there. The ultimate appeal in the securities side is the panel, which is a regulatory body in the UK that looks after the capital markets. In addition, obviously, there are some matters which fall under corporate law, and they would be under a court proceedings, if you ever decided to go there.

So those are the two types of things that could happen, I guess. Those are the two regulatory bodies that are there. But other than that, I think probably, um, if we can talk about it, I should get Jeff [LIDNER] to follow up with you.

Okay. That would be great. Just on a different vein altogether.

If we look at your residential properties division and just the location of -- of your assets in that division and the real estate prices, how we have seen them increase quite dramatically year-over-year in those markets. What efforts are you undertaking at this stage to really capitalize on what -- what could be very much a bullish real estate market in those regions, in particular in California, where we have seen property values up in some areas 50%, 70% year-over-year.

That's a very good question, Andrew. We've been -- I guess what I tell you is we've been worried about that for three years. In fact, it's probably cost us significantly over the three-year period. Even though we've been making a lot of money and it's been very good for Brascan and the shareholders of -- the other shareholders now, Brookfield Homes. We probably would have made more if we would have kept a lot more of the lots we had over the period. What we've been doing is really two things.

Firstly, we have been selling off bulk lots, which we had which have been entitled. And taking significant amounts of capital out of the business. Over the last two years in bulk -- other than just our regular housing business sales, we've taken out probably $250 million U.S. of capital out of the business by bulk lot sales. We've replaced all those lots by going into option.

So we have -- where we took 250 million out, we have under option probably the same amount of lots with 20 to 25 million, such that should we have a collapse in housing prices or lot prices, which we don't necessarily expect, but should we have that, we've protected a significant amount of our capital in the business. And, you know, in addition to that, I guess we keep very, you know, short -- a short inventory in the company and are building out things. And I think we believe that -- firstly, the markets will not just collapse like they did in the early '90s. We don't see that happening. But if that does happen, we're pretty well set up for it.

Okay. If I may ask one final question.

Sure.

As it just relates to your power sector assets.

How do you see the outlook for M & A in that sector and then in particular what opportunities do you see in the Ontario market, given the government announcements of late.

Firstly on the M & A side, I'd say we have been -- we thought there would have been many more assets trade in the market 24 months ago. A lot of those assets didn't trade. Some have and there's been a loft opportunity funds that have bought assets in the U.S., a lot of them were not sort of in the sweet spot of what we like to own, which is hydroelectric. But a number of assets have traded on the M & A front.

What happened, though, on a number of portfolios that we are looking at is the company's either issued high-yield data or the bank stood still and probably in hindsight they did the right thing. And now what they've done is after they've done that and the companies are now back in somewhat better shape but they still have too much debt, we've seen the sort of next phase of I think the M & A starting to happen and that really is based on the fact that the companies, even though they've extended their debt, some of the shorter term maturities are going to come due soon. But in addition what they want to do is get their balance sheet back in order so they're selling assets and, uh, that is starting to occur.

So we think there are a number of opportunities that we had looked at 24 months ago that will come back to the market this year and we hope to be able to participate in those purchases, if we can do it for value. So that's in general. And I say most of those are in the United States.

Specifically with respect to Ontario, um, the Ontario government announced its support of a regulated -- and I guess I would refer to it a regulated but a competitive energy market and, uh, it's going to call for RFPs for some renewable energy and also an additional 2500 megawatts of capacity in the province and we think that's good news for the province and also we're well-situated in the province to be able to take advantage of opportunities such as that. We've been a big investor in this province -- in the province of Ontario. We have committed capital in the last couple of years when most people were not. And given the shortage of power expected in Ontario, our assets we currently have plus things we can contribute to could be quite positive.

That's great. Thank you.

You're welcome.

Your next question comes from Shant Pole.

Good afternoon guys. During the AGM I think George had made a comment about potentially value in the insurance business, maybe you can provide some color on that.

We -- about three years ago, uh, George and his team set up a reinsurance business and, uh, we have been building that business over the last couple years. Really along the lines of our funds management business. And we've been looking at options with respect to that and, uh, where we go with it. And, you know, we'll have to see whether -- where we go with it. But it -- it could be something that doesn't fit longer term within the context of Brascan and we may look at some opportunities for that.

Okay. The next question just regarding Canary Wharf.

Wondering if there is a scenario where you could be a minority shareholder if the offer backed by Morgan Stanley is successful.

There are certain -- and I -- there's not too much that I can say, but the UK panel has said to Brascan and [RIKMAN] that we cannot tender to the offer based on statements we've made. And as a result of it, uh, if they were successful and received 51%, we could become a minority shareholder in the company that they own, meaning we'd just keep the shares and the company probably could stay public.

Okay. And just lastly. Maybe if you could just briefly talk about how the cash flows in the various businesses would perform if the North American economy became quite inflationary.

Well, that's a good question. I will try to answer it. Real estate, I guess, has been an asset which traditionally over the years, and I'll call it through the '70s and '80s, was a -- an inflationary hedge, people bought real estate as an inflationary hedge. The last 10 years essentially people have ridden the interest-rate curve down and that's what's created value in real estate. If you saw inflation come back to the market, it's not necessarily a bad thing.

Probably in the early stages of it coming back, it's not a good thing, but if it does take hold and increase rent significantly, and you can turn your rents over to a higher number, then clearly it becomes an inflationary hedge. I'd say on the housing, our residential housing business, probably the -- if -- if you believe that an inflationary environment brings higher interest rates, it will clearly hurt the residential housing business across North America. And that could be problematic for the business in the early stages, obviously over time when you liquidate the inventory you have you're just backbuilding houses.

So we keep relatively short within our inventory system. And -- or as much risk-free as we can and as a result of it you're just running a manufacturing business to a large extent.

The power business probably doesn't -- doesn't get affected by it to any significant extent, although over time if you fixed your financing, of which we have a very long-term financing profile, and over time your revenues go up from inflation and could be positive, and in the funds management business, since we're generally running a spread business or its opportunistic, it probably doesn't affect us. So generally overall it won't affect us in a substantial way.

The only other comment I make is within our investments. And Noranda clearly in an inflationary environment probably is -- pushes metal prices higher, and, you know, that's probably positive in the early stages, other than if it clips GEP growth across the world.

Great. Thanks a lot.

Your next question comes from Mark Milluany, please go ahead.

Hi, thank you. This question is for Bruce. Language in the current press release about Noranda was very different from the one from the previous release. And you had stated you're actively reviewing strategic options. I am just curious to know what those are, have you hired bankers or sort of how far along the process are you in your strategic review? Thanks.

You know, I guess the comments I'd make is, you know, we continue to look at all our options. We've been -- tried to be quite clear with shareholders over the last couple of years with the communications we've made to shareholders that we will continue to look at our strategic options for all of our investments. In fact, we do that with all the assets in the company. And people talk to us all the time.

Beyond that and beyond the comments we made in the press release, it's probably not appropriate for me to make any comments and we've just always had a policy in not making comments greater than that disclosed in the written material. So I probably won't make any comments other than that.

Okay. Thank you.

You're welcome.

Your next question comes from Michael Goldberg. Please go ahead.

Thanks. I have a few questions here. First of all, at the annual meeting today I thought you raised the possibility of a special dividend, did I hear you correctly? And under what circumstances and to what extent would something like that be possible.

Michael, it's Bruce. I guess the comment -- I think it was in the context of capital allocation, what should a company do with its resources, and that's really the context it was raised at the annual meeting. I think Brian actually talked about it. And I guess we believe that probably the best thing that a corporation can do with its resources is to look at all alternatives with respect to capital allocation at each time when it invests a dollar.

So the context that was raised in is that there are really four alternatives that you can -- you can deploy capital within a business. There are four things you can do with cash within a business when you generate it. Number one, is obviously reinvest the back-end opportunities. Number two is to buy back stock. Number three is to pay it out on an annual basis to shareholders and number four is to pay it out in a special dividend. Should we have excess capital in the company over time, obviously we'll look at all of those. And all of them, I guess, are something that our board does consider and will consider over time.

So there was nothing meant other than just the fact that those are the decisions we look at every month and, you know, bottom line, we believe those are the things that -- that the board and management -- senior management should be looking at for the company.

Okay. And turning back to Noranda for a second.

Is -- you know, are there any options that you're exploring with respect to Noranda similar to the initiative that you've undertaken in Nexfor, namely splitting it up and, you know, you also talked about the possibility in your non-core investments, as you described it, that there are parts that could be absorbed into the regular parts of the operation along with ultimately redeploying capital for other parts. Could you just comment on that possibility?

I guess, Michael, without going further in or making too many comments that are inappropriate with respect to specific investments. We look with respect to investments that we have, Noranda and all other aspects of investments that we have, our job is to maximize value out of those investments and we'll look at all alternatives for the position that we hold in the business or assets and all of the things that you mentioned, are on the table. And I guess we're not -- you know, all we're here to do is to try to maximize value from the assets that we have within the company. And, uh, we'll consider all of those things.

Okay. And one final technical question. What exchange rate will you apply on the new dividend declared in U.S. dollars but if it's paid in Canadian dollars, would it be the exchange rate at the record date or the average during the period?

It'll be the exchange rate at the time of payment.

So record date.

Actually, no. It'll be subsequent to the -- subsequent to the record date. It would actually be --

The payment.

Yeah, the date when the checks are mailed out basically.

And you also described the 14-cent U.S. quarterly dividend as being equivalent to the 27-cent presplit Canadian dividend. Is there not in fact a modest increase if you consider where the exchange rate is right now?

Arguably, if you -- if you try to nail it down right on the specific exchange rate, arguably there could be a slight increase but we don't know where the exchange rate's going to be at the time that we pay it, so it's pretty much equivalent.

So there was no intent to, you know, provide a modest increase as the -- as -- you know, as the dividend was -- was declared this time.

No. I -- in fact, I would say it was more -- you know, if we errored on having it slightly higher, it was more just to ensure that if the currency went the other way, that people -- the Canadian shareholders didn't see themselves as receiving less.

Okay. Thanks very much.

You're welcome.

Your next question comes from Neil Downey. Please go ahead.

Hi, good afternoon. My question may relate to a question that Horst had earlier. Your residential operations, I'd normally look at those on a normalized basis of being worth $1.2 billion, that's an eight multiple on a hundred and fifty million of cash flow and I think your supplemental comments that you're carrying them or viewing them as having a $1.4 billion number today. Presumably that $200 million difference is in fact the seasonal working capital that's sitting there today.

That's correct. It's a component of that.

Right. So you're effectively just grossing up the asset value because you've got a couple hundred million of extra liabilities associated with that as well.

You're exactly right.

Okay.

Also within the supplemental, we talk about -- or you talk about commercial property net operating income, having a run rate of 692 million, and I guess I have two questions as they tie specifically to that number. Is that a -- like a cash number as opposed to a GAAP NOI, which I guess would include straightline rents? And what amount in that is really non-Brookfield NOI?

Okay. First of all, it tends to be more of a -- it tends to be more of a cash-based NOI. The -- in the sense that we don't really build in -- much in the way of straightlining in there. In terms of what would be -- what you would describe as non-Brookfield, in the supplement, really the only assets in there that would be non-Brookfield would be the Brazilian assets.

Right.

That we show there.

Okay. That's what I thought.

And lastly, as we roll into Q2 here, we're going to be booking a fairly significant at lease termination fee at the Brookfield level. Am I to presume that that is going to show up in the net operating income from the real estate division, or will that be in effect in the investment income slash other line?

I suspect where you'll see that is in property gains.

Okay. All right. Thank you.

Thanks.

Any further questions, please press star one on your touch-tone phone. Your next question comes from Art Winston. Please go head.

Hi, guys. It appears that the financial services profits are not growing as much as they used to, is that the case.

No. I'd say, you know, they were -- it was pretty modest growth quarter over quarter, Art, but I'd say there are two things that play there. One is we had a very strong first quarter of last year. In particular, we had some exceptional performance in our high-yield fund that George referred to at the shareholders' meeting today. We had performance in excess of 60% returns on that fund. And that unfortunately we didn't -- we still had good returns in the high-yield area this year but it's a little hard to replicate that.

What we did see, though, is some good growth in some of the funds that we have more recently launched, uh, being the restructuring side of the business, the bridge lending and the real estate mezzanine funding, so that is quite encouraging and that really sets us up for good continuing growth in the business.

And, Art, it's Bruce. I'd make one other comment. In our past business was -- was really I'll call it a financial services business which was more volatile in nature. The business today is being reformatted into a funds management business and -- and is today, but we spent three years doing that and we're still really in the infancy of ramping up the returns out of that business.

We have the people in place, the funds in place from our pension funds and now we've got to put that money to work and I guess we've spent two years really rebuilding the business, we're there today and going forward it should be much more positive for us.

All right. Thank you.

You're welcome.

Your next question comes from Shant Pollardian, go ahead.

Just one last question. Looking at your slide 31? Your supplemental. Trying to figure out when should we expect to see cash flows being generated from the agricultural land in Brazil and what sort of level should we expect?

I'll give you a -- maybe just an overall comment on it and then Brian may answer that.

In general, we have those agricultural lands with beef operations on them and they generate some small amounts of cash flow, but over time what we're doing is we're converting it into long-term leases in nature. So we've done a couple of leases in the first quarter, we'll do that over the balance of the next 12 months, and, you know, I think it's a small amount of capital and because we round to the largest million, nothing else -- nothing shows up in the first quarter, but they did generate cash flow last year, even as they are on an operating basis and will continue to grow over time.

Okay. Thanks.

There are no further questions in the queue.

Great. Thank you, operator and thank you everyone for joining us this afternoon, we look forward to speaking to you at our next quarterly conference call. Have a nice weekend.

Bye for now.

This concludes today's conference call. Please disconnect your lines and thank you all for your participation.