BROOKFIELD ASSET MANAGEMENT LTD (BAM) 2006 Q1 法說會逐字稿

Good afternoon and welcome to the Brookfield Asset Management first quarter conference call for April 28, 2006. Your host for today will be Robert Harding, Chairman of Brookfield Asset Management. Mr. Harding, please go ahead, sir.

Thank you very much, operator. Good afternoon, ladies and gentlemen, and welcome and thank you for joining us for our first quarter 2006 conference call. Joining me on our call this afternoon is Bruce Flatt, our President and Chief Executive Officer; Brian Lawson, our Chief Financial Officer; Bryan Davis, our Managing Partner of Finance; and Katherine Vyse, Senior Vice President Investor Relations and Communications.

This afternoon Brian Lawson is going to give an overview of the first quarter and following Brian's remarks we're all available to respond to any questions or comments you may have.

Before handing things over to Brian, I should just note that in responding to questions and talking about our financial and operating performance, we may make forward-looking statements. These statements are subject to known and unknown risks and future results may differ materially. For further information on known risk factors, I would encourage you to review our annual information form, or our Annual Report which are available on our website. Brian?

Great. Thanks, Bob. Before I begin my remarks, I'd like to remind listeners that we held our annual shareholders meeting this morning and made a full presentation on the business. This presentation was webcast and is available on our website for your review. So as a result, we will keep our formal remarks on the call relatively brief and look forward to responding to any questions or comments that you may have.

We reported strong results for the first quarter of the year. Cash flow from operations was $307 million, nearly double the $155 million we reported for the same quarter last year. Nearly all of our operations contributed to this growth. In particular, our Power operations, which benefited from high realized prices as well as increased generation.

Our net income increased at a more modest pace, as the growth in operating cash flow was somewhat offset by lower equity counted earnings following the sale of a major resource investment last year. I will now do a quick run through the highlights for the quarter and start off with our Property operations.

We closed our $850 million core office fund in the U.S. with one-third of the equity provided by us and the balance from large institutions. We entered into agreements to acquire additional properties in the Washington D.C. and Toronto areas, further expanding our portfolio in these core areas. We see leasing conditions continuing to improve in most of our markets, particularly New York and Calgary.

We leased 1 million square feet of space during the quarter and that exceeded contractual expirees. REIT legislation was introduced in the U.K. which we think is positive for our U.K. properties, and in Brazil, our retail property fund is set to close in the second quarter with $800 million in commitments and will be seeded with our existing retail assets.

We are seeing some leveling off in our U.S. residential markets, although it appears as though 2006 results will be on track with expectations. And on the other hand, our Alberta operations are benefiting from substantial growth in the oil and gas sector and margins and returns are improving significantly there.

Turning to our Power operations, they contributed $200 million of cash flow in the quarter, up from $134 million in the same period last year. Much of this increase was due to higher prices. Our average realized price during the quarter was $74 per megawatt hour and that's up nearly 15% over the same quarter last year. Generation also increased by nearly 20% due to improved water flows and acquisitions; 3,545 gigawatt hours were generated during the quarter, 12% higher than our long-term average expectation, and the results in the first quarter of 2005 were in line with long-term averages.

We also added four stations in Northern Ontario with 50 megawatts of capacity during the quarter and have agreements in hand to purchase two more facilities with another 40 megawatts of capacity. 77% of our power is under contract for the balance of the year and we expect to experience continued growth and realized prices as contracts for nearly half of this power rolls off over the next 3-5 years, and those contracts were generally put in place in lower price environment. So we would expect that the rollovers will be higher. They may be lower, but dependent on electricity demand and pricing for fossil fuel we set the marginal price for electricity most of our markets in the outlook for that in the current environment is very good.

On our Timber and Infrastructure operations, of note we established the Acadian Timber Fund in the first quarter as a publicly listed income fund that holds roughly 1 million acres of private timberlands in Eastern North America and the fund is managed by our Timber Group. The Island Timber Fund, which owns 635,000 acres on the West Coast of Canada, continues to perform in line with expectations, and we continue to expand our timber operations in Brazil.

Our transmission systems performed on target, and we were just completing a major capital investment plan that expands our rate base and should lead to increased returns down the road. In our Specialty Funds, that's our bridge, restructuring, real estate finance, and public securities operations, we increased the capital deployed, particularly in the bridge and restructuring activities, substantially. This included nearly $700 million of our own capital. Our Bridge Group issued funding commitments totaling $1.4 billion including a major committment to fund, as part of the funding to acquire the Hudson Bay Company.

Our Real Estate Finance Group established the new CDO fund and committed $250 million in new investments. And our Restructuring Group was particularly active completing a number of major initiatives, including the restructuring of Stelco, which successfully emerged from bankruptcy protection at the end of the quarter, the recapitalization of Western Forest Products, and the sale of our interest in Vicwest for substantial gain. We continue to expand the assets under management and our public securities operations through new client relationships and expanded product offerings. And in our investments, while small relative to our operating businesses, our investments in the paper industry continue to be challenged by higher energy costs and the high Canadian dollar.

Fraser Papers has completed several restructuring initiatives which led to a charge to our equity counted income in the first quarter, but despite this the substantial growth in cash flow from the balance of our operations enabled us to report good growth in net income over the first quarter of last year. So all in all, it was quite a busy quarter and we're continuing to pursue a number of additional growth opportunities.

We see strong demand by institutional investors seeking to diversify their portfolios into long life infrastructure assets similar to our own, and as a result, we believe we are well positioned to achieve continued growth and cash flows and intrinsic value on a per share basis and to expand our asset management platform.

And just before handing the call over for questions, I should add that our Board of Directors approved the quarterly dividend at $0.16 per share, payable August 31 to holders of record August 1, and this of course reflects the recent three-for-two share split. So that concludes my remarks and if we could, at this stage, open it up for questions? Operator?

Thank you, sir. We will now take questions from the telephone lines. [OPERATOR INSTRUCTIONS] Thank you. Our first question comes from Brendan Maiorana, please go ahead.

Good afternoon, it's Brendan Maiorana with Chris Haley. Looking at your power operations and taking the $74 per megawatt hour price that you got in the quarter, would my back of the envelope math put the uncontracted Power sales at somewhere around $110 to $115 a megawatt hour, and I'm wondering how those prices might compare to pricing on long duration power sale agreements if you were to sign a new contract, a new power sale agreement today? And are there pricing differences based on a difference in duration of those power sale agreements, so if there were a five-year, 10-year or 20-year power sale agreement would you be see pricing differences among those?

I think the pricing would certainly be dictated somewhat by the duration of the contracts, Brendan. I think there's really two types of contracts that we work with. One, are the shorter term financial contracts and those tend to have a duration more along the 12, 18, 24-month range, and those would really reflect more what you'd see in the forward curves.

The longer term ones, those tend to vary substantially on individual circumstances and they are mostly with utilities or industrial customers, so it's dependent on what their objectives are and at this stage of the game, I don't think that I could give you much in the way of specific color on where we would see those contracts shaking out.

In terms of the math that you were doing, I don't know that we would have seen prices as high as what you were talking about. Having said that, what do get factored into our results is the ability to capture peak pricing because of the characteristics of the hydro plants and also ancillary revenues that we can earn by selling power into the various markets in which we have our infrastructure.

Maybe the only other comment I'd add to that and the last point that Brian made is extremely important which is that the all hours price is very different from the price that we received for our Power because we're normally selling on peak. So the price that we usually realize is significantly higher than an all hours price you'd see in the market at the same time. In addition to that, from time to time we take our power, or portions of the power, and fix it on longer term contracts, and while we haven't disclosed the actual details of the contract since it's not signed, we did recently agree to sign a 15-year contract with the Long Island Power Authority, which some of the power, depending upon the flexibility, and we have the flexibility in the contract, will be sold either out of our New York or our New England operations and that's an escalating contract over a 15-year period.

Okay, thanks. That's helpful.

Thank you. Our next question comes from Adam Weiss. Please go ahead.

Hi, guys just a quick question. I noticed from the Brookfield Properties call today that Brookfield properties, in addition to having booming land sales business up in Canada, is back in the business of buying land in the U.S. And I was just kind of curious what the thinking was there, you know, Bruce I know in the past you haven't always been wildly bullish about the U.S. home building prospects, and I'm curious if you're seeing interesting distressed opportunities out there and, you know, what kind of occasion do that change and the second part of that is why Brookfield Properties instead of Brookfield Homes?

It's actually a good point, and when we spun the home building business, and just for background, we spun the home building business out of Brookfield Properties years ago, which at that point in time was the exclusicve U.S. home building business of Brookfield Properties, named Brookfield Homes.

Other than these operations, which are run in conjunction with the western Canadian operations. We have an individual that runs the Western operations in Calgary and Edmonton, who has since then expanded and actually has a small operation at the time in Denver and subsequently has gone into Austin. He's run that operation for years for us.

In fact, almost 20 years, and at the time it wasn't spun out and, obviously, Brookfield Properties can do what they feel best for their shareholders. Brookfield Homes is a little bit different operation because it actually develops land, a lot of it though on options, and they sell homes; whereas the operations in Canada, which operates under the Carma name within Brookfield Properties, is really a lot developer so they buy far-out land, develop master plan communities and sell the lots off. So that's just a background.

As to them buying land, they have been doing that for the past 20 years and we've been selling lots and we've been entitling buying land that's farther out, entitling the land and turning it over. What they're doing today is no different than what they've done for the last 15 years. So it's really not an indication of any change of view in the land business.

The fact is you will get a few that are, that will escalate at the right time and a few that you may have bought at possibly the wrong time in the market but, you know, we continue to buy in that operation over time and these are very long-term tracts of land that are generally bought at a pretty low cost and the real value is the entitlement process they add to it. So you shouldn't take that we have any difference in view on the housing markets but that's how it developed.

Thank you, Bruce.

Does that answer the question?

That's it, thank you very much.

You're welcome.

Thank you. Our next question comes from Scott Phillips. Please go ahead.

Thank you. Good afternoon. My question relates to the property segment and specifically to New York, just looking at what you reported for the first quarter in operating cash flow, $85 million. I was hoping you could give a little bit of color on two comparisons, the first, year-over-year, the 85 versus the 93 that you did in the first quarter of 2005, why that was down , just given the strength of the New York market. And number two, if I've done the math here correctly, just looking at the fourth quarter of 2005, it looked like you did $74 million. So you've actually been up quarter-over-quarter but down year-over-year. If you could just provide a little more clarity there, please?

Sure. I'll make a couple of comments and then I think Bruce will add to that. There's, first of all, in terms of the results from quarter-to-quarter, we do have some variation in there from some of the releasing that's been going on over the past several years and we have had some rollover in our tenant profile there, so that would impact that to some degree. And, as Bruce mentioned, more recently we've been increasing some of the tenancy there. We did bring on stream the new property in Tower Three of the World Financial Center, which was a property under development until the beginning of last year, and so as that property has been leased up, it would have first shown a decline in terms of the overall contribution and vacancy levels and as that's picked up, it's tended to benefit the results. And then we also do get some variation in some of the contributions from the retail as well.

Scott, maybe the broad comment that I'd make to you, not to the actual -- just the specifics which Brian mentioned, but for five years, or three to five years, we've benefited from the fact that we had long-term leases in place at rents which were higher than the marketplace in downtown Manhattan was --

Yes.

Over that period, our cash flows were much stronger than what the market would have produced because we had those longer term leases. The good news is we're finally starting to see rental rates going up and what we now have is some leases turning over that extended out five, seven years past when we had markets going down. As a result of that, we're probably at or around where, some of them, a little bit below market and some of them at market, where we're rolling or where we had cash flows in place.

Yes.

And as a result of it, as we continue to rollover, we shouldn't see a big deterioration in cash flows. Having said that, the last, in the first quarter there were some leases that rolled over that we did have step downs in rent, and, the good news is the rents are going back up, so we shouldn't see too much of that in the future, particularly if you're a believer in that rental rates in Manhattan are going up.

Okay. And the additional lease up that you have available in Towers One and Three, any additional clarity you can provide just related to the status of activity there?

You know, Brookfield Properties is a separate public company and I'm not sure what Ric Clark said on his conference call about it, because we had our annual meeting this morning, so we probably shouldn't make any direct comments to their future leasing initiatives just because of the separate public company, but by and large, you know, leasing is picking up in New York City. Rents in Midtown have gone up quite significantly, and what follows on after that is downtown rents usually starting to increase, although we haven't seen that as much yet.

All right, thanks very much.

You're welcome.

Thank you. Our next question comes from Andrew Kuske. Please go ahead.

Thank you, good afternoon. Bruce, if we could just get your comments on how you see the risk profile changing for property development. In particular, we've seen some development proposals recently, one in Toronto, that seemed to have a fairly low lease commitment on the building that they're proposing in the front end, and I'm just wondering what your thoughts are and how the risk profile for some commercial property development is changing?

Are you referring to our doing commercial property development or just people in general?

Just in general and then we can talk specifically about Brookfield.

Well, the first comment that I'd make is in general. There is very little construction going on across North America.

Yes.

And as a result of that, I think that, people are being extremely prudent. Lenders are being prudent and I think through this cycle anyway, we probably will see prudence in the markets for developing assets in the commercial property business, and as a result of that, I think we won't see that many mistakes.

There's no doubt there are entities today who are well capitalized who can build buildings with less leasing commitments in place if they believe the market is strong. For example, in downtown, leading to ourselves, in Toronto. When you think of our portfolio, we have 60, 70 million square feet, depending on how you look at it, of space in the marketplace, or in our markets, and we have a 5% vacancy today.

So if you built a 1 million square foot office building, that would add, even if it was totally empty, that would add 4% to your vacancies, and, therefore, you may make, because the portfolios of some companies are very large, large entities like ourselves can make decisions based off of that type of analysis as to just looking at one building.

That's not to say that we're planning on building a lot of spec. buildings, but the balance sheets of a few companies allow you to take a little more risk than what you otherwise would take because it's looked at in the context of a full overall portfolio in the Company.

So on the context of your overall portfolio, your risk on an individual project might be increasing that you'd accept, but in the context of the overall portfolio the risk is actually declined?

Well, to put it into perspective, in lower Manhattan three years ago at the bottom of the market when everyone was very negative on real estate and after 9/11, we bought the other half of Three World Financial Center, and that was like building a 1.2 million square foot office building because we purchased it empty, so now we've virtually leased that whole building. So the fact is we had one building which was, in essence, you could call it a new development for 1.2 million square feet. It added 5% vacancy to the portfolio. It added, over time we think, very good growth and we bought it for a good price and we'll lease it out over time, but it will be done soon and therefore, you could add other vacancy to the portfolio and still have the same risk that we only had three years ago, and so it's looked at in a more call it a portfolio basis, given the size of some companies that are out there today.

And then if I may ask a bit of a follow-up, but also a bit of a different question, in the context of scale, if we were to look at your Asset Management business today, it is relatively small and some of the results wind up being a bit lumpy, which has created a bit of a predictability problem for some of the earning strains. To what point in time, you know, how many years ahead do we have to be until we see really good predictable earnings streams and cash flow streams coming out of some of your units, when you'll actually have a good scale?

Well in terms of -- if what you're referring to, Andrew, is specifically the Asset Management fees, you know, they are still relatively small. We're just really building out some of that business. When you break it down into the various components, the base management fees should be pretty consistent and you should see those just gradually step up over time as we increase the funds and as we've commented on, we've built out a lot of the operating base so we would expect as the revenues grow that our margins should expand there. That part of it should be fairly predictable.

What is harder to predict is the performance fee side of it, both in terms of the timing of the realization and how long it takes for a lot of that to kick in because those fees tend to happen over time as the funds mature.

And as we get more funds and more assets under management and as they mature and we get more fees, sorry, more funds of different vintages, I'll use that word for lack of a better one, then you should see more consistency overall in terms of the performance fees and if you think about the assets that we are investing in, we should actually have, I think, more stability in our fee streams than some other organizations or other firms might have just because of the nature of the assets and the timing of the values created there.

Although, Andrew, it's very probable that with a company with a $20 billion market capitalization, and the way that we run our Asset Management business, at least for the foreseeable future, is that we have a significant amount of capital invested in these assets. Sometimes we put them on our balance sheet first to sort them out.

Yes.

That either going into funds we'll be booking gains. Our portion of the funds will be booking gains and, therefore, those gains that we're booking over time in different funds will continue to be less stable than the actual just straight baseline fees being generated. The fact is that's going to be continued in the operations and, in fact, if we are very successful in earning proper returns for our investors, it will continue to be that way. So I'm not sure we're ever going to be just a straight line Company out there, but, obviously, over time it does get better.

And I think that's where my question is really coming from. The fees earned, as you classified them, that seems to be fairly predictable, but it's the one-time nature of the gains off of, say Acadia for the timber, Criimi Mae to a certain degree and the restructuring for Vicwest is understandable. I mean that's really part of that business but it does provide a bit of lumpiness into the numbers. And then just on that last point, what is your expected gain off of Stelco that you'll likely book in Q2?

Well we'll book no gain in Q2 off of Stelco because we haven't sold anything and we won't realize anything until it's sold. So I think if you mark-to-market our equity position, our gain is certainly north of $100 million.

Yes.

And that would be realized upon when we sold it. We don't have any intention of selling our shares today. In fact, we think there's, you know, still a lot to do in the restructuring of that Company, and the Tricap guys are working away on that. So there won't be anything booked in the second quarter.

And you have no intention of mark-to-market?

We do not mark-to-market that business.

Okay. That's great. Thank you.

Thank you. Our next question comes from [Louis Sapir]. Please go ahead.

I have two questions. The first is have you any indication of Wall Street's estimates of your earnings for this coming fiscal period, and the second question, will you elaborate on your properties in Brazil to the extent of the agricultural properties that you may own and the use pertaining thereto?

Sure. It's Brian. Just with respect to your first one, no, we don't have any comment on what the consensus might be for our earnings for the year.

As to the second question, we have a significant business in Brazil. We've been down there as an investor in Brazil for many years. I guess the good news, and the bad news, is a lot of people have decided that Brazil is an interesting place to invest and that means there's more competition than there used to be. Having said that, we're finding a significant amount of institutional investors who would like to come to Brazil and work with our platform that we have down there. So that's the first thing.

The second part of the answer is that we essentially have three real estate businesses in Brazil. We own a retail business which we intend to put into a fund -- a shopping center business. We own a condominium development business which builds single family homes and develops multi-family condominiums in Sao Palo and Rio. It's very significant and we've been in the business for almost 30 years.

And then the third real estate business we have is a rural, what we call rural land business, and we have just under 300,000 acres of lands. The lands traditionally were used for grains and cattle, but recently we have been putting long-term leases in place to ethanol producers who have been planting sugar cane and our contracts we've been signing again to the type of business that we try to run, we own the lands.

We're now converting them into the type of assets which we like, which is 20-year long-term lease contracts with minimum rents, with escalations upward only based on sugar and ethanol prices, and given the price of oil and the ethanol situation in the world, as a replacement for oil in cars, or to be mixed into gasoline, there's a very attractive market for this, and we continue to expand that business. We may look to develop a fund with it, but in essence, what we own is long-term agricultural land in the country which based on all those things I just said has increased in value dramatically over the last number of years.

Has the ethanol been exported to the States or it hasn't reached that level of production as of yet?

In fact our ethanol, most of it goes to Asia, and the corn lobby in the United States, and I may have this a little bit wrong, but I'll give you what I do know. The corn lobby in the United States puts tariffs on ethanol that comes in from foreign countries, which is largely Brazil, and therefore, a little ethanol is imported from South America into the United States, so most of our contracts with the people that we sign, lease our lands to, is sold into Asia.

Do you participate in the export of that product?

We participate -- we sign minimum rent deals and we participate on a portion of the upside based on the price of ethanol and sugar, dependent on each negotiation with a producer.

Do you get a piece of the action as it goes out?

Yes, we do.

All right, thank you very much.

You're welcome.

Thank you, sir. Our next question comes from Michael Goldberg. Please go ahead.

Thanks a lot. My first question is just on presentation, guys. My understanding is that the difference between total and net cash flows in your presentation is that the net deducts minority interest and related financing and direct operating expenses. Is that correct, so far?

Yes, Michael.

Okay, my understanding also is that you do this uniformly for your operations with the exception of Brookfield Properties' minority interest. Is that also correct?

That's correct.

Okay, so my question then is why a different presentation for Brookfield Properties? Is there even any kind of strategic reason to it? What would the net number for Property look like, if you took out the minority, the Brookfield Property minority interest, and just specifically can you clarify, is all of the $30 million property disposition gain in the quarter for your account or only half of it?

Okay, I'll take those in reverse order, Michael. The $30 million,that is a gain that was reported by Brookfield Properties on the disposition of a Denver property so we would participate as to 50% on a bottom line on that one. So $15 million net to us.

Yes.

And that would be before any taxes. On your second question, I'm not sure I could answer that one off hand in terms of what it would look like on a net basis. And that actually leads me into, the answer to your first question, and one of the reasons why we have chosen to present it the way that we have is that, as you know, Brookfield Properties has the core office element to their business.

They also are doing some of their business now in a fund context and also they are doing some of their business, they have the residential business, as well, and if we treated Brookfield Properties the way that we treat the other units, namely, where we look at it as the net capital invested into one entity, then it would make it extremely complex to break out those three aspects of the business into our own, and our preference was to be able to break it up into the residential, the fee generating and the core office side of it ,so frankly it was as simple as that. It would have been extremely difficult to do otherwise.

Okay. I have another question for Bruce. In the annual meeting today, you mentioned as one of the growth opportunities for the Company what you described as corporate initiatives. Could you give us some examples of what you're getting at?

You know, I was, merely a reference to the fact that we grow, and just for everyone's benefit on the line, that we grow through organic growth within each of the operations because we have businesses that are just doing things each day. Secondly, that we grow by acquisition, and, third, that we grow by developments and sometimes there are corporate deals we can do in the marketplace being, we can take over a company which has assets that we look at. And from time to time, we're looking at corporate acquisitions in the marketplace, and I don't have any specifically to talk about that we're looking at today, Michael, because these would be public companies, largely, but from time to time in the past there's been a number of public companies that we've got involved in either taking over or bought pieces of to possibly take over.

Okay. If I could ask another one, can you talk about the progress that you've made in adding higher value added third party assets under management during the first quarter, and a question that I've asked before, have you succeeded in actually getting any of Hyperion's clients to sign on to any higher value assets so far?

The answer to the second one is yes. Although we don't generally disclose which funds buy into which of our funds, just because they have confidentiality agreements, but the answer is, yes. The answer to your first question is, during the first quarter we closed the Acadia Timber Fund, as Brian mentioned, which is a high value externally managed product in the capital market. Secondly, we closed the U.S. Core Fund which is just under $1 billion and I'd say that was one quarter. The fact is we have a number of initiatives which are ongoing and we hope to close in the balance of the year, but these things, some of them take time and we will report them as we do them.

Thanks very much.

You're welcome.

Thank you. Our next question comes from Neil Downey. Please go ahead.

Good afternoon, everyone. Just wanted to spend 60 seconds on the returns that were generated effectively from Brookfield's excess liquidity. About $2.4 billion, I believe, of cash and financial assets, and, specifically, the $2.1 billion of financial assets generated $87 million of operating cash flow in the first quarter.

That seems to be quite a generous return if you were to look at that per se on an annualized basis. You know, it would indicate a return on capital up in let's say the mid-teens. Could you just comment on how those returns were generated? For instance, I know there's probably $600 million of common shares within those financial assets.

Were there very robust equity returns or is there something else in there?

No. I think that's a meaningful part of the difference. We wouldn't expect normally to turn those kinds of returns quarter in, quarter out. We do have, as you mentioned, if you'll look through the portfolio, the component of the portfolio, there's a fair amount of it that generally clocks a pretty stable return quarter in, quarter out, but then we do have some common share investments that do tend to give us gains and sometimes losses, and so it was really, we had a pretty good quarter in terms of some extra returns in that regard. But I wouldn't necessarily hold that out as being an ongoing predictor as much as we would love to get that more often.

Sure. Would those common share portfolios have had a heavy resource component to them as of late? Certainly, you know, base metals for instance has been a very strong performing segment of the equity markets.

Generally, as we're looking at corporate opportunities we're taking sometimes positions in companies, and from time to time we aren't successful in looking at an opportunity and we own stock in it and we sell it. A number of those would have been, or a couple of those, would have been in there and they will be from time to time.

Okay. Thank you.

You're welcome.

Thank you. Our next question comes from Peter Sklar. Please go ahead.

Just something in your presentation in the fourth quarter, you're showing that the capital you had invested in privately held forest products was $428 million. I would assume that as at March 31, the amount of invested capital you had in privately held forest products would have come down given that you transferred assets into the Acadia Fund. Is that correct? I'm just trying to get a feel for what that number would look like at the end of the first quarter because you changed your disclosure. You aggregated it all rather than breaking it out.

Okay, with respect to just the disclosure, we aggregated it, candidly, because not all of the entities involved there have reported, and so when we come down to putting out the interim reports there will be more detail in there, but there's certain parts of our report that we have to condense until such time as all of the individual entities have reported their own results. With respect to Acadian, those assets actually came out of our Timberland Group, so you would have seen those at the Eastern North American Timberlands under Timber and Infrastructure at the end of Q4.

Okay, meaning it's not part of that forest product, privately held forest products disclosure?

That's right. You may be referring to Cascadia, which we do expect to sell to Western Forest Products and that is scheduled to close in second quarter, but that would not have happened, that would not have been reflected at the end of March.

Okay. And the other thing I want to ask you about is the amount of capital you have deployed in Bridge Lending has gone up significantly since the fourth quarter. Now you talked about, in your introduction, the commitments you've made, but I don't believe that commitments would show up in that capital line. So I'm just wondering where you've actually deployed bridge lending capital and what sectors of the economy, and can you talk about what particular transactions?

Sure. I'd say in terms of the actual fundings, those were more in the property and in the oil and gas side. That would be where the bulk of the capital was actually deployed.

Okay. The other thing I want to ask you about is in your disclosure on fees earned, you're showing base management fees of $14 million, and by, coincidence, net operating cash flow of $14 million for the quarter. Would any of that have been earned within Brookfield Properties?

There would have been a smallish amount of that would have been within Brookfield Properties in terms of the base management fees, yes. That would be relating to the O&Y, the Canadian Core Fund they set up last year.

And lastly, on the insurance business, in the Annual Report, you said that the Company's looking at options to surface value and I'm just wondering if you could talk a little bit more, explore a little bit about what kind of transactions you're contemplating for your two insurance businesses?

It's Bruce. Maybe I'll take that, Peter. We've had these operations sort of as, I call it a private equity investment, for a number of years they date back, and longer term, they are not businesses strategic to the Company and at the appropriate time, we may look to merge them into something or take them public at the time, but there isn't anything immediate, and, but we may look at doing something like that in the future.

Bruce, do you have a view if the value of those businesses is well in excess or worth approximately the carrying value that you're showing them?

Well, we believe they're worth the carrying value because we hold them on the books at that. As to excess, these type of entities usually trade at between book and 1.4 times book, on the high end let's call it, and I'd say in that range is what you could attribute to these assets.

Okay that's all I have. Thank you.

Thank you. Our next question comes from Scott Phillips. Please go ahead.

Hi. I wanted to ask a follow-up question for the Power segment if I could. Regarding just how good a business this is and thinking about where you might be able to expand, understanding that a lot of the capacity in the northeast either you basically already own. Thinking about other markets where there are additional assets that you could become involved in, one area that comes to mind is Brazil where you also have other operations.

Curious if you are evaluating that market for further investment either of existing assets of for developments which they need? Thanks.

Scott, it's a good question, and three years ago, I guess, having historically been in the power business in Brazil and then gotten out of it years ago, we identified three years ago the opportunity to get back into the business just given our presence down there and given our operation capabilities. And over the past three years, we've both begun to develop projects. We've built five projects, I think, and have two underway today.

We've bought about eight projects, and we continue to, on a relatively low risk basis, put capital into both developing assets and buying assets down there. We've done nothing of a major scale.

Our total investment is around is between $300 million and $400 million today, and that will increase over time, but, and we probably will bring in some institutional investors with us eventually into those assets, but we've been getting the formula right before we expanded it in a more significant scale.

As you know, 90% of the electricity in Brazil is generated from hydro electricity and given the skills that we have on the small hydro side, we're uniquely set up to continue to develop there.

Okay, and then regarding the northeast market, I am just trying to understand. Do you think of a heat rate that your plants are earning when you think about marginal, or sorry, spot prices for your power when you're selling to the market that you can use or guide us for converting from say the price of natural gas, assuming that's typically on the margin, to where then your plants are earning? Because, well, peak heat rate is one way we could do it, but you're also capturing in some instances, I assume, peak-peak prices, so I was wondering if there was any clarity you could provide for us there?

Do you know, those are very complex calculations. They're easy to do but they are quite complex to explain on a call like this. I think, Richard Legault, who runs our business, is very good at sort of walking you through those type of numbers and if you phone Brian or I, we would be happy to put you on to him just to go through those numbers. You know, I think we can convert it for you in an easy fashion so you can understand it.

Understood thanks very much.

You're welcome.

Thank you, sir. [OPERATOR INSTRUCTIONS] Thank you. There are no further questions.

Thank you very much, operator. And thank you, ladies and gentlemen, for joining us this afternoon. We look forward to speaking to you at our second quarter conference call. Good afternoon!

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