Brookfield Asset Management Inc. (“BAM” or “the Company”) is an asset management company with interests across several business lines, most notably in real estate. As one of the world’s largest investors in real estate, the Company has a 51% stake in Brookfield Property Partners (BPY), which is its primary vehicle for real estate investments, owning 93 million square feet of office space along with 120 million square feet of retail space. This in turn has exposed BAM to the very significant impact that the Covid-19 pandemic has had (and will continue to have) on the real estate market, where a number of factors including job losses, inability to make rental payments, and decline in travel and tourism have negatively affected much of its portfolio mix that includes office, retail, multifamily, and hospitality.
As businesses become more comfortable, and capable, of having their employees working from home, along with a dramatic and perhaps irreversible shift in consumer behaviour with respect to doing more and more of their business online, this sees companies like BAM not only impacted now but also for the foreseeable and long-term future. However, the Company has the relative advantage of being able to broaden its customer base by operating across its many business lines (including renewable energy), such that through the power of diversification as a major financial organization, BAM may yet still emerge in solid financial shape.
➤ Key Factors: While BAM is an asset manager with exposure to multiple industries, the pandemic has had a notable impact on its important real estate business, specifically commercial real estate which includes office and retail spaces. With businesses promoting work from home practices, along with brick-and-mortar retailers being forced out of business due to the lockdowns (and subsequent inability to afford rent payments), BAM’s revenue stream has been directly and drastically affected.
➤ Financial Stress Test: BAM has great financials overall on the face of it, with ample liquidity available to meet its debt obligations (e.g. The Company accessed the investment grade debt market subsequent to the first quarter end, raising approximately US$1.3 billion of long-term financing across BAM and its public affiliates. It also obtained US$2 billion in temporary incremental credit facility capacity to be used for new investment opportunities).