The Real Deal New York

Brookfield could buy back $40B in shares over next decade

Company has $330B in assets under management, according to Q3 report
By Kathryn Brenzel | November 08, 2018 06:16PM

Bruce Flatt (Credit: iStock)

Brookfield Asset Management expects to buy back as much as $40 billion in shares in the next decade.

During a third-quarter earnings call on Thursday, the company said it expects to bring in $60 billion in the next 10 years.

But the opportunities to spend the capital will likely be “outstripped” by the anticipated volume of cash, CEO Bruce Flatt said. Brookfield expects to spend roughly $10 billion in the next decade and will likely distribute the remaining $50 billion to shareholders. Roughly $10 billion would be paid as dividends while the remaining $40 billion would likely be used to buy back stock.

“Of course, if better alternatives present themselves, it may be less than this, but this is the base case plan for the business,” Flatt said during the call. “It is most likely that the return of capital to shareholders will be accomplished through share repurchases, but alternatively the dividend could be increased.”

He noted that for many, a share repurchase would be more tax effective.

Net income this quarter hit $941 million, down from last year’s $992 million over the same period.

Still, in the last 12 months, net income totaled $6.5 billion, a jump from the $2.6 billion from the 12 months before that.

Company officials said the uptick was due in part to a string of recent acquisitions. In August, the company closed on its $15 billion acquisition of General Growth Properties. The company is expected to close on its acquisition of Forest City Realty by the end of the year.

Brookfield, which now has $330 billion in assets under management, isn’t alone in mulling a massive share repurchasing program.

In June, SL Green Realty increased its share repurchase program by $500 million, which brings the total value to $2 billion. Companies decide to buy back shares for a number of reasons. Sometimes it’s due to a lack of investment opportunities or because company executives believe the stock is undervalued. According to SL Green, its stock price is deeply discounted compared to the underlying value of its assets.

But there seems to be a larger trend of buybacks at play. According to the Financial Times. S&P 500 companies have authorized $741 billion of share repurchases so far this year and are expected to reach $900 billion by the end of 2018.