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Speaker 1: We're the backbone behind global business and when they need capital,

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Speaker 1: we fund it.

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Speaker 2: It's one of the world's largest alternative investment companies. Brookfield

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Speaker 2: owns hydroelectric plants, cell phone towers, power lines, wind farms, ports,

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Speaker 2: and even cities guidelines. Bruce Flatt has been at the

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Speaker 2: Helm for more than two decades, overseeing more than nine

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Speaker 2: hundred billion dollars of assets under management. The veteran chief

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Speaker 2: executive is considered a visionary investor with a golden touch,

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Speaker 2: but for him, it's all about patients and finding the

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Speaker 2: right investments.

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Speaker 3: What you might think of is risky.

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Speaker 1: To us, it's not risky because we've been in this

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Speaker 1: business for these businesses for a long period of time.

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Speaker 2: In this episode of Leaders with Lacwat, I speak to

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Speaker 2: Bruce Flatt about the secrets of his success, the outlook

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Speaker 2: for commercial real estate, and his own future.

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Speaker 4: Bruce Flatt, thank you so much for coming on Leaders.

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Speaker 3: How are you?

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Speaker 2: I'm great, I'm speaking to you. Brookfield has gone from

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Speaker 2: strength to strength. If I was immersion meeting you for

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Speaker 2: the first time, how do you describe your company?

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Speaker 1: We invest in, buy and own the backbone of global economy.

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Speaker 1: When the water gets delivered to your house, the road

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Speaker 1: to drive on, the pipeline that brings different things to

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Speaker 1: your community, the telecom towers that transmit your phone, the

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Speaker 1: data center, the real estate that you live in. It's

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Speaker 1: what we own and build. So it's really what drives

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Speaker 1: the economy. And you don't often see our.

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Speaker 4: Name because good to a bad thing.

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Speaker 3: You know, it's just because we're behind the scenes. But

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Speaker 3: it's big.

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Speaker 1: With a trillion dollars of assets almost we're behind a

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Speaker 1: lot of the things of the global economy.

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Speaker 4: So being low key to do you think it gives

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Speaker 4: you strength.

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Speaker 1: We just try to be quiet and do our thing,

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Speaker 1: and sometimes it helps and sometimes it doesn't. But I'd say,

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Speaker 1: on balance, it's been good for us.

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Speaker 4: You've been in charge for twenty two years.

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Speaker 3: That seems like a long time when you say it

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Speaker 3: that way.

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Speaker 2: Two decades over two decades, what was the most interesting transit?

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Speaker 2: I mean, you've grown the business by so much. What

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Speaker 2: was the most difficult question about how to grow it?

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Speaker 1: Look, the amazing thing about this business is you learning

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Speaker 1: every day and the world's changing all the time.

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Speaker 3: But if I went back twenty.

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Speaker 1: Two years or thirty two years, what we invested in

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Speaker 1: then and now are very different. Data centers didn't exist then.

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Speaker 1: Telecom towers were owned by all the phone companies. So

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Speaker 1: these are things that the business evolves and the backbone

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Speaker 1: evolves of the economy. So it's a really interesting business

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Speaker 1: to be in because you're always learning.

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Speaker 2: But it's a difficult business because you don't want to

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Speaker 2: be codec right, you don't want to invest in something

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Speaker 2: that goes nowhere.

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Speaker 3: Yeah.

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Speaker 1: Look, we're always trying to understand where is the future

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Speaker 1: are going and how do we invest with that? And

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Speaker 1: often it's listening to your counterparties, your clients, your partners,

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Speaker 1: and hearing what they're saying and what they want to do,

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Speaker 1: and we're going with them. And that's really we're the

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Speaker 1: backbone behind global business and when they need capital, we funded.

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Speaker 2: And I think your north star, as it were, is

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Speaker 2: three d's right.

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Speaker 3: Yeah.

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Speaker 1: Look, i'd say over time, we're always trying to figure

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Speaker 1: out what are the things they're going to what are

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Speaker 1: the themes right they're going to drive the world. And

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Speaker 1: and today the digitalization of everything, the decarbonization of everything,

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Speaker 1: and the deglobalization of everything are three.

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Speaker 3: I'd say mega trends themes.

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Speaker 1: That are going to be very dominant in investing for

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Speaker 1: the next not not the next two or three years,

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Speaker 1: next twenty to thirty years.

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Speaker 2: Geopolitics is I guess taking a turn for the worst.

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Speaker 2: How do you again keep that trajectory and saying, look,

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Speaker 2: we will digitize. Interest rates are also all over the place,

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Speaker 2: So how do you stay the course?

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Speaker 4: As it were?

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Speaker 3: No Frenzine.

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Speaker 1: What we try to do is find good countries, go

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Speaker 1: there and stay there, invest in these things, and whether

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Speaker 1: governments come or go, where in strates go up a

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Speaker 1: little bit or down a little bit, aren't really relevant

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Speaker 1: to these themes. In the long term, you need to

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Speaker 1: make sure you have liquidity, you can fund yourself, and

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Speaker 1: you run good businesses, and that's more important than those

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Speaker 1: general trends.

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Speaker 3: So we're trying.

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Speaker 1: We're investing for ten, twenty, thirty, forty fifty years.

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Speaker 2: So out of the three d's, is digitalization the hardest

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Speaker 2: because of AI because we don't really know where we'll

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Speaker 2: end up.

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Speaker 1: Look, I'd say digitalization was happening because of cloud computing

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Speaker 1: and the supertech companies getting into cloud compute, and that

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Speaker 1: was the whole thing going on. The amount of things

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Speaker 1: that go to your iPad every day today in your phone.

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Speaker 4: Crazy.

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Speaker 1: It's amazing what's happening in the past twenty years. But

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Speaker 1: now with AI, it's just it's almost exponentially taken it up.

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Speaker 1: And so that's just another tailwind behind this whole sector.

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Speaker 1: It was very strong before that, and for the last five, seven,

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Speaker 1: ten years we had been pushing into it. But the AI,

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Speaker 1: what's going on with AI is even more dramatic. The

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Speaker 1: digitalization of everything is being driven by data centers and

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Speaker 1: just the connectivity of everything. But remember, everyone in the

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Speaker 1: world has in some way committed to let's have less carbon,

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Speaker 1: and it's just transitioning the economy. It's not good or bad,

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Speaker 1: or green or black. It's just let's just transition the

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Speaker 1: economy to have less carbon. We're funding that, and the

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Speaker 1: leaders in that today are the technology companies. So a

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Speaker 1: lot of this is being driven by the technology companies

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Speaker 1: to go greens that were one of the largest builders

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Speaker 1: of solar and wind and now batteries to be able

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Speaker 1: to get carbon out of the system. And whereas years

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Speaker 1: ago we sell power to the grid, today it's our

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Speaker 1: power is mostly sold to global corporates.

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Speaker 2: And again this is you have to take a bet

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Speaker 2: on what kind of technology or do you have to

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Speaker 2: take a bet on just the infrastructure that supports it.

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Speaker 1: We were doing wind fifteen eighteen, twenty years ago. We

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Speaker 1: were doing solar ten years ago, but very small and

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Speaker 1: only when the cost curves made solar and wind at

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Speaker 1: the point where they were they're the most economic thing

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Speaker 1: way to generate electricity. And at the point of that,

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Speaker 1: you know, if they're the most economic way to do

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Speaker 1: it and they have less carbon, they're going to win.

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Speaker 1: And that's why we're decarbonizing today because in most countries

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Speaker 1: this is the lowest cost energy.

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Speaker 2: But gew politics must get in the way. Politicians have

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Speaker 2: to be re elected. There are pro climate change against

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Speaker 2: climate change. How do you not waiver?

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Speaker 1: Remember just the important point in most countries, the lowest

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Speaker 1: cost energy today for electricity is solar wind.

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Speaker 3: You don't need subsidies. And when you did need subsidies,

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Speaker 3: politics matter.

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Speaker 4: Today you don't deglobalization. So this is what bringing back

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Speaker 4: on shoring.

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Speaker 3: All it is is.

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Speaker 1: I think in COVID, I'd say it's always been happening.

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Speaker 1: And in COVID people just learned we should have production

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Speaker 1: capacity located in many things, located where you use them.

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Speaker 1: So increasingly. For example, batteries for cars, for example, they're

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Speaker 1: being used in America, and therefore their battery plants getting

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Speaker 1: built in America, and there's an enormous need for capital

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Speaker 1: to fun battery plants. There's enormous need for semiconductors, enormous

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Speaker 1: need for manufacturing capacity in various locations around the world.

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Speaker 1: And it's just natural that everyone doesn't want to have

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Speaker 1: all of their manufacturing capacity in one country or place.

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Speaker 3: Let's diversify. So that's just a.

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Speaker 1: Big theme, which means it's just a lot of capital.

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Speaker 2: You make it sound very easy, but actually this has

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Speaker 2: gotten you, like more than nine hundred billion in assets

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Speaker 2: under management.

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Speaker 1: You know, it's it's not easy, but if you have

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Speaker 1: operating people and you keep repeatable do repeatable things around

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Speaker 1: the world, it gets easy.

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Speaker 3: It gets simpler. It's not easy, but it's simpler.

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Speaker 1: And and I guess that's that's why we're in business,

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Speaker 1: right it.

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Speaker 3: We've been doing this a long time.

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Speaker 1: And everything's not the same, but it's there are there

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Speaker 1: are a lot of things that rhyme, and therefore you

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Speaker 1: can learn and continue to grow over time.

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Speaker 2: Coming up, Bruce Flatt on plans to invest in the

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Speaker 2: financial backbone of the global economy.

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Speaker 1: We think that's the next the next phase of infrastructure

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Speaker 1: invest eight.

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Speaker 2: Infrastructure has been a bright spot for Brookfield. The company

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Speaker 2: is gathering cash for a new fund targeting buyout opportunities

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Speaker 2: in the Middle East, and it plans to start a

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Speaker 2: pool that invest in financial infrastructure such as payment systems

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Speaker 2: as demand grows. I continue the conversation with Bruce Flatt.

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Speaker 2: Did you know in two thousand and two that you

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Speaker 2: wanted to be at nine hundred billion asset under management

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Speaker 2: or a trillion.

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Speaker 1: We're just trying to make money for our clients in

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Speaker 1: a thoughtful way, and we've done that for a long

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Speaker 1: period of time. And the reason why we are at

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Speaker 1: the scale we are is because we've been thoughtful with

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Speaker 1: their mind and we've earned them a good return and

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Speaker 1: we've not taken a lot of risk. And if you

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Speaker 1: can do that over long periods of time, you can

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Speaker 1: compound their wealth investment wealth to very large.

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Speaker 3: Sums of money.

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Speaker 1: And that's what's important for these sovereign institutional pension investors

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Speaker 1: because they have very long durations.

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Speaker 3: They need these type of assets.

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Speaker 1: To earn them returns over the longer term.

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Speaker 4: You've also gone to credit. How much are you expecting

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Speaker 4: that to grow?

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Speaker 1: Look what's happened with regulations in the banking system is

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Speaker 1: they've just it's pushed out credit off the balance sheets

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Speaker 1: of the banks, and the right place where that is

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Speaker 1: being funded from is institutional investors. And therefore investors like

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Speaker 1: ourselves are continuing to grow our businesses where we're funding

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Speaker 1: these type of products. But it's not our business is

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Speaker 1: not in competition with the banks. It's actually in partnership

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Speaker 1: with banks. And as a result of that, I'd say

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Speaker 1: it's facilitating the growth of the global financial markets as

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Speaker 1: opposed to something that often people talk about it that

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Speaker 1: wor't the wrong time in the cycle or whatever it is.

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Speaker 1: This is going to be growing and happening for a

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Speaker 1: long period of time.

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Speaker 4: So how big do you expect it's going to get?

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Speaker 1: Dig Because remember this is this is where most of

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Speaker 1: the capital is in the world is in sovereign institutional funds,

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Speaker 1: these and pensions. These funds are used to be twenty

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Speaker 1: and thirty billion. Today they're three hundred billion, five hundred billion,

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Speaker 1: a trillion and a half dollars.

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Speaker 3: These are large, large suns of money.

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Speaker 1: They need to put it to work and therefore it's

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Speaker 1: going to continue to grow for a long period of time.

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Speaker 2: And are you focused when you look at regions? Is

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Speaker 2: it mainly the GCC countries?

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Speaker 1: We invest for people in the for the long term,

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Speaker 1: try to earn them good returns by taking moderate risk.

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Speaker 1: And if we can do that, it's all around the world.

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Speaker 3: For you.

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Speaker 1: What you want to well too in your own portfolio

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Speaker 1: is take moderate risk and earn a good return.

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Speaker 2: But what's moderate risk? So do again? You make it

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Speaker 2: sound easy, but actually this is a no. How so

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Speaker 2: do you look into you know you're also quite acquisitive.

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Speaker 3: Yeah, Look, I.

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Speaker 1: Would say we in the businesses that we are in,

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Speaker 1: we have more information than most people about what we do. Therefore,

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Speaker 1: what you might think of is risky. To us, it's

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Speaker 1: not risky because we've been in this business for these

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Speaker 1: businesses for a long period of time.

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Speaker 3: We have the information of everything we know.

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Speaker 1: We know what's getting shipped across the ocean in our containers.

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Speaker 1: We know what's getting booked into the ports in different countries.

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Speaker 3: We know what's traveling on the.

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Speaker 1: Roads, we know what the how many people are going

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Speaker 1: into a shopping mall.

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Speaker 3: We know all of those things and that just informs us.

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Speaker 1: So we have i'd say, better information to base our

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Speaker 1: decisions than most people.

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Speaker 3: But we're always you know.

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Speaker 1: We're trying to take so we're trying to lower the

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Speaker 1: risks by doing that.

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Speaker 3: Of course you can investing.

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Speaker 1: Investing is tough, it's not easy, and therefore you're always

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Speaker 1: taking some former risk.

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Speaker 4: How do you choose what company to buy?

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Speaker 1: You know, thoughtful analysis about what's in the business, proper

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Speaker 1: pricing when things are up a lot, just wait and

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Speaker 1: most people invest at the wrong time because they get

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Speaker 1: excited about what the markets are telling them about a business.

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Speaker 1: And therefore we're that's using when we're not investing and

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Speaker 1: just wait for the time when it'll be a little

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Speaker 1: better to invest.

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Speaker 2: Do you expect mean I think you've spoken in the

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Speaker 2: past about, you know, a possible big acquisition that would

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Speaker 2: be transformational for Brookfield, So.

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Speaker 1: You know, I would say we're always in the we're

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Speaker 1: always looking for additions to the business. In twenty eighteen,

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Speaker 1: we brought oak Tree into our fold and we have

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Speaker 1: a partnership with the management there that's been transformative to

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Speaker 1: our credit business, and we're always looking for things like

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Speaker 1: that to continue to build the business and just grow

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Speaker 1: over time.

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Speaker 3: But if not, we'll just we just keep plugging away

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Speaker 3: every day.

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Speaker 2: So this is it's more partnerships than outright acquisitions like Altera.

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Speaker 2: I mean, this is a different kind of carbon fund.

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Speaker 1: Our transition business we started, we split off from our

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Speaker 1: main infrastructure business four and a half, four or five

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Speaker 1: years ago. We raised a large first time fund.

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Speaker 3: We just did.

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Speaker 1: A first close of our second fund for ten billion dollars,

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Speaker 1: and then we we started an emerging markets business.

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Speaker 3: So I'd say that's just a split off. This is

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Speaker 3: just all we're trying to do.

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Speaker 1: Is we we informed ourselves about transition. We built a

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Speaker 1: team over a long period of time. Now are some

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Speaker 1: people said to us, can you solve emerging markets as

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Speaker 1: opposed to just developed markets. We didn't feel it appropriate

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Speaker 1: to put the two in the same fund, So we're

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Speaker 1: creating another fund to do that and some of our

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Speaker 1: clients will come along with us, and we're quite excited

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Speaker 1: about it.

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Speaker 4: Is that a template for possible future kind of spin offs?

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Speaker 1: You know, we have in our private equity business, we

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Speaker 1: have a biot sponsor business, but we're also doing We're

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Speaker 1: just in the midst of creating a strategy for the

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Speaker 1: Middle East, which will be a separate pool of money.

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Speaker 1: We're creating a strategy for financial infrastructure because we think

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Speaker 1: that's the next The next phase of infrastructure investing is

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Speaker 1: in the financial backbone of the global economy, and a

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Speaker 1: lot of the world has been pushing towards financial infrastructure

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Speaker 1: and it's not appropriate for our infrastructure fun So we're

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Speaker 1: creating a new pool of money to do that. So

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Speaker 1: there's a fine line between to having too many things

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Speaker 1: and making sure your clients who want to be invested

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Speaker 1: with you in that type of area have have a

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Speaker 1: pool to be able to do it with us.

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Speaker 2: When you look at infrastructure, I mean there's a consolidation.

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Speaker 2: It was really I guess the name for the last

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Speaker 2: six months. Does that make your job easier or tougher?

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Speaker 3: Look, we.

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Speaker 1: Were the maybe one, I'm going to say, one of

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Speaker 1: the pioneers of infrastructure.

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Speaker 4: The original you want to say, well.

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Speaker 1: Going into institutional clients, we were the original because we

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Speaker 1: were in industrial businesses ourselves, and how we got into

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Speaker 1: the infrastructure businesses. We decided we didn't like the up

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Speaker 1: and down of many of the industrial businesses we had

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Speaker 1: in mining, businesses. But we really liked the backbone infrastructure

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Speaker 1: that was in these businesses. And but twenty years ago

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Speaker 1: we started doing it for institutional clients. At that time,

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Speaker 1: nobody would listen to us, nobody would invest with us.

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Speaker 3: So it's quite and it's quite.

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Speaker 1: It's great that that this has become mainstream today. The

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Speaker 1: good news, I'd say we're still a leader in it.

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Speaker 1: We have very large funds, in fact the largest in

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Speaker 1: the world, and therefore we just continue to try to

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Speaker 1: differentiate our investment strategies and with size, scale, operating people,

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Speaker 1: and the ability just to grow in the places we are.

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Speaker 1: So I think we're does to others getting stronger help us.

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Speaker 1: Probably not, but it doesn't really bother us. And I

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Speaker 1: think there's a place for us to continue to grow

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Speaker 1: in the business coming up.

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Speaker 2: Why Bruce Flatt has faith in the future of commercial

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Speaker 2: real estate.

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Speaker 1: There's opportunity coming and if you know what you're doing,

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Speaker 1: you can pick the right assets.

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Speaker 3: There's a great opportunity here.

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Speaker 2: From the United States to Europe. Plunging off, his valuations

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Speaker 2: are spooking investors, raising fears about a broader contagion. As

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Speaker 2: one of the world's biggest owners of commercial real estate.

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Speaker 2: Brickfield is at the center of a global industry shakeout.

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Speaker 2: For the chief executive, Bruce Flant, who made his name

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Speaker 2: in real estate, sees opportunities where others see risks.

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Speaker 4: We continue the conversation commercial real estate. So a lot

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Speaker 4: of people say, look, this is.

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Speaker 2: Not that this is not the right time we're going

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Speaker 2: to see a shakeout and commercial real estate.

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Speaker 4: There are opportunities that you see.

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Speaker 3: I think lookt The next story is that interstrates are

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Speaker 3: coming down.

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Speaker 1: Fundamentals are pretty good in a lot of commercial real estate.

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Speaker 1: Of course, there are some there's a tail of some

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Speaker 1: investors that had properties that for this environment the fundamentals

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Speaker 1: either don't support it or the financing they have can't

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Speaker 1: be supported, and therefore those.

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Speaker 3: Have to get dealt with. So that's a tale that's

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Speaker 3: getting dealt with.

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Speaker 1: Within the financial system, fundamentals are actually getting better. Interest

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Speaker 1: rates are coming down, which means the values are going

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Speaker 1: to improve. But that tail, there's opportunity coming and if

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Speaker 1: you know what you're doing, you can pick the right assets.

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Speaker 1: There's a great opportunity here. And we've done this for

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Speaker 1: a long period of time and we've seen these cycles before.

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Speaker 1: Real estate's cyclical, and you can make a lot of

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Speaker 1: money when you pick the inflection point of markets. And

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Speaker 1: I remember it in the early nineties, I remembered it

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Speaker 1: in early two thousands. I remembered it in two thousand

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Speaker 1: and nine, ten, eleven, twelve. There are points when there's

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Speaker 1: inflection point, and we're at one of those inflection points.

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Speaker 4: So you're buying.

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Speaker 1: We are buying our opportunistic fund. We just bought some

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Speaker 1: we foreclosed on some loans for multi family in the

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Speaker 1: US recently. We're very excited about that, and we continue

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Speaker 1: to look at a bunch of things.

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Speaker 4: Do you see anything in Europe?

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Speaker 3: Absolutely, I think there'll be. Uh.

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Speaker 1: You know, the biggest, most liquid markets are in the

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Speaker 1: United States. That doesn't mean therefore because of the most

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Speaker 1: liquid you always find the most opportunities. But Europe there's

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Speaker 1: less capital, and therefore there will be there will be

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Speaker 1: opportunities here as well.

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Speaker 2: But how do you make a difference between the ones

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Speaker 2: that you know will get better and the ones that

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Speaker 2: actually you just you should forget, you know, I would.

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Speaker 1: Just say it it depends on the types of real estate.

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Speaker 1: You just need to quality wins always, it always has,

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Speaker 1: it always will.

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Speaker 4: What you spend most of your time thinking about.

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Speaker 1: You know, I personally, I spend my time. I'm sometimes

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Speaker 1: helping our teams with business sometime say a third that

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Speaker 1: a third with clients helping them understand what we're doing,

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Speaker 1: where we're going, and a third is just internal people

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Speaker 1: running the organization, I'll call it.

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Speaker 3: And with that, we spend an enormous amount of time.

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Speaker 1: Building our people and transitioning our people within all of

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Speaker 1: our businesses.

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Speaker 3: And it's just this is not something that happens once.

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Speaker 3: It's happening all the time.

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Speaker 1: And our whole goal is our culture of our place

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Speaker 1: is bring people up that are very young, give them

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Speaker 1: opportunities that they never get anywhere else, grow them throughout

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Speaker 1: the organization, make sure they're entrepreneurial, hardworking in.

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Speaker 3: One win.

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Speaker 1: And if you have that, you have a great culture

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Speaker 1: in a company. And that's sort of what we spend

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Speaker 1: all of a huge amount of our time trying to

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Speaker 1: build within the organization.

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Speaker 4: But bring them up to test them or just to

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Speaker 4: make them learn.

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Speaker 1: Look, if we can bring them up to take on roles,

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Speaker 1: and eventually eventually I will I will become an executive

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Speaker 1: chairman and I'll still be around, but somebody else.

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Speaker 4: Can you ever retire?

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Speaker 3: Well, you know, I.

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Speaker 1: Will become an executive chairman at some point in time,

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Speaker 1: and what that means is I'm here to help mentor

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Speaker 1: young people, help with business development, look after clients that

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Speaker 1: can be helpful to overall the organization. But at some

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Speaker 1: point in time, this is a hard business. We're in

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Speaker 1: thirty countries, we have lots of people. It's better to

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Speaker 1: have younger people grow the business. I took over at

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Speaker 1: thirty in my thirty early thirties, and I probably slower

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Speaker 1: today than I was then.

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Speaker 3: Not that I've slowed down, but I'm slower today.

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Speaker 1: And at some point in time it's the right thing

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Speaker 1: just to bring to give the people those roles. And

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Speaker 1: so we're continually evolving the organization in that way.

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Speaker 4: But are you going anywhere anytime soon?

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Speaker 2: No? Is this the biggest mistake actually for politicians and

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Speaker 2: chief executives.

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Speaker 4: Is staying on for too long?

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Speaker 2: Or is leadership in twenty twenty four different to what

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Speaker 2: it was in early two thousands.

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Speaker 1: You know, I think it all depends on the organization.

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Speaker 1: Some organizations fit one way, some fit another. I'm not

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Speaker 1: suggesting our culture is what works for everybody else. But

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Speaker 1: we have a culture where our elders stay around for

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Speaker 1: long periods of time to help, and our young people

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Speaker 1: get opportunities which they wouldn't otherwise get if the elders

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Speaker 1: stayed in place in a full time role. And that's

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Speaker 1: what we do. But maybe it doesn't work for everyone,

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Speaker 1: and that's okay.

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Speaker 4: Where's flat. Thank you so much for joining us today.