Operational Alpha at Any Scale: How a $300 Billion Platform Invests Like a Sector Specialist - Lowell Baron - CEO | Real Estate - Brookfield

So just so I understand this definition of operating expertise, so you have boots on the ground looking on the acquisition side who deeply understand the market.

If it's a rental housing strategy, are you doing the facilities and the asset management? If you're doing construction, are you fully vertically? I mean, in kind of real estate parlance, we might think of this as vertical integration.

Are you fully vertically integrated? Is that what we mean by operational expertise all the way down to the asset in every market?

Exactly.

So we are vertically integrated.

We have, you know, inside each one of these sector platforms and new markets, you know, this is how it adds up to 30,000.

A lot of people who have all the expertise of all those different functions and are doing it for...

in, you know, some people are doing it for multifamily, it's the multifamily platform.

And some are doing it.

And manufactured housing, it's the manufactured housing platform.

And it's, and it's the industrial platform and all like all the hospitality of all of these platforms, they they, they're standalone.

So everyone, there are people in those specific platforms that have the expertise really in their sector and in their markets.

And what Brookfield is, is the total of all of that, all those different platforms that are all Brookfield platforms, plus a layer of people that you would think of as the more allocators of capital who are the people that came out of investment banking or out of other private equity shops that are thinking broadly about which public companies are trading cheaply and where do I see distress? And then let's say, let's say we see, you know, we just bought it.

For example, we just took private an industrial company called Peakstone in the U.S., what we call our M&A team might identify that is trading incredibly cheaply and start to build a relationship with the CEO and with the board of that company.

But ultimately, when we get into dialogue with them and diligence, it's the combination of the entire industrial platform that we have in the US with our M&A team working to take it private in a way that, you know, that company had about 75 assets.

We have 75 individual business plans by the time we close on exactly what we're going to execute at every one of those with our team.

And so that's the beauty.

That's the value add that comes with having the scale and the specialization.

With size, with scale, with specialization, I'm sure it's not perfect.

I mean, what are some of the things that you need to consider? Not everybody has the privilege or the opportunity to get to the size and the scale that you have and that the team has.

But I think the counterfactual might be, well, you can't do everything well.

How do you have 30,000 people? You can't be an expert at everything.

So surely there's an area for sharpshooters.

And I know that Playing where there's less competition, you mentioned, is a strategic advantage.

But how do you think about these two maybe opposing ideas of can you be big and can you be specialized at the same time as it might relate to what an investor could challenge you on in this type of conversation?

So just so I understand this definition of operating expertise, so you have boots on the ground looking on the acquisition side who deeply understand the market.

If it's a rental housing strategy, are you doing the facilities and the asset management? If you're doing construction, are you fully vertically? I mean, in kind of real estate parlance, we might think of this as vertical integration.

Are you fully vertically integrated? Is that what we mean by operational expertise all the way down to the asset in every market?

Exactly.

So we are vertically integrated.

We have, you know, inside each one of these sector platforms and new markets, you know, this is how it adds up to 30,000.

A lot of people who have all the expertise of all those different functions and are doing it for...

in, you know, some people are doing it for multifamily, it's the multifamily platform.

And some are doing it.

And manufactured housing, it's the manufactured housing platform.

And it's, and it's the industrial platform and all like all the hospitality of all of these platforms, they they, they're standalone.

So everyone, there are people in those specific platforms that have the expertise really in their sector and in their markets.

And what Brookfield is, is the total of all of that, all those different platforms that are all Brookfield platforms, plus a layer of people that you would think of as the more allocators of capital who are the people that came out of investment banking or out of other private equity shops that are thinking broadly about which public companies are trading cheaply and where do I see distress? And then let's say, let's say we see, you know, we just bought it.

For example, we just took private an industrial company called Peakstone in the U.S., what we call our M&A team might identify that is trading incredibly cheaply and start to build a relationship with the CEO and with the board of that company.

But ultimately, when we get into dialogue with them and diligence, it's the combination of the entire industrial platform that we have in the US with our M&A team working to take it private in a way that, you know, that company had about 75 assets.

We have 75 individual business plans by the time we close on exactly what we're going to execute at every one of those with our team.

And so that's the beauty.

That's the value add that comes with having the scale and the specialization.

With size, with scale, with specialization, I'm sure it's not perfect.

I mean, what are some of the things that you need to consider? Not everybody has the privilege or the opportunity to get to the size and the scale that you have and that the team has.

But I think the counterfactual might be, well, you can't do everything well.

How do you have 30,000 people? You can't be an expert at everything.

So surely there's an area for sharpshooters.

And I know that Playing where there's less competition, you mentioned, is a strategic advantage.

But how do you think about these two maybe opposing ideas of can you be big and can you be specialized at the same time as it might relate to what an investor could challenge you on in this type of conversation?