Brookfield Office Properties Inc T.BPO.P.R

RE:RE:x,y,z

[SONOFFERGUS]

Taxes too -- interest sucks at tax time.

To compare on a pre-tax basis, the pref market grosses up dividends by 30%.  This is a rough approximation ofc.  Lots of retail investors pay little (or even negative) tax on dividends because of how the dividend tax credit works.

So 13.26% adjusted for tax is 17.25% or so.  Compare that to 3-month t-bills at 5.00%.  Where else are you getting +1225bps?

Brookfield mother ship has two series with the same dividend -- 70% of prime.  They trade around $12.40. They traded $17.70ish in Sept/18 when t-bills were 1.10% or so.  Think about your premise that floaters sell off when t-bills go down.  The value is relative to alternative floaters, not an inverse relationship as with fixed rate bonds.  As a thought experiment, what would happen if t-bills go to zero?  Prime is likely to be 2.2% (this has been the spread to t-bills forever, including last rounds of ZIRP), dividends are 1.54% on par, 2% pre-tax, 4% on price.  +400bps is pretty attractive when there is no other yield to be found.  What kind of shape is BN in when short rates are zero?  Probably pretty good.

Same dividend on BPOs trading $9.40ish is 5.3%.  Beautiful.

If BN decides to make a tender offer for the shares, price goes up. 

If BPO credit worries continue to subside, price goes up.

If inflation is sticky and policy rates go up, price might go up, subject to increased credit spreads on BPO.

Things to consider.  I am long floaters for these reasons.