Brookfield Office Properties Inc T.BPO.P.R

Brookfield Group Returns

[Carena]

Good morning,

I have been looking at the Brookfield group charts recently.  I do not think I am missing anything (eg stock splits etc) and since Dec 31, 2019, BN stock price is up 39%.  

I have not recently seen a sum of the parts valuation, but it is pretty incredible given the following:

(i) In 2021 it paid way up to bring "IN" BPY (buyout at $18 per share) and it is widely conceded that BPG is a big drag on BN at the moment.  IN 2019, BPY was a cornerstone asset of BN and it has all but collapsed.

(ii) In 2022 they distributed "OUT" BAM.  BAM is a $22 billion public company and I think they still own like 75%, so the value of the 25% that was distributed is valued at about $6 billion.  BAM stock has surged nicely in last 6 months.

(iii) In 2022 they distributed "OUT" BNRE.  BNRE is a $6 billion public company and I really don't know how it connects to BN, to be honest.  Lol. But I think they still own a vast %.

For the record, a distribution is effectively a form of a dividend.

(iv) And so that leaves us with their main operating subs  - BIP.UN down 6% since 2019, BEP.UN down 22% since 2019 and BBU.UN down 44% since 2019.  5 years have gone and all their current public all subs are down and BPY is way down.

So I think BN is a huge "show me" story over the next 24 months.

As you all know, my money is totally on Bruce Flatt but something is not ringing true to me.  BN's stock price is suggesting BN is stronger today than 5 years ago but it certainly doesn't feel stronger to me, if simply based only on the general acceptance that we are in a "higher for longer" interest rate environment.   

Very interesting times for us BPY/BPO pref holders.

Have a great day,
Carena

[Carena]

Hi again, Following up on this post, some comments on BN's leadership: I remember reading in one of the Canadian business media say 8-10 years ago and there was a full page spread on BN's Leadership.  There was Bruce Flatt (the leader) and his lieutenants ....Sam Pollock in BIP, Brian Kingston in BPY, Cyrus Madon in BBU and Sachin Shah in BEP.  That was the team.  Things

[Carena]

And I missed a pretty big point....in that article 8-10 years, Brian Kingston of BPY was touted as the heir apparent to Bruce Flatt.  I would say there is a near zero per cent chance of that happening now. Happy to be proven wrong on my thesis! I am very long Brookfield et al. Lol. That's it.  Have a  great day! Carena

[Carena]

Hi again,  I was churning some more on this post and went back to check my numbers on the operating subs.  The historical charts and stock prices factor in stock splits but they missed the fact that subsequent to 2019, each of the operating subs of BN (ie BEP BIP BBU) created a corporation to increase liquidity in their stocks for those investors who did not want to own the LP. 

[Carena]

Hi again, So why do I write a long winded post on the Brookfield Group and their subs and their leadership etc ? The BPO prefs are great instruments but they are buried within the BN structure and at the whims of the bigger Brookfield.  My thesis is the BPO prefs go the direction of Brookfield (ie BN).  I have said before, as long as the greater Brookfield is strong, then our BPO prefs

[pierrelebel]

Carena wrote "The BPO prefs are great instruments but they are buried within the BN structure,,," Yes and many others are hidden under the Brookfield umbrella. My wife and I own Bridgemarq (formerly Brookfield Real Estate Services) BRE on the TSX.  They have maintained the same monthly dividend of $0.1125 (yield 9.66%) since we first acquired the shares six or seven years ago. We

[Carena]

Pierre, I totally agree....good on you.  We think the same.  I believe BRE is in the BBU structure and will be interesting to see how BBU performs over the next 24 months too.  I would not expect any problems from BRE as it is an asset light business that should generate cash year after year. It would have been an easy excuse to cut divs during the pandemic and many did and

[SONOFFERGUS]

GM Carena. I enjoy your thoughts on BN -- you come at it from a different angle than I do and it makes me think.  I am riding with your premise that BPO prefs are fine as long as BN is safe, and BN's debt ratings suggest it is and will be. The size of the scraps subindex is interesting too.  I guess the general creditworthiness of issuers has migrated downward over the decades

[Carena]

Hi again, I have no idea what the "scrap index" is or whats in it....just sounds bad!  lol. I look forward to the great de-levering, but I am skeptical. Carena

[SONOFFERGUS]

It does sound bad.  Pretty sure it's DBRS Pfd-3H and lower.  That is one big scrap heap!

[Carena]

Hi there,  BN et al share performance year to date: BN down 4% BAM down 4% BEPC down 25% BIPC down 18% BBUC down 12% SPY Up 6% QQQ Up 7% XIU Up 3% Its all about interest rates. Looking forward to Flatt's shareholder letter in a few weeks.  Be wary if his letter includes lots of reference to compounded returns since year 2000.  Lol. My BPO preferred share investment is

[SONOFFERGUS]

GM. Tough times for bond proxies.  US10 yield from 3.86% to 4.64%, price down 9.4%.  BN and friends could be down a lot more.  OTOH, a great place to be if we get a sustained move down in rates.  Waiting...waiting...waiting