Conference Call TranscriptFellow investors, just throwing down my thoughts......I have a long position here and let me know if you think I am messed up, thanks. I have zilch interest in blogging but would like to see if there is someone who has other thoughts.
Just read the conference call script and also read the transcript from investor day in September.
Any BPY investor should read this stuff. Smart guys leading this company but the CEO seems a little overwhelmed or tired and the CFO seems solid and very good highlighting the financials.
I think the story is so exciting for all their opportunities and ability to raise and make money but the 4 big concerns seem to be:
Interest rate headwinds on their additional cash expenses but also how rising rates impact value of their assets. Management had great responses to the questions but the market may not be agreeing with them. I do not have a strong conviction that rates are going to skyrocket and I cant disagree with managment that rates will remain low-ish.
Investors dont like the external managment fees being paid to BAM and concern that BPY is buying assets so BAM gets paid more fees which certainly looks like the case given the leverage but managements response was BAM does have a big investment in the company and would not jeapordize this investment.
High debt levels. Managment response was its mostly asset level only debt and they have lots of assets to sell if necessary. Interesting when the CEO was asked about share buybacks and he said BAM will be doing the insider buying....I think that means that BAM gets to buy the shares cheap not BPY ....very bad answer from a CEO who probably has most of his net worth at BAM (IMHO).
There seems to be confusion and concern over the legal structure of BPY and liquidity of the shares and there has not been a big following in the stock and management was very defensive to this and its a priority for them. They seemed very proud that BPR is trading well....that is weird.
I totally believe in this company over the long term and enjoy the dividend but the big risk is the share prices starts to drift down or crumble and there is an opportunity for BAM to take it in on the cheap, especially since the stock has not been embraced by the market....so I have a good position but I am being careful. Very concerned this stock is getting to levels when it was created 5 years ago. Not BAMs style to screw shareholders and its a big investment for them to take in but look no further than GGP, BOX, Rouse or BPO stock charts to see how this could play out. Not saying it is going to happen but its a RISK. BAM needs only like $9 billion to take this in at TODAYS price and they just raised like $8 billion of EQUITY just to take in GGP. If I BAM, I take it in if the share price starts to fail. Be careful.