RE:RE:RE:RE:RE:RE:RE:RE:RE:I own a lot of one bank...pierrelebel wrote:
wynner wrote "Flatt cares more about his credit rating than the actual real estate. imo. Job one will be to pay down debt promptly on select prefs and debt. So it is going to happen "
I love your optimism. And I wish I could feel it.
However, from my perspective Flatt cares mostly about Brookfield Assets Management (BN and BAM), not Brookfield Assets Properties Inc. (BPO) His priority is on the mother ship.
Preferred shares in BPO are not "debts", they are part of the capital used in the business. The credit rating for Brookfield (BN/BAM) is good, the problem of credit rating is with Brookfield Office Properties (BPO) and that will not be fixed quickly.
While lower interest rates over the next two years will help, the main issue remains vacancies in office buildings, resulting in lower revenues while inflation increases expenses. As a society, we are years away from solving the vacancy problem as many "office workers" still prefer to work from home. Then, and only then, will the credit rating improve, not before.
In the meantime the well above average yields on BPO preferred shares reflect that credit risk. I expect the high spread to remain for years and my wife and I will keep enjoying those high quarterly dividends for years to come.
And, if we have to pay income tax, so be it. It beats the alternative!
I agree that BN/BAM credit is good. But the rest.......not so much.
He does not "care" about BN/BAM credit quality. Because it is good.
He Does care about BPO/BPY credit . Because it will cost more money for financing.
Lower interest helps a lot. Yes.
Then the common falacy.
Brookfield properties in general are fully leased. Check out the G&M graphic of downtown T.O. financial district. Below 7% vacancy for Brookfield. I mentioned places like Atlantis and Ala Moana which are not even offices. Bishopsgate in London . I read today (again) about how Fullers pubs in London are doing well because workers are coming back to the office. (CITYAM)
B-class buildings and non-recourse financed buildings look bleak for now. Hence the drag down of Brookfield. I buy. Cap gains and high dividends here we come (again).
We will both be right in the long/medium game.