Brookfield Office Properties Inc BROAF

BPO story progressing nicely

[Spiderdon]

A couple encouraging developments this quarter, firstly the continued decline in equity associated with USA office in the Transitional Development portflio, without much change in overall equity value to BPY.  As you can see in the chart below USA office equity has dropped from 2.395B to 1.521B over the last 7 quarters with a corresponding reduction of 7 properties.  This is the only real trouble spot in the BPY portfolio with low occupancy at 76.4% and high loan/Value at 70.6%.  The 1.5B in equity now represents only 7% of the total 21.6B in BPY equity, there will likley be some write down of this equity value but it will have little impact on overall value and likely contribute positively to FFO as these properties have negative FFO.  When you exclude the USA office metrics from the total Transitional Development office portfolio the metrics improve dramatically, occupancy goes from 85% to 93% and loan to value from 59.62% to 49.95%, to do this exercise yourself yo will have to use the BN supplemental.  The second intresting development this quarter is the de-consolidation of BSREP IV.  This will reduce B/S debt by >19B and be a big step towards getting FCC and Debt/EBITDA ratios back in line with historical norms which is a catalyst for S&P to remove the negative outlook.  Each quarter there is incremental improvement as the story unfolds,  all BPO series remain compelling value with some greater than others.

USA Office
Transitional Development	Q1 2023	Q2 2023	Q3 2023	Q4 2023	Q1 2024	Q2 2024	Q3 2024
USA Office
USA Office Equity	2,395	2,170	1,831	1,730	1,664	1,635	1,521
USA Office Non-recourse Debt	4,276	4,386	4,397	4,427	4,409	4,268	3,652
Office Discount Rate	6%	8%	8.20%	8.30%	8.30%	8.40%	8.40%
Office Occupancy	79.40%	79.30%	77.50%	78.50%	77.70%	77.30%	76.40%
Office Loan/Value	64.10%	66.90%	70.60%	71.90%	72.60%	72.30%	70.60%
Number of Properties	48	48	46	45	45	44	41
Asset Value	6,671	6,556	6,228	6,157	6,073	5,903	5,173

[SONOFFERGUS]

Thx Spiderdon.  Very insightful and encouraging. "Each quarter there is incremental improvement as the story unfolds,  all BPO series remain compelling value with some greater than others." Endorsed.  It's tough to make sense of the relative prices.  Ts for current yield (which, rightly or wrongly, seems to be the overriding metric for prefs generally), As for

[rodbhar]

It's amazing that all the panic 1 year ago was due to bad headlines about some poorly performing buildings in this group. With only $1.5 B equity at risk out of >$20B. 

[Carena]

Hi there, I have not had time to look at much of the BPY financials but I plan to this weekend....but it would seem encouraging to see that the BSREP has been deconsolidated after having been just consolidated in 2023.....but no doubt, lots of audit special issues billing I would bet. Lol. So the big one that caught my eye is in terms of the BPY balance sheet, the Assets Held For sale are up $34

[CrazyTrader]

Follow the money.   As I understand, Brookfield plans to move capital from this sector of the company to the broader areas. Does this mean BPY will now be into Insurance, Green Energy, etc ???

[CrazyTrader]

Sorry I think I'm mistaken.   I don't think assets are being sold and moved into Insurance, Green Energy, etc.....   No, now think they are being sold at a Huge Loss, and Debt reduced.    Huge hit to Shareholder Equity to come I'm guessing.