Brookfield Office Properties Inc T.BPO.PR.P

I own a lot of one bank...

[SONOFFERGUS]

C
W
B.

I also hold a whack of CWB.PR.B, which I was lucky enough to pick up late last year and held because I couldn't figure why it had a lower YTW than that of CWB.PR.D -- which is priced at a premium to par because of its giant fixed spread and assumed call in 5 years.  Those of you who read Prefblog will note that James likes prefs with somewhat lower fixed spreads to reduce call risk, and that makes sense to me.

I kept on buying through some turbulence thanks to Pierre -- his astute observation that some in the market are late to the news of a rate reset has paid off handsomely.  Thanks Pierre!

The press release doesn't say anything about plans for CWB's prefs.  Bringing my yippee post back to BPO, I'll be interested to see what they plan to do with the CWB prefs.  Hopefully we have the same problem to deal with someday soon.

[Carena]

Hi Sonoffergus, Big congrats on your big win!   Almost 100% premium....a great signal for the downtrodden Cdn stock market.  It is also great to see some bank M&A in Canada.  I have followed CWB for years and always wondered. As for the prefs, I read the press release just now and since the prefs are not mentioned, it would seem they are going to be left in place.  I

[SONOFFERGUS]

Thanks Corena! Tomorrow's price action will be interesting.  I don't see any problem with the deal getting done, so I expect that the CS discount to execution value will be pretty small.  Wrong before in this situation tho lol. Off the top, NB's goal will be to wind up WMB once the acquisition is complete -- I imagine having capital stuck in a subsidiary is not optimal

[Carena]

Good morning, Sorry I had not even looked at the CWB pref share price or details.  D trades over par?  (The spread on the B's os 4.04%.  Nice. And even nicer that it is under the NB umbrella now.) In terms of the structure.  My context would be to say that BN did not care about cleaning up the structure when it took over BPY or when BPY took over BPO (back in 2015!). 

[Carena]

Hi Sonoffergus, Well the market is telling you that you played CWB perfectly.  Congrats again! Interesting that the commons are only up 60%.  Deal risk I guess. I think a Cdn company being taken private and the target's prefs responding nicely is a shot in the arm for the entire pref space in Canada, including our BPO prefs! Carena

[SONOFFERGUS]

Good morning Carena. Off the top, I expect that regulatory capital is better kept in one big pot.  BN and friends get to play more, ahem, fast and loose, with their capital. It seems Mr. Market is a little skeptical that the deal will get done.  CWB $42ish versus $52ish announced value when NA only off 5%.  Hmmm. The BN complex should be absolutely rocking today with long rates

[pierrelebel]

Good afternoon SONOFFERGUS. I am sure it feels very good this morning to get a big winner once in a while. "It seems Mr. Market is a little skeptical that the deal will get done.  CWB $42ish versus $52ish announced value when NA only off 5%.  Hmmm." If I were younger (and more aggressive) I would be buying CWB today/tomorrow in the $42 range, looking at a potential capital

[SONOFFERGUS]

Thanks Pierre.  Enjoying so far thx but having to do some homework on the prefs. Dunno why the discount is so big -- it's a little concerning.  Maybe there is something to the idea that politics could get in the way. When I was younger and more aggressive I got absolutely torched on the 2008 BCE takeover that was aborted on a ludicrious interpretation of the agreement terms. 

[wynner]

"On capital appreciation from here, hopefully an improved credit situation for BPO will offset lower resets." SONOFFERGUS. I concur. 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 . It is the way. Mandalorian. He says most of the debt is variable. Lower rates

[pierrelebel]

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

[wynner]

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

[wynner]

Forgot the link. https://www.theglobeandmail.com/business/article-downtown-toronto-office-buildings-vacancy/ Profit jumps at pub group Fuller’s as City workers return https://www.cityam.com/profit-jumps-at-pub-group-fullers-as-city-workers-return/ https://www.cityam.com/revolut-to-move-global-headquarters-to-canary-wharf-as-it-waits-for-uk-banking-licence/

[pierrelebel]

"...Below 7% vacancy for Brookfield...." True but the high vacancy in most other downtown buildings - in all major cities around the world - minimizes the opportunities of rent increases. "...Fullers pubs in London are doing well because workers are coming back to the office. (CITYAM)..." Olivia Chow, mayor of Toronto, is on a mission to keep Toronto’s financial district

[wynner]

I was at The Well in Toronto on Sunday. Packed with young people including their dogs.....all day. Best food court I have ever seen. Fully licenced everywhere to boot. Shopify rents most of the office building for 10 years or more. Sub-let to others. The Toronto Star is in there.

[pierrelebel]

wynnet - I hope your optimism is well placed and we all win. Should S&P realize they made a mistake and reinstate a higher credit rating for BPO preferred shares justifying an average yield of 8% (considering the lower Bank of Canada rate next year), my BPO.PR.T would trade for $21+ giving my wife and I an additional $60,000+ capital appreciation. I hope you are right!  Our

[wynner]

 My BPO.PR.X will be $15 +++ Lol. That's why we do this. For our kin. Our grandkids will need all the help they can get if they change the CEO down south to a clown from a S King book.

[pierrelebel]

Good morning SONOFFERGUS Regarding CWB/NA deal you wrote "why the discount is so big -- it's a little concerning.  Maybe there is something to the idea that politics could get in the way." Since banks are governed by the federal government there is nothing Smith can do about it but scream and complain. My concern, if I had one, would be about people in Western Canada with

[wynner]

Congrats SONOFFERGUS ! Re CWB prefs: I doubt that National bank will do much except change the name. I have limited experience I admit . The last company I had was Genworth Canada . Now renamed Sagen. I think the prefs are still Genworth. Taken out by Brookfield . Yay? Of course you will be familer with my beloved BPO.PR.X and Dubya. The Y is gonzo. Formerly Brascan from the "before"