Brookfield Property Partners is a large, diversified global real estate company. The company owns, operates, and develops office, retail, multi-family, industrial, hospitality, triple net lease, student housing, and prefabricated properties. BPY.UN has total assets of approximately $ 88 billion.

Brookfield Property Partners has 136 prime office properties totaling 96 million square feet in Gateway markets around the world and 122 retail properties totaling over 120 msf in the United States. The operating segments include Core Office (~ 57% of the CFFO 2020 and realized profits), Core Retail (~ 57%), LP Investments (~ 24%) and Corporate (~ -38%). Brookfield Property Partners has properties in Canada, the United States, Brazil, Europe, the Middle East, and the Asia-Pacific region.

Brookfield Asset Management currently has a 60% stake in Brookfield Property Partners.

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Investment data

Sales growth and market exposure

Brookfield Property Partners’ portfolio includes some of the most iconic commercial properties in the world. The company has one of the largest diversified real estate portfolios. Brookfield Property Partners is both geographically and real estate diversified. It has high quality assets in resilient and dynamic markets. BPY achieved growth of 2 to 3% for the same properties in its core businesses.

Brookfield Property Partners’ diversified global structure gives it a competitive advantage in the marketplace. The company’s investments are backed either by high quality, well located assets and development projects or by real estate with significant added value. The growing population and the increasing number of cities should act as a strong tailwind for Brookfield Property Partners.

Additionally, bricks and mortar and e-commerce should team up to create single-channel opportunities for the company in the near future. Since 2017, more than 500 new stores have opened in 22 leading digital native brands, and ~ 850 more such stores have been announced over the next five years.

Brookfield Property Partners saw an increase in home market activity and office operations in the fourth quarter of last year. Office rental income remained at normal levels during the quarter, while collections in the retail portfolio also showed signs of improvement. Several asset sales have been completed including One London Wall Place and the self storage business.

The occupancy rate in the core office portfolio was 89.8% with a remaining weighted average rental period of 8.2 years, while retail properties were 92.5% let. Brookfield Property Partners reported a loss for fiscal 2020 due to the economic slowdown caused by pandemics.

Distributions

Brookfield Property Partners shares have a dividend yield of 7.5% and a payout ratio of 85%. It most recently increased its payout by 0.76% and has seen dividend growth rates of more than 5% over the past three and five years. The annual payout has increased by 6% since 2014. Brookfield Property Partners also has an active unit buyback plan. The goal is an annual sales growth of 5 to 8%.

Brookfield Property Partners’ FFO was impacted by the global economic slowdown over the past year. Fiscal 2020 was $ 815 million, compared to $ 1.35 billion in 2019. However, the company is well positioned to leverage and win long-term relationships across regions and businesses.

BPY.UN generates a significant part of its annual income from LP investments in private funds. It is projected to generate significant income from its LP investments, including approximately $ 400 million in annual profit based on projected returns.

BPY.UN wins
Source: Corporate Presentation

BPY.UN is Brookfield Asset Management’s main tool for making real estate investments across all strategies. Brookfield Asset Management has proposed to acquire 100% of BPY.UN’s units for ~ $ 5.9 billion. Shareholders can choose to receive a combination of Brookfield Asset Management stock, cash, or BPY.UN preferred stock for each Brookfield Property share they currently own.

Brookfield Property Partners has seen its CFFO grow 7% and make profits since 2014. The investment objective is to achieve attractive long-term returns on equity of 12% to 15%. Stable cash flows, a stable retail portfolio, and asset appreciation should support annual payouts and earnings growth.

BPY.UN will benefit from a healthy pipeline of 8 million square feet of core office and multi-family development projects currently underway. The company expects annual CFFO growth for the next several years by achieving the same property growth and completing active developments.

BPY.UN historical yield
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competition

Brookfield Property Partners competes with other commercial property developers, managers, and owners. In addition, it faces intense competition in the retail real estate sector.

Tricon Capital Group, FirstService Corp, Colliers International and Altus Group are other Canadian companies active in the real estate services segment. The global size of BPY.UN and the large operating platforms are the strong competitive advantages.

Bottom line

Pandemic closings and travel restrictions resulted in declines in BPY.UN’s retail and hotel properties. However, Brookfield Property Partners is well positioned to generate steady cash flow from core portfolios that is enhanced by investing in opportunistic strategies.

BPY.UN is Brookfield’s flagship public commercial property and the primary vehicle the company uses to invest in real estate worldwide. Shareholders have a good chance of benefiting from its global presence, operational excellence and relationships.

BPY.UN historical PE
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