I’ve been generally bearish on the outlook for Brookfield Property Partners (TSX:BPY.UN) in this current macroeconomic environment. But in this article, I will make the bull case for why BPY could actually be one of the better near-term performers over the next 12-24 months.
Despite the various concerns around BPY’s various holdings, which have been widely covered by other analysts following the company, the negativity around office and retail real estate assets is likely to persist for some time. Macro-secular trends toward work from home and e-commerce will continue to undermine the value proposition of these two asset types.
The belief that delinquencies and nonpayment of rent is likely to skyrocket in the coming months, due to Covid-19 mandated shutdowns, is a real concern and should not be ignored. That said, despite the undeniable evidence that the future may be rocky for Brookfield Property Partners, the company continues to post very good operating measures compared to its peers and its delinquency rate is below what I expected to see.
Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM), the parent company of BPY, has recently issued an offer to buy up to 60% of Brookfield Property Partners for shareholders willing to exit their position in the subsidiary at these levels.
This is a strong signal that BAM believes BPY is undervalued. I do think there is some opportunistic motive behind the offering. Given the backing of BAM and the high percentage of ownership already held by the parent company, the future may not actually be that uncertain for Brookfield Property Partners. Investors interested in buying this interesting value play may be well rewarded.
Invest wisely, my friends.
