Opinions
Brian Madden
Brookfield Property Partners
BPY.UN-T
SELL
Apr 05, 2021
Stock price when the opinion was issued
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Re the recent offer. Don't take the preferred share option. Taking some cash and some portion of BAM makes some sense. He finds it all expensive, but the franchise continues to grow. If you just want yield, look for other alternatives. If you want to participate in the recovery, do this through the parent, BAM.
There are three options: get the preferred stock, cash, or to get BAM.A stocks. He would chose the option to get BAM.A stocks. It really works. It will take them a long time to turn around retail and commercial property portfolio. However, these guys buy things at good times. 80% of their business is working really well. A great engine for growth.
Thrilled when BAM came to bump out the stock. The market, after the initial offer came in, went up expecting for a hire offer. This is where he sold his stock. Took the money and invested elsewhere. He would recommend others to do the same.
He does invest in some selective preferred shares for some clients with balanced mandates. Unique because BPY.UN used to be a separate, publicly traded company, so you got full transparency. But then Brookfield privatized it, so you don't get the same transparency. But Brookfield has always been a fairly good corporate citizen and stood by their issues, and they typically repurchase their own preferred shares in the market, making sure unitholders are not disadvantaged.
If you own it outside a registered account, collecting north of 10% on the dividend yield, it's a very tax-advantaged way to collect income. If you can get 10-12% here, versus 5% on a corporate bond where you're going to pay 50% tax on, the arbitrage is quite huge. Buy, or consider adding to your position. Whereas in a registered account, relative to bond yields, that kind of tax arbitrage isn't there, so not as attractive.
It is subject to a take-over offer. He also owns the parent. He initially took none of the offers. He waited for them to sweeten the offer which they did. He thinks that will be the final offer. You should tender your shares for BAM.A-T so you participate in the recovery of their assets. The draw back is that you may not be able to crystallize losses, if that is a consideration.