Brookfield Property Partners LP (TSX:BPY.UN)(NYSE:BPY) is 10% higher than it was a year ago. That aligns with average market returns, but let’s not forget that it paid an above-average yield north of 4% on top of the price appreciation.

Quality companies that become more profitable and valuable will appreciate higher over time. Here are several reasons Brookfield Property will head higher.

Global portfolio of quality assets

Brookfield Property is one of the largest commercial real estate companies. It has more than $66 billion in total assets and invests internationally.

Its core portfolio has about 150 premier office properties and 128 best-in-class retail properties that make up about 85% of its balance sheet. Brookfield Property targets total returns of 12-15%.

The rest of the company’s portfolio are opportunistic investments that target 20% total returns. These investments include multifamily, triple net lease, industrial, hospitality, and self-storage assets.

Growing distributions

In the second quarter Brookfield Property’s funds from operations (FFO) per unit were $0.35–a 25% increase over the same period in the previous year.

The growth was due to new investments made within the last 12 months and higher net operating income from recently signed leases in its core office portfolio, among other reasons.

Since healthy cash distributions come from FFO, a higher FFO implies a safe distribution. Additionally, Brookfield Property’s FFO payout ratio for the second quarter was 80%, which provides a greater margin of safety compared to the payout ratio of over 94% in the same period last year.

The company also increased its distribution per share by almost 5.7% this year.

Capital recycling

Year to date Brookfield Property has sold mature assets, which largely had cap rates of less than 5% for net proceeds of US$1.5 billion. Brookfield Property sold these assets at or above IFRS values.

The sale proceeds were used to fund new investments and development activities to generate higher returns. These investments included core office and retail assets, such as a 50% interest in a 766,000-square-foot office development in Washington, D.C., which is 70% pre-let, and opportunistic investments including more than 5,600 student housing units in the U.K. and 33 self-storage properties with 18,500 units in the U.S., among others.


According to Brookfield Property’s IFRS value per unit at the end of June, the company is worth US$29.75 per unit. The company is undervalued by about 17%.


If Brookfield Property continues to find value to do so, the company can continue buying back its units. In the second quarter Brookfield Property bought back US$7.5 million worth of units for cancellation at an average price of US$21.99 per unit. Any buyback efforts by the company will help reduce the outstanding unit count and increase the stakes of unitholders.


Quality companies tend to head higher as they become more profitable over time. I believe that’s the case for Brookfield Property, which has a premium international portfolio of commercial real estate assets, from which it generates a stable cash flow.

The company uses a percentage of its portfolio for opportunistic investments that targets higher returns. In each of the last few years, unitholders saw their cash distributions grow, and that trend is likely to continue with the company-distribution-per-unit growth guidance of 5-8% per year.

Stock buy alert hits astounding 96% success rate!

The hand-picked investing team inside Stock Advisor Canada recently issued a buy alert for one special type of "bread-and-butter" stock where The Motley Fool U.S. has banked profits on 23 out of 24 recommendations. Frankly, with an astounding 96% success rate that has delivered average returns of 260%, chances are this new pick could deliver life-changing returns as well. Because the team at Stock Advisor Canada fully embraces the same time-tested investing philosophies that have led to countless Motley Fool winners globally. So simply click here to unlock the full details behind this new recommendation and join Stock Advisor Canada.

*96% accuracy includes restaurant stock recommendations from Motley Fool U.S. services Stock Advisor, Rule Breakers, Hidden Gems, Income Investor and Inside Value since each services inception. Returns as of 5/27/16.


Let’s not beat around the bush – energy companies performed miserably in 2015. Yet, even though the carnage was widespread, not all energy-related businesses were equally affected.

We've identified an energy company we think offers one of the best growth opportunities around. While this company is largely tied to the production of natural gas, it doesn't actually produce the gas. Instead, it provides the equipment required to get natural gas from the ground to the end user. With diversified operations around the globe, we think it's a rare find in the industry.

We like it so much, we’ve named it as 1 Top Stock for 2016 and Beyond. To find out why, simply enter your email address below to claim your FREE copy of this brand new report, "1 Top Stock for 2016 and Beyond"!

Fool contributor Kay Ng owns shares of Brookfield Property Partners.