Where Can You Get Great Value in Real Estate?

In select Canadian real estate markets, housing prices have skyrocketed. The average price is $1.2 million for a detached home and $700,000 for an apartment in Toronto.

In select neighbourhoods, it may be cheaper to rent than to own. If you’re looking to invest in real estate, better deals can be found in commercial real estate.

It used to be that only the wealthiest people had access to commercial real estate. After all, a commercial building easily costs hundreds of millions of dollars!

However, anyone can now get in on the action and earn rental income from commercial real estate through the stock market, and Brookfield Property Partners LP (TSX:BPY.UN)(NYSE:BPY) is one of the best options available.

Capital appreciation is nice, but part of the value that comes with real estate investing is the consistent monthly rental income. Brookfield Property offers capital appreciation as its assets become more valuable over time, but it also offers a growing income stream for unitholders.

Investment philosophy

Brookfield Property is a value and counter-cyclical investor. Because it invests globally, it can invest in the best value at any time with reduced risk and higher expected returns.

The company doesn’t sit idly by after making investments; it continuously looks for opportunities to recycle capital from stabilized assets to higher-yielding assets to build long-term value for the company and unitholders.

Recycling capital for higher returns

In the first half of the year Brookfield Property sold two core properties: World Square Retail in Sydney for AUD$285 million and Royal Centre in Vancouver for $428 million.

It also acquired a portfolio of self-storage facilities across the U.S. for about US$840 million, a portfolio of student housing properties in the U.K. for about US$401 million, among other acquisitions. These were opportunistic investments that will generate higher returns than its core portfolio.


Brookfield Property’s quarterly distribution per unit is US$0.28, which equates to an annual payout of US$1.12 per unit. Trading at roughly $30 per unit, the company offers an attractive yield of 4.8%.

Brookfield Property’s distribution is supported by its core portfolio of retail and office assets that make up roughly 83% of its portfolio. Its opportunistic investments in multifamily, industrial, hospitality, triple net lease, self-storage, and student housing assets make up about 17% of its portfolio.

Based on Brookfield Property’s targeted funds from operations (FFO) per unit, the company’s payout ratio will be below 63%, which gives ample margin of safety for its distribution.

Since it was spun off from its parent company in 2013, Brookfield Property has increased its distribution per unit every year, and there’s reason to believe it will continue to do so.

Based on the company’s net-operating-income growth projections, its FFO per-unit growth will be 8-11% per year, which supports the company’s aim to grow its distribution per unit by 5-8% per year while retaining enough FFO to reinvest in the business for future growth.


If you’re looking to invest in real estate, Brookfield Property should be at the top of your list. The company is a value investor with access to global real estate opportunities. It offers a 4.8% yield with an expectation to grow 5-8% per year and long-term capital-appreciation potential. Any dips will only make Brookfield Property a more attractive investment.

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Fool contributor Kay Ng owns shares of Brookfield Property Partners.

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