To invest in real estate, you don’t necessarily have to invest in individual properties and burden yourself with debt. Besides, it takes longer to save for a down payment than investing in a stock.
You can consider quality real estate companies, such as Brookfield Property Partners LP (TSX:BPY.UN)(NYSE:BPY). You might have heard of Brookfield Asset Management Inc, which is its general partner and manager; it owns about 30% of the partnership.
Now is as good a time as any to consider buying Brookfield Property when it is cheap.
The stock has shaved off a few percentage points in the last few days and trades at a huge discount from what its assets are worth.
Brookfield Property’s big dividend and diversified portfolio of quality properties around the world are more good reasons to like the company as a long-term investment.
Core portfolio
Brookfield Property has core office and retail assets, which make up 80% of its portfolio. This portfolio targets total returns of 10-12%.
Its office portfolio consists of 149 premier office properties in gateway cities, such as New York, London, Toronto, Sydney, and Berlin, its wholly owned subsidiary, Brookfield Office Properties, and a 50% interest in Canary Wharf Group, which owns some quality office and retail space in Canary Wharf, one of London’s two major business districts.
Brookfield Property’s retail portfolio consists of 126 best-in-class retail properties across the U.S. through its 34% interest in General Growth Properties Inc.
Opportunistic portfolio
Brookfield Property has 20% of its portfolio in opportunistic investments in office, retail, industrial, multifamily, hospitality, triple net lease, self-storage, and student-housing properties.
This portfolio targets total returns of 18-20%.
It has 19 hospitality properties in North America, Europe, and Australia with over 14,000 rooms, and it has 14 student-housing properties with more than 5,800 beds in the U.K.
Distribution yield of 5.3%
Brookfield Property has hiked its distribution for two consecutive years. The company aims to increase it by 5-8% per year, and its next hike should be coming up soon in the first quarter. Right now, it yields 5.3%.
Valuation
At US$21 per unit, Brookfield Property trades at a good discount of about 31% from its IFRS value per unit, which was just below US$31 at the end of the third quarter.
Conclusion
Brookfield Property is a global investor, so it has more opportunities to invest in mispriced properties than companies operating in one geography.
In addition, it doesn’t shy away from selling stabilized, mature assets and reallocating the proceeds for higher returns. It also has an active development pipeline that contributes to growth.
So, at about $28 per unit, Brookfield Property is a great real estate investment for the long term. It yields 5.3% with the potential for capital appreciation and income growth. The company targets total returns of 12-15%, and the discounted units can only boost those returns.
