I spoke to the investor relations person at Brookfield Properties today.
Her theory is that these rate resets are down in price mostly because of sort of the competition from higher interest rates available everyplace now. She gave me some detail on the two bonds that Brookfield defaulted on in Los Angeles. She said Brookfield always finances on the basis that each loan is secured by a particular asset only. Brookfield has the right in Los Angeles to hand over the buildings to the lender. It seems these buildings are empty or nearly so and she mentioned that downtown Los Angles is a bad area and workers have not come back. It’s no Manhattan. Brookfield may want to get a concession on the loan values such as a big reduction in the amount owed.
The bottom line is that the Brookfield Office Properties preferred shares look quite attractive on yield. But that high yield also tells us that there is some risk here.
After talking to her, I did decide to add somewhat to my position. It’s always a tough call especially when markets push prices down. Do we go for safety or take a chance on apparent bargains? In any case I would not want to get too heavily exposed to these becasue it seems anything can happen.
See the Subscriber Home page where I updated one Brookfield rate reset share (BPO.PR.G) and added another one that I own (BPO.PR.A)