The TSX-listed reset preferred shares of Brookfield Office Properties (BPO) are relatively attractive. Key points about the securities: BPO was privatized by Brookfield Property Partners (BPY) in 2016 and its preferred shares became backed by a “full and unconditional guarantee
On looking I see on quantumonline that BPYPP is rated BB, while BPO.PR.A, etc. apparently are rated just B. That makes a big difference, doesn't it? Perhaps being guaranteed by BPY in some way is not quite as strong support as actually having been issued by BPY?
I like the article and I am digging deeper into these securities... Thanks!
Also, it looks like the cumulative default rates over time, even for B rated securities, comes out to an annual expected default rate of 1%-2%, which strikes me as quite low given the spreads on these that are much much higher vs CAD govt bonds. So, apart from the short-term price drop of which one might wish to take advantage, just owning a diversified portfolio of such assets would be expected to produce quite generous returns even with defaults quite above expected. Am I missing something on that front? Even single B credit risk shouldn't result in a spread of something like 1000 bps, no? - more like 300-500 is the usual spread in the market I would think but I am far from an expert on that...
Thanks. Always best to check the primary source. I linked the S&P ratings report dated 12/21/23 showing BPY preferred shares downgraded to B. QuantumOnline indicates that its BB rating is as of 1/6/23.
On looking I see on quantumonline that BPYPP is rated BB, while BPO.PR.A, etc. apparently are rated just B. That makes a big difference, doesn't it? Perhaps being guaranteed by BPY in some way is not quite as strong support as actually having been issued by BPY?
I like the article and I am digging deeper into these securities... Thanks!
Also, it looks like the cumulative default rates over time, even for B rated securities, comes out to an annual expected default rate of 1%-2%, which strikes me as quite low given the spreads on these that are much much higher vs CAD govt bonds. So, apart from the short-term price drop of which one might wish to take advantage, just owning a diversified portfolio of such assets would be expected to produce quite generous returns even with defaults quite above expected. Am I missing something on that front? Even single B credit risk shouldn't result in a spread of something like 1000 bps, no? - more like 300-500 is the usual spread in the market I would think but I am far from an expert on that...
Thanks. Always best to check the primary source. I linked the S&P ratings report dated 12/21/23 showing BPY preferred shares downgraded to B. QuantumOnline indicates that its BB rating is as of 1/6/23.
Great article.
Brookfield sees "major tailwinds" in real estate
https://www.threads.net/@konekofinance/post/C3GWp9LxbhK
BPO filed a SEDI report showing repurchases during January. They bought less than I expected which means that end-investor demand was strong.
Series N 36.692 shares
Series P 47,952
Series R 21,058
Series T 28538
Series AA 32,564