Brookfield’s REIT Acquisition Signals Hidden Value in Commercial Real Estate
Brookfield’s REIT Acquisition Signals Hidden Value in Commercial Real Estate – MarketCurrents WealthNet
Brookfield’s REIT acquisition signals hidden value in commercial real estate
February 02, 2021
One of the largest real estate mutual funds in the world will be delisted and privatized by its parent company this year. The acquisition could signal how undervalued the commercial real estate sector is right now.
The fact that the Brookfield Property REIT is trading below book value explains why Brookfield Asset Management (NYSE: BAM) acquired 40% of the shares it does not own in the REIT. The company is ready to pay a 15% cash bonus on a deal valued at approximately $ 5.9 billion.
Brookfield Asset Management’s chief financial officer Nick Goodman said the privatization of Brookfield Property is attractive because the company always trades at a discount and book value of 0.61, taking into account the value of its underlying assets.
These assets include iconic objects like London’s Canary Wharf, Toronto’s Brookfield Place, New York’s Brookfield Place, and Los Angeles’ Bank of America Plaza. However, many of these iconic properties were given up for much of 2020.
Reduced traffic in the shopping centers, increased remote working and reduced vacation travel weighed heavily on Brookfield Property partners over the past year. However, the outlook has improved significantly in recent months. With the launch of the vaccine, offices, malls, and retail stores are expected to reopen around the world in the second half of 2021.
Investors haven’t yet considered this recovery. Large REITs like RioCan in Canada trade well below book value. American commercial REITs like Brandywine Realty and Kimco Realty trade at book value while still offering lucrative dividend yields.
Property investors could expect to find plenty of bargains in this sector and prepare for more mergers and acquisitions in the months ahead as the economic recovery begins to emerge.