Sunday, September 10, 2017

Brookfield Property Partners - A Strong Development Pipeline to Drive Growth

Brookfield Property Partners (BPY) has a strong Development Pipeline that will bring online cash generating assets between 2017 and 2022 that should meaningfully contribute to cash flow growth. The key factor is that this growth is funded organically with retained cash generated from existing assets and through cash proceeds from capital recycling and no new units are being issues. More than 10 million square feet of office and multifamily projects currently in development and include the following:

  1. Manhattan West, New York City
  2. Bay Adelaide North, Toronto
  3. 100 Bishopsgate. London
  4. Brookfield Place Calgary
  5. London Wall Place
  6. ICD Brookfield Place Dubai
  7. 655 New York AvenueWashington, D.C.
  8. Canary Wharf's New District, London
  9. Wynyard Place
  10. Greenpoint Landing, Brooklyn, New York
  11. Principal Place London
BPY trading at $23.50 per unit and at a 5% distribution yield should produce strong risk adjusted returns over the next 10 years. 

Insurance Disasters Harvey & Irma - Short Term Pain & Long Term Gain

Insurance Disasters like Harvey and Irma may cause Short Term Pain but will produce Long Term Gain for well capitalized Insurers and Re-Insurers like Munich Re (MURGY) and Berkshire Hathaway (BRK-B) companies like Geico, General Re and Berkshire Hathaway Reinsurance Group.

The payouts from these disasters will flush out the smaller companies and companies that insured aggressively over last few years with improper risk underwriting. The rise in rates should allow the well capitalized companies to move in now and gain market share with less risk on a going forward basis.

Sunday, July 30, 2017

Brookfield Asset Management Update

Brookfield Asset Management (BAM) shares have been range bound between $30 and $40 over the last 2 years. This however masks the steady progress made by the company in growing value. The company now has AUM of $250B with $120B of fee paying AUM. The spin of of BBU which will unlock value through the growth in the Private Equity side of the business is a positive. The acquisition of Asciano, Brazilian Pipeline and Water Company, Colombian Hydro, Sun Edison assets, India Telecom Towers all are building the platform and growing the value. There has been good progress on the Manhattan West and Canary Wharf developments. Risks remain relating to Emerging Market currency trends and impact to GGP due to the Amazon disruption of retail and Brexit impact on UK currency and growth. If BAM can grow Fee Paying AUM to $200B over next 3-5 years and continue building its asset platform this cash generating business which will grow and prosper with the growth of the global economy and infrastructure should grow the value of BAM from $40B to $100B over the next 10 years.

Berkshire Hathaway Update

Berkshire Hathaway (BRK-B) is growing value slowly but steadily. Possible take over of Texas Utility Oncor is a positive but there is $100B of cash which needs to be deployed. This large cash position has been a drag on BRK-B cash earnings growth rate. The rail freight recovery and the manufacturing upswing in the US economy are a tailwind for earnings growth over the next 12 months. BRK-B is trading for $174 which is reasonable and target 2018 end fair value in excess of $200 is feasible.

Real Assets Stand Test of Time

The technology companies are changing the world. 20% plus topline growth is very impressive. But FAANG stocks have a lot of good things for the next decade already factored into the share prices. Many tech companies will be crossing the 1 Trillion Market Cap in next 2 years at this rate of valuation. Is this time really different or are we in another tech bubble, only time will tell.

Regardless of how the future unfolds real assets that produce cash and have barriers to entry will continue to retain value and grow value as real cash flows rise. Top picks include BRK-B, BAM (and child companies BPY, BIP, BEP, BBU).

Saturday, March 18, 2017

Retail REIT Companies Offering Reasonable Entry Point

GGP Inc. (GGP) and Simon Property Group Inc. (SPG) are offering a reasonable entry price at $22.80 and $169 respectively due to the pullback due to market focus on Fed Rate Increase and Death of Retail. The rise of Amazon and E-Commerce is not a fad but I think the rumors of Death of Retail are highly exaggerated. Class A Premium mall owners can continue to earn reasonable returns over the next 8 years to earn back the cash and malls can be re-purposed and locations in city centers will remain a valuable asset.

Update on Berkshire Hathaway Inc

On 01 Mar 2017 Berkshire Hathaway Inc (BRK.B) at $177.50 traded close to full (fair) value after a long time.