UNITE HERE, the hospitality union, has released a report questioning the price of Brookfield Asset Management’s [NYSE: BAM] offer to buy out public investors of Brookfield Property Partners’ [NASDAQ: BPY] at $16.50 per unit. The report analyzes pre- and post-pandemic statements by BPY and BAM consistently arguing that BPY is undervalued in the public markets and concludes that those statements point to a price between $19.50-$21.00 per unit.

In the third quarter of 2020, BAM’s Chief Executive Officer Bruce Flatt noted that “[BPY’s] current trading price does not reflect anywhere near the value of the high-quality portfolio of real estate that it owns.”

Meanwhile, in late September 2020, Bryan Davis, BPY’s Chief Financial Officer stated: “And that investment today can be made at a substantial discount to intrinsic value, 60% if you consider it relative to our IFRS value, or 50% if you consider it relative to consensus NAV.”

The report presents these and other Brookfield-related quotes and substantiation for the following key points. It can be found here: https://www.pecloserlook.org/bpy/

• In the third quarter of 2020, BAM reported the value of “non-controlling interests” in BPY at $26 billion, while its buyout offer is valued at $5.9 billion;
• BAM and BPY executives publicly stated in 2019 and 2020 that BPY’s trading prices undervalued its assets;
• At Brookfield’s Investor Day presentation in September 2020, management reported BPY’s net asset value (NAV) at $27.01 and stated the consensus NAV of analysts was $19.50 per unit;
• The premium to BPY’s unaffected trading price offered by BAM in this deal is 14%, lower than the premium Brookfield companies have offered in a sampling of buyouts over the last several years.
• BAM has amassed $75 billion of capital and dry powder to invest in distressed assets and the post-pandemic economy.

“Brookfield Property investors have financed a world-class portfolio, which BPY’s and BAM’s executives have in the past year valued higher than $16.50, the price offered in this related-party buyout,” says Dana Wise, research deputy director for UNITE HERE.

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