Brookfield Office Properties: Attractive Valuation, Dividend Yield, And Fundamentals

| About: Brookfield Office (BPO)

Brookfield Office Properties (NYSE:BPO) stock is trading around $15.95 versus its 52-week range of $14-$18.60, flat in the past 1-year. Brookfield trades at 14 times the consensus 2013 FFO estimate, which is a 3% discount to the office group. On an unlevered basis, the stock trades at 15.2 times EV/EBITDA, which is a 6% discount to the office group. The stock yields 3.5%. Other peers such as Vornado (NYSE:VNO) yields 3.6%, and SL Green (NYSE:SLG) yields 1.34%.

Brookfield is a commercial real estate company that owns, manages, and develops premier assets in North America, and Australia. In New York, the company owns some of the most premier properties such as the World Financial Center, and the Grace Building. Other key properties in its portfolio are the KPMG Tower in Sydney, London Wall Place in London, and The Royal Center in Vancouver.

Positive fundamentals that prompt investors to add Brookfield to their radar screen:

Ample liquidity on the balance sheet, which consists of unrestricted cash & cash equivalents of $270 million, and $500 million in borrowing capacity under its credit agreements.

Strong lease economics: In Q3-2012, the company's same property NOI increased 2.1% sequentially, and 3.6% year-over-year. Additionally, BPO's net rent increased 20% above BPO's average in-place rent. This positive change is significant given the weak economic environment for office space.

The company escaped Hurricane Sandy with no serious damage reported in any of its properties.

Brookfield still holds a strong occupancy rate with same-store occupancy reported as 93.4% in Q3-2012, up 50 bps from last year. Although total occupancy was 92.1%, slightly lighter than the 93.4% reported for Q2-2012, the company is still well placed in its portfolio.

Biggest risks in investing in Brookfield are an increase in unemployment rate, which will lead to a decline in occupancy rates, and a failure to lease space in the World Financial Center on favorable terms.

The chart below compares share performance over the past year. "D"s mark dividends paid.

Tool provided by Kapitall.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: Business relationship disclosure: Kapitall is a team of analysts. This article was written by Sabina Bhatia, one of our writers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.

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