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I occupied Wall Street - BPO

|Includes: BAM, Brookfield Office Properties Inc. (BPO)

I  spent part of last night with Occupy Wall Street in New York.  Playing the drums with a group of musicians. The night was warm. The crowd was young. The vibe was mellow. More like a concert than a revolution.

FWIW - After hearing a politico denounce  the Occupy Wall crowd as  "anti-American" and thunder "To protest Wall Street and the bankers is ...saying you’re anti-capitalism.”  I just had to go. Surprise: these kids believe in American democracy  in ways those moneyed politicos don't ...and never will.
The reality is nowhere near the Fox News / NY Post / political candidate hype. The park crowd was far smaller, far tamer and much better organized than I expected. (I saw not one but two people with those little theater-type sweepers cleaning up.)   Anarchy?  Drummers will go all night.  We had a 10 pm curfew so people could sleep. And we all stopped at 9:55 pm..

Signs represent ideas, so I made an effort to check out the signage. Umm, really crazy stuff, like  "End the Fed - Restore Glass Steagall." --  "No bank left behind"  --  "Wall Street, Please Leave me a Future."   --  "No more bail-outs."  --  "Impeach Obama." The only political flyers I saw - Ron Paul flyers in a student backpack.  Hardly anti-American, sounds like the sentiments of most of middle America. Or a Tea Party function, without Koch Brothers funding. 


The park where the Occupy Wall Street group is camped is private, owned by Brookfield Office Properties. Strangely, the New York Police asked a reluctant BPO to let the demonstrators stay in Zucotti Park, rather than a public park. 
If you know New York City and New York real estate, you know that the City and its big real estate developers are intertwined. Everything interlocks.

John Zucotti, BPO's Chairman is the former head of the City Planning commission, a former Deputy Mayor and served under Mayors Lindsay and Beame. He's also an attorney at one of the city's most powerful law firms and teaches at Columbia (and Yale.) One of BPO's directors is Mayor Bloomberg's girlfriend.  Like I said everything interlocks.

BPO is basically an office owner and manager in the US and Canada. BPO has grown by acquisition. The US unit came from Trizec; the Canadian properties, from Olympia and York.  BPO recently picked up some Australian properties.

It's portfolio consists of 109 properties. Occupancy is 93.3%. Average lease duration is a bit over 7 years.  Total square footage is 78.4 million sf. Half of BPO's Canadian space is in Toronto; 40% of its US space is in New York. 

Tenant quality averages "A."  BPO has tenant concentrations in government agencies,  large  banks (Bank of America) and energy companies. This may not be a cause of concern in the current economic environment. 

56 of its 109 properties are held direct ownership, with half of that number (28) located in the Canada, and the rest in the US (17)  and Australia (11).  49 properties are listed as "Equity Accounted," with 38 of those in its US Office Properties unit. 4  properties are listed as discontinued.
I found BPO complex for a REIT. It's grown by acquisitions and operates in 3 different countries, making it subject to various tax regimes and currency fluctuations. 59% of its income comes from the US, the balance from Canada (23%) and Australia (18%).

The US unit is a joint venture with Blackstone. Internet scuttlebutt has it that (1)  the JV interests are callable/puttable between the parties in ways only accountants can understand and (2) BPO has some debt maturities this year, "easily handleable" if you believe the message board posters. Posters have been touting BPO as a high-yield value play. You'll need to read the financials on this one.

As far as Australia goes, I wouldn't invest in real estate there without reading Rolling Stone's articles on the extreme environment problems there.

BPO metrics--
Recent Price $14.00
yield = 4.2%
52 week performance = down 20% (vs S&P 500, even)
FFO growth 2010 vs 2009 = about 30%
price / book = 79%
Earnings surprise = plus 15%
Next year's projected EPS = up 3%
Analyst sentiment = 56% bullish, 44% neutral

My spin: Maybe the simple way to analyze BPO is with two questions. Do you like offices? Do like like New York and Toronto?

Yes, New York real estate  is hot, but I'm not seeing a huge leap in office occupancy in the recession.  I'll take a pass on BPO.

Just my opinion.

No position in BPO.



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