As mentioned on the message boards here by BearNJ and others Brookfield Corporation has defaulted again on office properties.
This is the second this year and so far maybe near a billion bucks so far.
I also was not aware that PIMCO also defaulted on a $1.7 billion in office mortgages earlier this year.
This Forbes article has much good information in it.
All of this is why I warned on commercial mREITs a month or two ago – and sold what I had earlier this year–it could be a real bloodbath.
21 thoughts on “Brookfield Corp Defaults Again”
Their current proclamations notwithstanding, I keep thinking about OZK in this space. They played in somebody else’s sandbox when the locals would not.
I had a long conversation with “Nicole” from Brookfield Infrastructure Partners LP today. She stated at least 3 separate times in our conversation, “ we have no plans to end the listing of the Triton preferreds”. I must have asked her 20 questions and she answered 17 or them. As someone that went to law school, I rarely ask a question I do not know or have a very good idea of the answer beforehand (but it was a quality conversation). The other 3 were direct leading questions (like the financing of the deal) and she referred me to Andrew Kohl the Director of Triton’s Investor Relations division.
IMHO, I am more at ease with my decision to hold on to my oversized preferred position in Triton. I encourage each of you to do your own DDD because each of us are responsible for our own portfolios. I have much more to say, but I’m watching the Miami Heat 🔥 get their a$$es kicked and I need to screammmmmm 😱
That very well may be the wise the decision, Azure. But every since this infamous quote came out, the words need to be parsed, dissected, and ran through a truth and obfuscation meter. As more than one company has done this….
Each share of the company’s currently outstanding preferred stock will remain outstanding, and it is expected that they will continue to be listed on the New York Stock Exchange following the consummation of the transaction,” AmTrust said on March 1, 2018.….
Im on an another sport. Flush with cash from cashing several NHL season bets, I reinvested some into the Dallas Stars winning the series against Wild, so my focus is on tonights game, ha.
Azure, if I may & not to be rude… Consider the scenario in which Investor Relations is currently aware of a plan to delist the shares. Further assume this plan is not in the public domain. (if it were in the public domain you would not be calling in the first place). If they told you about this plan in your communications, then you would be in possession of Material NonPublic Information. For this reason IR teams will not be given any information like this (even if it exists), and will certainly not disclose in the unlikely event that they did have such information.
IR reps/managers/execs won’t get fired for lying to you about the existence of MNPI.
They will get fired on the spot for giving out MNPI.
Probably best to assume that there is a material chance that these shares may get delisted after the change in control event/trigger date and determine your conversion rights under the change in control covenants.
In these situations I sometimes find it best to shoot first and ask questions later once you know the nature of the organization that you are dealing with. Of course if you have a significant capital gain in these shares, that will also be an important decision driver.
AW, of course I have no clue if Nicole from BIP was telling the truth or lying to me/withholding material information (only she knows). She also said the plan is for the deal to close in the 4th quarter (I did not know that). As I previously stated, EVERYONE should do their own DDD as we are all responsible for our own portfolios and each of us hopefully will never rely on someone that is a stranger posting on random investment boards behind a computer. Since I left my position managing institutional money on Wall Street, I have worked as a consultant for some of the companies mentioned here often (I do laugh or shake my head when people post things that I know are complete BS). I would NEVER disclose even 1 word of information that has not been published or released from those that run these corporations. I am also certain Nicole wouldn’t give me information that their management team has not disclosed and even if I knew something not yet released, I wouldn’t share it or trade on the knowledge. We all are making our bets each day by buying/selling/holding each security in our portfolios; it’s of “interest” to note that my largest positions currently are tax free (mainly insured) bonds, CD’s, Agencies and Treasuries. My old position of money management required me and my team of luminous imperious professionals to meet with those on boards of directors and management of these companies to form opinions and then trade for our clients on that knowledge; I HATE to guess and rely solely on others as I only frankly trust myself (I have no agenda). I was in Chicago a couple weeks ago meeting with management of a large publicly traded firm. Immediately after the multiple day meetings I sold my entire position. I got a terrible feeling something was wrong and the answers I received from the questions I asked seemed to be thick smoke or at the very least “untruths”. Am I right? Am I becoming jaded in my old age? Only time will tell, but I live by the mantra; I’d rather be out of the market wishing I was in then in the market wishing I was out. This may help https://www.youtube.com/watch?v=LW_s6EqOxqY
Be well and I wish you profitable trading and good health, A
And if that Frank doesn’t work for you, how about this one???? Frank Perry…..From the 80’s, man………. far out…… I actually owned this album for some reason but I don’t remember why…You won’t either……..https://www.youtube.com/watch?v=OvgnasF8n2c&ab_channel=FrankPerry
Az, That is the way to make a decision! Congrats.
Your demeanor has been present to anyone who reads here regularly, but…then write it down? How UNLIKE a lawyer and I associate with a few of your closed-lip, cards-close types.
Just to be clear, halting payments on all kinds of commercial property loans has been commonplace for decades. It is not just Brookfield and/or Pimco that does this. As I have posted previously, “default” means that the whole situation gets turned over to a “special servicer” to optimize the outcome for the party that owns the paper (loans.) There is a wide range of how these situations get resolved, all the way from 100% walking away from the property to modifying the terms of the loan so that the current owners stay. Starwood Property (STWD) owns one of the largest special servicers and Barry recently said something along the lines of “business has picked up.” So it is NOT like these special servicers were out of business and then just sprung to life in the last 6 months.
Everybody that has been involved in commercial real estate for say 10+ years has been through this. Old timers have been through it MANY times.
Many of my commercial real estate friends made their fortunes buying during these downturn times. From an investment perspective, the place(s) to look might be for investments that can make opportune investments with dry powder. Sam Zell has made an entire career doing this. . .
During the Depression the saying was something like, “some years ago I committed to make payments at a fixed rate with my farm as collateral, but no matter how hard I work the prices for what my farm produces has done nothing but go down since that same time.”
Renegotiating and restructuring notes was and is essential and part of the regulations that banks did not want. Papermen need to, as Tex says above, make their fortunes during asset price destruction. Sound familiar? Seems like Wall Street/Banker Playbook 101.
There’s a great book by Matt Stoller , 2019, Goliath, if you want a good read. Full of facts we seem to have forgotten.
My wife’s grandfather in Northern Wisconsin tried everything to make money. Even set up a mill to do his and the neighbors grain. Problem was they paid him in grain or flour. She heard he was one of the few people the bank closed on, to make an example.
Is this the reason for nervous declines in GOODO/goodn? They aren’t an mReit, though, right?
Maybe because of sysetemic risk increasing but probably not related much to Brookfield.
Why are some people still defending Brookfield? Screwing over the type of investments we make. They’ve been sleazy since day 1 some short sighted investors cut them some slack because they’ve been successful at destroying your other investments.
Who is Brookfield screwing over here and what is sleazy? It is Brookfield who is taking a loss — likely a total loss — on their investment.
$2.4B of CMBS defaulted in March plus some additional amount of whole mortgages. Brookfield’s default represents a small portion of all commercial mortgages defaults in the past month. Blackstone just defaulted on a mortgage that was 3x the size of this one. PIMCO had a default 10x the size of this one recently.
I could ask you the opposite question – why are some people still bashing Brookfield. I own a number of their entities that have made me a nice return.
Brookfield is not “sleazy” as you call them. They are smart, aggressive businessmen. As I mentioned before, they make the companies they acquire stand on their own. So if you buy and own a loser company that Brookfield acquired, and it is not able to be turned around, don’t get upset that Brookfield didn’t bail you out. And yeah, Brookfield has bought a few of these loser companies where preferred holders took a loss – but that is on the holder IMO because they were in a high risk holding to begin with.
I expect Triton to be 100% fine under Brookfield because Triton is a thriving business
Hi Tim, or indeed anyone knowlegeable in this area
Anyway of ascertaining accurately which Prefs in this area are most exposed to office mortgages?
I have ABR, KKR and RITM. It seems on a very surface at least ABR is much more into multifamily loans (90%), whereas KKR is 26% office and 12% industrial. RITM seems a lot more opaque.
Not looking to sell particularly as underwater on all 3, but obv need to monitor closely
Below is a link from Seeking Alpha that will provide you with the property exposures for each commercial mortgage REIT. You have to page down to find it.
FYI – Both Rida and Penniless have recently been begging their subscribers/readers to buy more BRSP common (and its near 14% yield) as it has been shellacked since they first recommended it. If Tim is correct, we should see massive common dividend cuts in the commercial mortgage REITs that have the highest exposure to office.
Kid, PennYless is such a horrible investor, he won first, second, and third place medals for worst investor in US.
Is this the same company as BIP or BIPC or BIP PR A which are defined as Infrastructure companies? Brookfield Corp seems to be a Real Estate Company. Are they related or completely independent?
Brookfield has multiple businesses and a complicated structure. I own a number of Brookfield related issues because they are an excellent company
BIP is separate from BEP which is separate from their real estate companies. They are all related but operate independent of each other.
Check out https://www.brookfield.com
Something to consider, I think Brookfield and Blackrock are the TBTF in the fund world. On the other hand you have Blackstone and it’s funds. So far Blackstone has had 5 straight months of redemptions where they have limited withdrawals. If there came a Lehman Bros moment and one of the smaller REIT funds collapsed it could affect all of them.
On the other hand Blackstone raised 30 billion for a global REIT fund. One side of the room you have people trying to get out the door and the other side of the room you have people trying to get in the room, Crazy