Brookfield Property Getting Bought Out


Brookfield Property

Brookfield Property Getting Bought Out – New Diversified Etf

Hey everyone

Unfortunately I woke up Monday morning to the news of Bam and other institutional investors wanting to take Brookfield Property Partners Private. I enjoyed the stock and it paid very well while waiting for its stock price to rebound.

This stock was too cheap and Bruce Flatt said earlier in the year this one is a easy double in the coming years. He put his money where his mouth is though and are now going to make bpy private. They are getting these stocks dirt cheap at 16.50 usd per share in my opinion.

On the plus side this was a premium of 14.9% on the closing price of Brookfield Property Partners on December 31st.

On Monday the stock price actually surpassed that 16.50 usd mark, and we took advantage and sold off our entire position. In total we sold 287 shares at 21.57 per share Canadian. After trading fees we locked in a roughly 1% gain plus the dividends over our holding period. (Like I said earlier I think this buyout was too cheap, but times are different now and retail and office are undervalued at the moment.)

At the same time my portfolio of reits is extremely retail heavy. Its basically reits with a side of offices. So for diversification it’s not that bad to exit this position and diversify more in the real estate space.

I wanted to keep the funds in the same sector to not throw my sector diversification out of whack. For awhile I was playing with the idea of starting a position in Canadian Apartment Reit’s but the yield is so low and it will take a lot of capital to get that one to drip at current prices. I also would be lacking industrial reits moving forward.

I have also kept debating maybe selling all our reits brookfield property, riocan and even smart centers to just put it in some etf.. But riocan is still down a nice chunk. Smart Im up 15% but I think both are still undervalued and in time they will recover.

Considering the lack of dividend growth and overall beat down sector. I decided to go the etf route moving forward in the reit space. I like the idea of holding a basket of reits (from industrial,residential,office and retail) a great starting yield (lower than bpy was though) and monthly compounding.

CI First Asset Reit – RIT

Now the question was which fund….. xre and zre come to mind in the Canadian Reit Etf Space.

But I remembered my buddy Dale @cutthecrapinvesting did a post comparing the Canadian Reit etf Space and both those were outperformed by one fund.

From Dales Site

Honestly this was a fund I have never even heard of but the results speak for themselves.

I can try to talk about rit etf as much as I want but Dale did a great write up and I think you would be better off reading his post comparing the bunch. Find that post Here.

Now the biggest downside you will find right off the bat is the management expense ratio.

  • Rit sports a mer of .87%
  • xre – .61 mer
  • zre – .61 mer

We have all been trained to lower fees on our investments. So why would I go with the highest one. 1 – Clearly the better performance and 2 I already hold smart and riocan.

xre currently has riocan as their 2nd largest holding (9.85%) and smart as their 8th (5.49%).

zre currently has smart centres as their 10th largest holding at 4.27% of net assets

Rit currently has neither of them in their top 10.

All these etfs pay monthly which is a huge bonus for compounding. At current prices zre has the largest starting dividend yield at 5.05% followed by Rit @ 4.98% and then xre at 4.57%

Xre does have 2 times the market cap of both Rit and Zre though. If that’s something you consider, but zre and rit are no small fry’s at about 550 million each.

The Purchase

The sale of Bpy stock left me with $6,180 bucks to play with but also lowered our forward dividend income by 373 bucks a year… I wanted to keep things even but obviously with rit’s lower starting yield I had to put more cash in.

We had 400 sitting in the account sitting idle from dividend payments and I tohttps://www.passivecanadianincome.ca/drips-investing-made-easy/ssed another 1000 in to make things even.

In total we deployed roughly $7,650 to buy 469 units of Rit Etf. This should bring in $31.65 a month or 379.89 per year. A gain of 6 bucks! It also will bring in 1 Drip per month at current prices.

Not massive by any means but certainly strengthens the portfolio moving forward as we are a lot more diversified in the reit space.

2021

Moving forward in 2021 I still debate what to do with our extendicare position (I’d toss it but we are down 30%) things could either get worse as covid continues or better as covid passes. (Id sell it then at less of a loss, no dividend growth)

I’m also debating selling bmo and national bank to move into rbc (wide moat) or just selling bmo and beef up that national bank position. National Bank and Bmo have done well for us, especially na but we don’t need 4 different Canadian banks, I prefer 3 chunky positions.

Interpipeline is another one I debate but they are just too cheap that I may add here. Heartland project will be huge for them once the project is complete. Especially now that JamesB pointed out that Pembina is suspending their petrochemical project indefinitely. Thanks again James!

Other than those I like the look of our portfolio and will continue on focusing to grow existing positions.

Conclusion

At the end of the day I wasn’t planning on selling our brookfield property shares, but it is what it is. Bam is getting them at a great price. Atleast we made a profit on them and collected that 9% dividend for a year or 2. I feel good buying this etf, in these uncertain times its a good idea to be diversified.

Im curious what do you think of these moves and what would you do with the bank stocks or exe?

Have a great one

cheers



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