Analyst Update - BPY Q1 Earnings & Brookfield Asset Management Overview

On May 1, Canaccord Genuity (CG) released a research note, "Core operations healthy, aggressive pace of growth," updating $16.5 billion Brookfield Property Partners L.P.

after Q1 2015 earnings. Brookfield, a Toronto based REIT, owns over 22,000 multifamily apartment units in the U.S and Canada, and trades with a $5.9 billion float on the NYSE, with units currently yielding ~4.6 percent. However, it is difficult to put BPY's recent performance into perspective, without understanding how it fits into the overall Brookfield real estate realm. Tale Of The Tape - Past Year

The Vanguard REIT Index ETF

is a good proxy for the broader U.S. equity REIT sector. Despite trading lower, after a massive preferred equity issuance to Qatar Investment Authority (QIA), Canadian REIT BPY has still outperformed the U.S. REIT index by a wide margin TTM. The QIA investment was in conjunction with the joint purchase and redevelopment plans for the huge Canary Wharf project, outside of London -- including over 3,000 residential units, additional office space, shopping and a school site on a vacant 30 acre land parcel.

During the past 52-weeks, BPY has traded in a range of $18.39 to $26.25 per share. Brookfield Real Estate - The Big Picture Global alternative asset manager, Brookfield Asset Management, Inc.

with over $200 billon of AUM, owns ~68 percent of BPY units. On April 22, it was BAM in the news purchasing U.S. apartment REIT Associated Estates Realty for $28.70 cash per share, or ~$2.5 billion including assumed debt. Brookfield Office Properties, owns and operates 255 properties, containing 118 million SF of space around the globe. Brookfield's retail holdings include: a 33 percent undivided interest in U.S. No. 2 Class-A mall REIT General Growth Properties; a 34 percent interest in Class-B mall re-development specialist Rouse Properties, Inc.; as well as significant mall interests in Brazil. BAM also owns ~65 percent interest in U.S. multifamily giant Fairfield Residential, manager of over 50,000 units, and owner of more than 27,000 units through its non-traded REITs. Additionally, BAM owns significant hotel properties; over 59 million SF of industrial/logistics space worldwide; and recently purchased 300 net-leased automobile dealerships in the U.S. at the close of 2014. Brookfield Asset Management holds a 22 percent interest in the Canary Wharf project. CG - Brookfield Property Partners: Buy, $28 PT The CG $28 price target represents a potential upside of ~22.3 percent, based upon a May 1, closing price of $22.90 per share; plus a 4.6 percent dividend yield.

Canaccord has lowered its estimates based upon BPY Q1 2015 performance, and guidance from management. The CG target price of $28 is still below its BPY NAV (net asset value) estimate of $28.79 per LP unit. CG - Brookfield Property Partners: Rationale  BPY reported FFO per diluted unit of $0.25, down from $0.28 Y/Y, and below the CG estimate of $0.28.  CG noted that the 10 percent reduction Y/Y in FFO per unit was attributed to the issuance of $1.8 billion of preferred equity to the Qatar sovereign wealth fund; and $9 million reduction in FFO from FX, the strong USD vs other currencies.  CG also noted that the Canary Wharf investment will not be accretive until later years, after development is completed; however, BPY's Brookfield Place in lower Manhattan should begin to contribute to FFO as it is occupied in FY 2016.  CG felt that the announcement of COO and CFO management changes at BPY would be viewed positively by the market, as they are experienced Brookfield REIT executives.  The CG NAV per LP unit of $28.79 represents a ~19.5 percent discount from current pricing. CG - BPY Bottom Line Canaccord continues to believe "that BPY is well positioned to drive cash flow and NAV per unit higher over the next several years, through 1) the lease-up of vacant space; 2) marking leases to market; 3) completing development and redevelopment projects; and, 4) completing a substantial volume of large opportunistic acquisitions." Investor Takeaway During the past five trading days, BPY shares have lost ~5 percent of their value. Mr. Market appears to be discounting the upside from future developments, as well as Q1 earnings and management guidance. However, the broader REIT sector as measured by VNQ ETF shares, has also traded down 3.2 percent during the same period.