Brookfield Property Partners (BPY), the real-estate arm of asset management company Brookfield Asset Management (BN 0.40%), just released an update for shareholders about the potential impact of the COVID-19 coronavirus outbreak on its portfolio.
Brookfield Property has $200 billion worth of assets under management and owns and operates more than 450 million square feet in properties primarily across office, retail, multifamily, and hospitality, Unsurprisingly, the large-scale restriction of movement in the U.S. to contain the spread of the novel coronavirus has triggered panic among investors, sending Brookfield shares down by a whopping 53% in just the past month, as of the time of this writing.
Brookfield Property's update on COVID-19
Brookfield Property reports three segments: core office, core retail, and LP investments. The first two are the company's core operations.
Core office made up nearly 70% of the company's net income in 2019. According to the company's latest statement, 93% of the portfolio is under long-term leases with an average lease term of nine years. So even if tenants face difficulties in coming months because of coronavirus-related operational restrictions, Brookfield says it's well capitalized and that the company's own debt in the segment has a comfortable average maturity of five years.
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While it's hard to guess if Brookfield is underplaying the potential impact on its office properties, the company's renewals and new leases will likely trickle down this year.
Brookfield's core retail portfolio could take the biggest hit, as it comprises malls, restaurants, and entertainment properties, primarily in the U.S., all of which are currently limiting operations or shutting down. The situation has only magnified the so-called retail apocalypse, and as Brookfield just said, could have "severe consequences" for several of its tenants if the government doesn't intervene in a timely manner. Again, while the company said its retail portfolio doesn't have any major near-term debt maturities, it will "undoubtedly face a challenging year ahead."
Overall, Brookfield tried to convince shareholders about its financial standing, with access to roughly $6 billion in undrawn credit lines and cash in hand and the backing of parent Brookfield Asset Management, which itself boasts a strong balance sheet. The company also said it has repurchased 6 million units (or shares) in the past three weeks.
Brookfield Property believes it's "well positioned for this volatility" for now, and will update shareholders about any major developments. Keep an eye on this one as the risks appear real.
