Governance and Investing
Substandard corporate governance often leads to poor investment results. In the attached opinion piece, we make the case the Brookfield Property Partners (BPY) and its publicly traded mall REIT subsidiary, Brookfield Property REIT (BPYU), are financially unsustainable entities.
The YieldCos have embedded financial incentives for the external manager, Brookfield Asset Management (BAM), to overlever assets and overpay distributions. In 2019, BPY upstreamed close to $800M to BAM in fees and distributions despite eroding fundamentals. BPYU remains the sole publicly traded mall REIT to not have cut or suspend dividends, despite collapsing cash flows.
Corporate structure and governance have strong long-term influence over investment results. In the cases discussed here,
two companies have been burdened with enough debt to make us question their ability to survive the current downturn.