Quiet but dire warnings from the other “hard asset class” have implications far beyond Canada. Here’s some of them…
In what seems like an never ending barrage of bad economic data, today we get another heap piled onto the commercial real estate sector.
As reported today by Marguerite Chambers of BZ Weekly:
Eric Sprott decreased its stake in Brookfield Ppty Partners Lp (BPY) by 26.37% based on its latest 2016Q4 regulatory filing with the SEC. Sprott Inc sold 296,350 shares as the company’s stock declined 4.93% while stock markets rallied. The hedge fund run by Eric Sprott held 827,260 shares of the real estate company at the end of 2016Q4, valued at $18.19M, down from 1.12M at the end of the previous reported quarter. Sprott Inc who had been investing in Brookfield Ppty Partners Lp for a number of months, seems to be less bullish one the $6.05 billion market cap company. The stock increased 1.85% or $0.43 on August 1, reaching $23.65. About shares traded. Brookfield Property Partners LP (NYSE:BPY) has declined 7.06% since August 2, 2016 and is downtrending. It has underperformed by 23.76% the S&P500.
This is not quite the picture that Brookfield Property Partners painted when they released their Q2 Earnings August 2, 2017:
It is worth noting that companies are still showing the happy face coming from commercial real estate land, with Brookfield (NYSE: BPY | TSX: BPY.UN) highlighting yet another quarter of growth. Within their same point though, it seems a bit curious they are “reallocating capital from mature, stable assets to
junk bonds higher returning investment opportunities”.
Brookfield invests in commercial real estate not just in North America but also the UK. The investments are in office and retail commercial real estate, and also self storage, student housing, manufactured homes, and other types of “opportunistic” investments. A look at the daily shows the company has come under serious pressure since Q1, and the market action of late is showing an ominous sign of what appears to be trouble maintaining current price levels:
A closer look at the 15 minute chart shows just how little volume there is right now, despite President Trump’s Dow 22,000.
This leads us to ask these questions about hard assets:
- How easy will it be to get out of real estate if the selling continues?
- How much counterparty risk exists for a company that invests in storage units and trailer parks, as opposed to an individual who invests in physical gold bullion and physical silver bullion?
- Is Eric Sprott quietly ringing the bell for commercial real estate?