Subject: Re: BAM spinout damage, quantified
Doubts about the IFRS values Brookfield has relied upon for its real estate portfolio were validated in the Q1 report, when the company wrote down the value of BPG, the private version of BPY, by 27%.

Above is incorrect. If it were true, IFRS book value would have been about 9 billion lower than the 2022 yearend IFRS book value of 39.608 billion and the stock would have massively cratered 20-25% from its already low price. On the contrary, IFRS book value increased to 39.960 billion as of 3/31/23. On a per share basis, book value increased from 25.17 to 25.54 using the basic share count which stood at 1564.4 million at quarter end.

Page 42 of the quarterly report, titled REAL ESTATE (Summary of Operating Results) states that Common Equity of the Brookfield Property Group increased from 31,368 to 32,205 in 1Q 2023.

Page 43 says "Common equity in our Real Estate segment increased to $32.2 billion as at March 31, 2023 compared to $31.9 billion as at December 31, 2022. The increase is mainly attributable to contributions from net acquisitions, which were partially offset by distributions paid during the quarter."

You are being misled because page 6 of the Supplemental doc titled Capital is showing BPG IFRS at 23,149 which is 27% lower than the value reported 3 months ago of 31,868. The difference of 9056 did not get written down. It simply got moved to a line item called 'Direct investments' which shows a value of 12,488. It comprises of the 9056 that got moved from BPG and some other items previously reported as Energy Contracts, Other Unlisted, etc.

More about direct investments from page 14 of the quarterly report. "Our direct investments are primarily comprised of capital invested in flagship real estate private funds which own high-quality assets and portfolios with operational upside 'LP Investments') across office, retail, multifamily, logistics, hospitality, triple net lease, self-storage, student housing and manufactured housing sectors. We also invest directly in certain private equity funds."

I guess investments which BN made directly into the funds were previously lumped into BPG, but now they are trying to draw a distinction. If someone can shed more light on this, it will be useful.

Quarterly Report
https://bn.brookfield.com/repo...

Supplemental Information
https://bn.brookfield.com/repo...