By Konrad Putzier
Bigger is better – at least as far as Brookfield Property Partners is concerned.
On Monday, the owner of commercial and residential real estate announced its intention to buy all remaining shares of Brookfield Office Properties, expanding its current 51% stake.
The transaction is confusing enough, and not just because of the similar names. Earlier this year, Brookfield Property was split off from Brookfield Asset Management, which retained 56% of the new company’s shares. Monday’s announcement seems to indicate that trading Brookfield Property separately didn’t quite work out — at least in its current form.
“The corporate structure was not what Brookfield wanted it to be,” Alex Avery, an analyst at CIBC World Markets Inc. in Toronto, told Bloomberg. “They wanted to house all their real estate investments under one umbrella.”
“For (Brookfield Property trading on its own) to function properly, it needs to be large, liquid and unique,” Avery told Bloomberg.
Brookfield Property will offer Brookfield Office’s shareholders a choice between $19.34 in cash or a limited partnership unit of its own company in return for each share.
If the plan works out, Brookfield Property will not only become one of the world’s largest commercial real estate owner, but also significantly increase its float — or the number of its shares.
In a press release, Brookfield Property said the move would enable it to acquire capital more cheaply in the future. Bigger companies with a larger float tend to be more attractive to investors, pushing down capital costs.
The company also said it hopes the acquisition will “simplify its corporate structure” and “eliminate duplicative costs.” Brookfield Office owns skyscrapers on several continents, including the Brookfield Plaza in Manhattan — the former World Financial Center