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Brookfield makes $5.9B offer to take real estate arm private

Brookfield Asset Management (Brookfield) has made a proposal to buy the 40 percent of Brookfield Property Partners (BPY) it doesn’t already own for $5.9 million.

The Canadian asset-management giant is offering $16.50 for each remaining share of the commercial real estate division.

The unit price represents a premium of 14.9 and 14.0 percent, respectively, to the closing price of the BPY units on the TSX and Nasdaq on December 31, 2020.

Nick Goodman, CFO of Brookfield Asset Management said the move to privatize BPY would give shareholders an opportunity to upsize their investment at a time when prices have been struggling as the company battles COVID-related stress while funneling money into major developments such as the 5.4 million square foot Manhattan West mixed-use project.

NICK GOODMAN

“The offer presents an excellent opportunity for BPY unitholders to either monetize their units in cash at a premium to recent trading prices, continue to invest with us in the upside of the portfolio via Brookfield shares, or select BPY preferred units designed for income-oriented investors who would like to maintain similar dividend income which they receive from BPY today in a preferred instrument, based on what is best for them,” said Goodman.

“The privatization will allow us to have greater flexibility in operating the portfolio and realizing the intrinsic value of BPY’s high-quality assets.”

Brookfield has presented its proposal to the board of directors of the general partner of BPY and has asked the board to begin a process to review the proposal and appoint a special committee of independent directors to commission an independent valuation of the BPY units. 

Once the valuation is available, Brookfield would seek to enter into a definitive agreement with BPY with respect to the proposed transaction for presentation to unitholders.

Brookfield Asset Management has some $575 billion of assets under management across real estate, infrastructure, renewable power, private equity and credit. Brookfield owns and operates long-life assets and businesses, many of which form the backbone of the global economy.

Brookfield Property has roughly $88 billion in assets, including office buildings, logistics hubs and malls such as Brookfield Place in New York. In 2018, it acquired GGP, the second-largest mall operator in the U.S., for about $15 billion.

In September, it announced 20 percent of its retail division would be laid off as the pandemic crippled global brick-and-mortar shopping. At the time, BPY retail boss Jared Chupaila said, “While we are amid challenging times, we remain confident in the strength of our high-quality portfolio, steadfast in our positive long-term view of our industry and determined in our ability to execute our business plan.”

That plan includes reducing its portfolio of assets “by opportunistically disposing of assets we determine do not meet the long-term investment strategy for our core portfolio,” added Chupalia.

In the company’s third quarter report, BPY chief executive Brian Kingston said he believed the worst of the crisis was behind them.

BRIAN KINGSTON

“We saw consistent improvement in our operations over the course of the third quarter and, while there may be temporary setbacks as different regions reach different stages of recovery, we are confident that the worst of the economic shutdown is now behind us,” said Kingston.

“Our staff has done an amazing job preparing our buildings for safe re-opening and each day it is gratifying to see more office workers, retailers, customers and visitors returning to our properties around the globe.”

BPY said today (Monday) its board has established an independent committee to review

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