CLEAN UP: Brookfield AM Seeks to Take Brookfield Property Partners Private

Posted on 01/04/2021


Brookfield Property Partners (BPY) is the flagship listed real estate company of Brookfield Asset Management. Brookfield Asset Management Inc. along with institutional partners announced that it has made a proposal to Brookfield Property Partners L.P. to acquire all of the limited partnership units of BPY that it does not already own at a value of $16.50 per BPY unit, or $5.9 billion in total value. The $16.50 per unit price represents a premium of 14.9% and 14.0%, respectively, to the closing price of the BPY units on the TSX and Nasdaq on December 31, 2020. The privatization will allow Brookfield to have greater flexibility in operating the portfolio and realizing the intrinsic value of BPY’s assets. Brookfield Property Partners could end up selling off its hospitality and core retail portfolios to more long-term investors or other funds it manages. Brookfield acquired most of Oaktree Capital Management in 2019, which specializes in distressed assets and credit investments.

Brookfield seeks to ensure that holders of the Class A stock of Brookfield Property REIT Inc. will be entitled to receive the same per share consideration as BPY unitholders under the proposal upon exchange of their shares into BPY units.

In recent periods, Brookfield Asset Management has been buying shares of Brookfield Property Partners. From SEC filings, in the period ended September 30, 2020, the company bought 13,99,351 shares, or 16.073% of the shares of Brookfield Property Partners.

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.

Funds from operations (FFO) of Brookfield Property Partners decreased to US$ 578 million during the nine months ended September 30, 2020 compared with US$ 810 million during the same period in the prior year. The decrease was driven by operating losses from its hospitality portfolio due to government-mandated closures primarily at Atlantis in the Bahamas and occupancy restrictions at Center Parcs in the U.K, as a result of the shutdown. Brookfield Property Partners’ hotels are running, on average, at much lower occupancies than is required to break even, and some properties continue to be closed subsequent to the quarter. Government and government agencies comprise 7.7% of Brookfield Property Partners ‘ Core Office segment tenant base and, as at September 30, 2020.

Brookfield Property Partners
9-Months Ended 2020
Hospitality Revenue = US$ 591,000,000
Commercial Property Revenue = US$ 4,075,000,000
Total Revenue = US$ 4,973,000,000
Net Income = US$ -2,020,000,000

9-Months Ended 2019
Hospitality Revenue = US$ 1,466,000,000
Commercial Property Revenue = US$ 4,240,000,000
Total Revenue = US$ 6,116,000,000
Net Income = US$ 1,606,000,000

Atlantis

In the third quarter of 2020, Brookfield Property Partners completed the recapitalization of the Atlantis Paradise Island resort with a consortium of investors who made a total commitment of US$ 300 million in the form of preferred equity, of which Brookfield Property Partners committed approximately US$ 125 million.

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