Month: February 2017

Brookfield Office Properties has announced (but not on their website yet, as far as I can tell given their idiotic, but ever-so-cool website design):

Brookfield Office Properties Inc., a subsidiary of Brookfield Property Partners L.P., announced today that it has agreed to issue to a syndicate of underwriters led by Scotiabank, CIBC Capital Markets, RBC Capital Markets and TD Securities Inc. for distribution to the public, eight million Cumulative Minimum Rate Reset Class AAA Preference Shares, Series EE (the “Preferred Shares, Series EE”). The Preferred Shares, Series EE will be issued at a price of C$25.00 per share, for aggregate proceeds of C$200 million. Holders of the Preferred Shares, Series EE will be entitled to receive a cumulative quarterly fixed dividend yielding 5.10% annually for the initial period ending March 31, 2022. Thereafter, the dividend rate will be reset every five years at a rate equal to the greater of (i) the five-year Government of Canada bond yield plus 3.96% and (ii) 5.10%.

Holders of Preferred Shares, Series EE will have the right, at their option, to convert their shares into Cumulative Floating Rate Class AAA Preference Shares, Series FF (the “Preferred Shares, Series FF”), subject to certain conditions, on March 31, 2022 and on March 31 every five years thereafter. Holders of Preferred Shares, Series FF will be entitled to receive cumulative quarterly floating dividends at a rate equal to the 90-day Government of Canada Treasury Bill yield plus 3.96%.

The Series EE Shares and Series FF Shares will be fully and unconditionally guaranteed, jointly and severally, as to: (i) the payment of dividends, as and when declared, (ii) the payment of amounts due on redemption, and (iii) the payment of amounts due on the liquidation, dissolution or winding-up of the Corporation, by the following entities: Brookfield Property Partners L.P., Brookfield Property L.P., Brookfield BPY Holdings Inc., Brookfield BPY Retail Holdings II Inc., BPY Bermuda Holdings Limited, BPY Bermuda Holdings II Limited, BPY Bermuda Holdings IV Limited and BPY Bermuda Holdings V Limited.

Brookfield Office Properties has granted the underwriters an option, exercisable in whole or in part anytime up to two business days prior to closing, to purchase an additional 2,000,000 Preferred Shares, Series EE at the same offering price. Should the option be fully exercised, the total gross proceeds of the financing will be C$250 million.

The Preferred Shares, Series EE will be offered in all provinces of Canada by way of a supplement to Brookfield Office Properties’ existing Canadian short form base shelf prospectus dated August 29, 2016.

The net proceeds of the issue will be used by Brookfield Office Properties for general corporate purposes which may include the redemption of existing preferred shares. The offering is expected to close on or about February 17, 2017.

They later announced:

Brookfield Office Properties Inc., a subsidiary of Brookfield Property Partners L.P., announced today that as a result of strong investor demand for its previously announced offering it has agreed to increase the size of the offering to eleven million Cumulative Minimum Rate Reset Class AAA Preference Shares, Series EE (the “Preferred Shares, Series EE”). The Preferred Shares, Series EE will be issued at a price of C$25.00 per share, for aggregate proceeds of C$275 million. There will not be an underwriters’ option. The Preferred Shares, Series EE are being offered on a bought deal basis by a syndicate of underwriters led by Scotiabank, CIBC Capital Markets, RBC Capital Markets and TD Securities Inc.

Holders of the Preferred Shares, Series EE will be entitled to receive a cumulative quarterly fixed dividend yielding 5.10% annually for the initial period ending March 31, 2022. Thereafter, the dividend rate will be reset every five years at a rate equal to the greater of (i) the five-year Government of Canada bond yield plus 3.96% and (ii) 5.10%.

Holders of Preferred Shares, Series EE will have the right, at their option, to convert their shares into Cumulative Floating Rate Class AAA Preference Shares, Series FF (the “Preferred Shares, Series FF”), subject to certain conditions, on March 31, 2022 and on March 31 every five years thereafter. Holders of Preferred Shares, Series FF will be entitled to receive cumulative quarterly floating dividends at a rate equal to the 90-day Government of Canada Treasury Bill yield plus 3.96%.

The Series EE Shares and Series FF Shares will be fully and unconditionally guaranteed, jointly and severally, as to: (i) the payment of dividends, as and when declared, (ii) the payment of amounts due on redemption, and (iii) the payment of amounts due on the liquidation, dissolution or winding-up of the Corporation, by the following entities: Brookfield Property Partners L.P., Brookfield Property L.P., Brookfield BPY Holdings Inc., Brookfield BPY Retail Holdings II Inc., BPY Bermuda Holdings Limited, BPY Bermuda Holdings II Limited, BPY Bermuda Holdings IV Limited and BPY Bermuda Holdings V Limited.

The Preferred Shares, Series EE will be offered in all provinces of Canada by way of a supplement to Brookfield Office Properties’ existing Canadian short form base shelf prospectus dated August 29, 2016.

The net proceeds of the issue will be used by Brookfield Office Properties for general corporate purposes which may include the redemption of existing preferred shares. The offering is expected to close on or about February 17, 2017.

Implied volatility analysis indicates:

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So according to that, the new issue is a little expensive and should have had a coupon of more like 5.25%, but that depends on how much value you accord the minimum rate guarantee. I value it as zero!