BPP REIT Conversion Amended

BPO Properties Limited has announced:

that BPP will be shortly mailing its information circular to shareholders containing some modifications to the previously announced proposal to create Canada’s pre-eminent office real estate investment trust (REIT), to be named Brookfield Office Properties Canada. After consultation with a number of interested parties, including the independent committee of the board of directors and its financial advisor, Brookfield Office Properties Canada has agreed to pay $100 million of the purchase price for Brookfield Properties’ interest in Brookfield Place in cash instead of solely through the assumption of debt and units in the new REIT, as originally announced. The remainder of the purchase price will be paid by the assumption of debt and units valued at approximately $20.90 per unit. In light of this change, Brookfield Office Properties Canada will not pay the previously announced special distribution to unitholders on closing of the transaction.

The impact of the above cash payment is a reduction in the number of units outstanding by approximately five million to 93 million and an increase in expected funds from operations available to unitholders on an annualized basis in 2010 to $1.27 per unit from $1.20 per unit. In addition, Brookfield Office Properties Canada’s monthly distributions commencing on closing of the transaction as modified will increase to $0.07 per unit, or $0.84 per unit on an annualized basis.

On closing of the transaction, Brookfield Properties and its affiliates, which currently hold approximately 89.7% of BPP’s common equity, will hold in aggregate an equity interest in Brookfield Office Properties Canada of approximately 90.6%, including the consideration Brookfield Properties is receiving for the sale of Brookfield Place.

As a result of Brookfield Properties’ ownership of equity interests in the REIT of more than 90%, under applicable Canadian securities laws it would be possible for Brookfield Properties to initiate a privatization of the REIT and certain related party transactions without seeking the approval of the minority unitholders. Recognizing this, Brookfield Properties has agreed that following closing it will not initiate any such privatization or related party transaction without minority approval. This undertaking will terminate in the future if Brookfield Properties and its affiliates hold in aggregate an equity interest in Brookfield Office Properties Canada of 75% or less for a period of 12 months.

The independent committee appointed by the board of directors of BPP to consider the proposed transaction has received an opinion from its financial advisor, Macquarie Capital Markets Canada Ltd., that the transaction as modified is fair, from a financial point of view, to shareholders of BPP other than Brookfield Properties and its affiliates. The board of directors, on the unanimous recommendation of the independent committee, has determined that the proposed transaction as modified is in the best interests of BPP and is unanimously recommending that shareholders vote in favour of the transaction at the meeting.

An information circular describing the modified transaction is anticipated to be mailed shortly, but at least prior to April 1, 2010 and will be available on BPP’s website and at www.sedar.com at that time. The meeting of shareholders to consider the transaction is now expected to take place on April 27, 2010. If shareholders approve the transaction at the meeting, and the requisite court approval is obtained, it is anticipated that the transaction will be completed on or about April 30, 2010.

The plan of arrangement has been discussed on PrefBlog.

BPP has three issues of preferreds outstanding: BPP.PR.G, BPP.PR.J and BPP.PR.M. It is not yet clear whether they will vote as a class on the transaction.

One Response to “BPP REIT Conversion Amended”

  1. […] On the whole, the deal seems to me to be a continuation of the basic Brookfield philosophy of accumulating assets at the parent level and then pushing them into subsidiaries; attracting co-investors and increasing (non-recourse!) leverage along the way. It hasn’t been too long since they last did this, with the BPP conversion to a REIT. […]

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