Brookfield Asset Management Inc. has announced:
that it has made a proposal to Brookfield Property Partners L.P. (“BPY”) (NASDAQ: BPY; TSX: BPY.UN) to acquire all of the limited partnership units of BPY that it does not already own (“BPY units”) at a value of $16.50 per BPY unit, or $5.9 billion in total value.
…
Brookfield will ensure that holders of the Class A stock of Brookfield Property REIT Inc. (NASDAQ: BPYU) will be entitled to receive the same per share consideration as BPY unitholders under the proposal upon exchange of their shares into BPY units. It is also expected that the BPYU 6.375% Series A Cumulative Redeemable Preferred stock would be redeemed at its par value of $25.00 per share in connection with the proposed transaction. Brookfield is not proposing to acquire other securities of BPY and its subsidiaries, which are expected to remain outstanding.
Brookfield Property Partners L.P. has responded:
As outlined in Brookfield’s press release, the proposal provides that each unitholder can elect to receive consideration per Unit of a combination of (i) 0.4 Brookfield Shares, (ii) $16.50 in cash, and/or (iii) 0.66 BPY Class A Cumulative Redeemable Perpetual Preferred Units with a liquidation preference of $25.00 per Unit (“BPY Prefs”), subject in each case to pro-ration based on a maximum of 59.5 million Brookfield Shares (42% of the total value of Units), maximum cash consideration of $2.95 billion (50% of the total value of Units), and a maximum value of $500 million in BPY Prefs (8% of the total value of the Units). If unitholders collectively elect to receive in excess of $500 million in BPY Prefs, the amount of BPY Prefs can increase to a maximum of $1 billion, offset against the maximum amount of Brookfield Shares. The maximum amount of cash consideration would not be affected.
As outlined in Brookfield’s press release, Brookfield is not proposing to acquire other securities of BPY and its subsidiaries, including existing preferred units of BPY and preferred shares of wholly owned subsidiary Brookfield Office Properties Inc., which are expected to remain outstanding. However, it is expected that holders of the Class A Stock, par value $0.01 per share, of BPYU would receive the same per share consideration as BPY unitholders under the proposal upon exchange of their shares into BPY units. It is also expected that the BPYU 6.375% Series A Cumulative Redeemable Preferred Stock would be redeemed at its par value of $25.00 per share in connection with the proposed transaction.
BPO preferreds responded …:
| BPO Preferred Share Issues | ||
| Ticker | Closing Quote 2021-1-4 |
Day’s Price Change (bid/bid) |
| BPO.PR.A | 16.58-90 | +13.48% |
| BPO.PR.C | 24.00-05 | +10.85% |
| BPO.PR.E | 20.20-21.25 | +14.45% |
| BPO.PR.G | 19.00-20.00 | +17.00% |
| BPO.PR.I | 19.00-05 | +18.82% |
| BPO.PR.N | 13.47-65 | +14.64% |
| BPO.PR.P | 13.75-27 | +15.55% |
| BPO.PR.R | 14.92-30 | +12.94% |
| BPO.PR.S | 14.38-15.50 | +13.05% |
| BPO.PR.T | 16.00-17.15 | +7.60% |
| BPO.PR.W | 8.27-00 | +8.82% |
| BPO.PR.X | 8.30-40 | +9.21% |
| BPO.PR.Y | 8.05-9.50 | +5.92% |
BPY.UN had its 52-week high of a little over $26 in January, 2020, and closed today at $21.80, up $3.39 (+18.41%) on the day.
Similarly, BPO.PR.A (to choose an issue at random) remains significantly below its 52-week high, as investors speculate whether anybody, anywhere, will want to occupy a piece of property ever again.
It’s odd that many of the preferred shares performed comparably to the Capital Units today after both parties stressed that they were “expected to remain outstanding”, but that’s show business! The preferreds still yield considerably more than equally rated (Pfd-3) issues, so if one has a firm belief that people will resume shuttling between the office, the mall and the rental apartment, the shares might be of continuing interest! However, a lot will depend on just how the privatized company is financed …
Since BAM preferred shares are rated 2L/2 and BPO preferred shares are rated 3/3H by DBRS and S&P, respectively, I assume that today’s buyers are speculating that the BPO shares will receive a credit upgrade when they are directly under the BAM umbrella post-privatization. Are they wrong?
I assume that today’s buyers are speculating that the BPO shares will receive a credit upgrade when they are directly under the BAM umbrella post-privatization.
Nothing’s certain. Brookfield has a huge amount of consolidated debt … very little of which is ‘with recourse’ to BAM. If problems at BPO start threatening to sink the ship, I have no doubt but that BAM will throw it overboard.
What’s the ownership going to look like? BAM is doing this “with institutional partners”.