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Brookfield Office Properties Inc., a subsidiary of Brookfield Property Partners L.P., has announced (on 2021-6-1; broken link fixed 2023-2-4):

the reset dividend rate on its Class AAA Preference Shares, Series N (“Series N Shares”) (TSX: BPO.PR.N)…

Series N Shares

If declared, the fixed quarterly dividends on the Series N Shares for the five years commencing July 1, 2021 and ending June 30, 2026 will be paid at an annual rate of 4.01% ($0.250438 per share per quarter).

Holders of Series N Shares have the right, at their option, exercisable not later than 5:00 p.m. (Toronto time) on June 15, 2021, to convert all or part of their Series N Shares, on a one-for-one basis, into Class AAA Preference Shares, Series O (the “Series O Shares”), effective June 30, 2021.

The quarterly floating rate dividends on the Series O Shares have an annual rate, calculated for each quarter, of 3.07% over the annual yield on three-month Government of Canada treasury bills. The actual quarterly dividend rate for the July 1, 2021 to September 30, 2021 dividend period for the Series O Shares will be 0.801530% (3.18% on an annualized basis) and the dividend, if declared, for such dividend period will be $0.200383 per share, payable on September 30, 2021.

Holders of Series N Shares are not required to elect to convert all or any part of their Series N Shares into Series O Shares.

As provided in the share conditions of the Series N Shares, (i) if Brookfield determines that there would be fewer than 1,000,000 Series N Shares outstanding after June 30, 2021, all remaining Series N Shares will be automatically converted into Series O Shares on a one-for-one basis effective June 30, 2021; and (ii) if Brookfield determines that there would be fewer than 1,000,000 Series O Shares outstanding after June 30, 2021, no Series N Shares will be permitted to be converted into Series O Shares. There are currently 11,000,000 Series N Shares outstanding.

They later announced (on 2021-6-21):

that after having taken into account all election notices received by the June 15, 2021 deadline for the conversion of the Class AAA Preference Shares, Series N (the “Series N Shares”) (TSX: BPO.PR.N) into Class AAA Preference Shares, Series O (the “Series O Shares”), the holders of Series N Shares are not entitled to convert their Series N Shares into Series O Shares. There were 71,662 Series N Shares tendered for conversion, which is less than the one million shares required to give effect to conversions into Series O Shares.

The Series N Shares will pay on a quarterly basis, for the five-year period beginning on July 1, 2021, as and when declared by the board of directors of Brookfield, a fixed dividend based on an annual dividend rate of 4.01% ($0.250438 per share per quarter).

BPO.PR.N was issued a FixedReset 6.15%+307, that commenced trading 2010-1-20 after being announced 2010-1-11. The issue attracted some unfavourable comment on issue due to the relatively long call lock-out period – which shows complete misunderstanding of the investment impact of an issuer call option, but we’ll ignore that. The issue reset to 3.782% in 2016; I recommended against conversion and there was no conversion.

UPDATE, 2023-2-4: It has come to my attention that the figure quoted for the dollar amount of quarterly dividends in the text ($0.250438) does not agree with the annual rate in the text and headline (4.01%). The rate that gives the dollar value shown in 4.007%. In the absence of any response to my initial attempt at contact, and unless and until I receive an answer to my current eMail, I’m going to assume the dollar value is correct.

UPDATE, 2023-2-13: So I had a highly entertaining exchange with the Brookfield Investor Relations representative:

I sent on Feb 4:

In your press release of 2021-6-1 ( https://bpy.brookfield.com/press-releases/bpo/brookfield-office-properties-announces-reset-dividend-rates-and-conversion ), the rate given for the Series N shares (4.01%) is not in agreement with the dollar figure provided for the quarterly dividends (0.250438 per share).

What is the correct rate and dollar amount?

She answered on Feb. 6:

Thank you for your email. I’ve looked into this and confirmed that what we stated in the press release is correct. The quarterly dollar amount of 0.250438 per share is in Canadian dollars. This per share amount was determined by multiplying the Annual Fixed Rate (4.01%), applicable to the Subsequent Fixed Rate Period, by C.$25.00 and dividing by four.

Please let me know if you have any additional questions.

I replied on Feb. 6:

It appears we have an arithmetical dispute.

I claim that:

1. 25.00 * 4.01% = 1.002500
2. 1.002500 / 4 = 0.250625
3. This is a different result from your answer of 0.250438

Can you tell me which of my claims you disagree with?

And she responded on Feb. 6:

Oh I’m sorry, I forgot to mention an important point in my previous email that the fixed rate % is rounded in the press release from 4.007% to 4.01%

Therefore, the exact calculation would be,

25.00 X 4.007% = 1.00175
1.00175 / 4 = 0.2504375

This entry was posted on Sunday, August 8th, 2021 at 12:01 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.