Brookfield Property Partners L.P. (BPY), which already has a 51% stake in Brookfield Office Properties Inc. (BPO), is seeking to buy the remaining stake of the latter in a cash and stock deal valued at $5 billion.
The move will result in a one of the biggest global commercial real estate company with consolidated assets of $45 billion alongwith ownership of a diversified portfolio spanning over 330 million sq. ft.
Structured as a cash and stock offering, each Brookfield Office share is valued at $19.34, reflecting a 15.3% premium over Brookfield Office’s friday’s closing price of $16.77 per share.
Shareholders of Brookfield Office can either opt for $19.34 in cash or one limited partnership unit of Brookfield Property for each Brookfield Office share they hold. This is, however, subject to a maximum cash consideration of $1.7 billion. The company plans to finance the cash part of the deal through an acquisition facility with a syndicate of banks.
On the other hand, shareholders who will receive Brookfield Property stock can enjoy a 79% uptick in the quarterly dividend per share as well as an 18% increase in the book value per share.
If the deal culminates, the shareholders of Brookfield Property too can benefit from its increased size and scale. The combined portfolio would have several office, retail, industrial and multi-family assets in major global gateway markets in the U.S., Canada, Australia and the UK.
Moreover, the company would gain from the increased exposure to office assets positioned in the supply constrained markets. Brookfield Office has a strong tenant base consisting of a roster of major tenants with over one million square feet of space. Its portfolio includes Bank of America Corporation (BAC)/Merrill Lynch, the U.S. and Canadian governments and government agencies, Chevron, Wells Fargo & Company (WFC)/Wachovia and a number of other reputed companies.
In addition, Brookfield Property Partners' public float will increase to around $4 billion significantly boosting the trading liquidity of its units. As such, the company could gain from a rise in accessibility to the capital markets and lower borrowing cost.
Notably, earlier this year the global alternative asset manager – Brookfield Asset Management – had spun off its commercial real estate unit, Brookfield Property.
The news has been much welcomed by the shareholders that led to a 13.7% rise in Brookfield Office’s stock price yesterday. Also, the shares of Brookfield Property have gone up a few cents.
Brookfield Office currently has a Zacks Rank #3 (Hold).
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