Brookfield Asset Management recently announced that it reached a $6.5 billion agreement to acquire shares of Brookfield Property Partners that it doesn’t already own according to Bloomberg and other news outlets. The agreement would allow the company to take its property arm private.
Brookfield’s property division owns, operates and develops one of the world’s largest real estate portfolios. It had $88 billion in total assets at the end of 2020. Brookfield Property acquired GGP, the second-largest mall operator in the United States, in 2018 for approximately $15 billion. The company reported a $2 billion loss due to the COVID-19 pandemic however as stay-at-home orders prevented people from shopping at malls.
“We are pleased to have reached agreement with BPY’s independent directors on a transaction we believe is appealing to BPY unitholders in many aspects and allows for greater optionality in how we manage our portfolio of high-quality real estate assets,” Nick Goodman, Brookfield Asset Management’s chief financial officer, said in a statement.
Dean Wilkinson, an analyst with the Canadian Imperial Bank of Commerce, deemed the deal terms, “ultimately attractive” for Brookfield Property unitholders, Bloomberg reports. Wilkinson said in a note to clients that the deal was 10% higher than the proposal put forward in January. It’s also approximately a 10% discount on the consensus value of the Brookfield’s assets.
Brookfield currently owns 60% of the property arm, which had a market value of approximately $17 billion as of the close on March 30. The deal is still subject to a vote of public unitholders and other conditions. The company expects the deal to close in the third quarter of this year.
For Goodman, taking Brookfield Property Partners private was appealing because the company was constantly being traded at a discount, even before the COVID-19 pandemic hit the U.S., according to Bloomberg. He attributed the company being traded for less because a lot of Brookfield’s value was generated through projects like New York’s Manhattan West, which can take years to create a return on investment.
Meanwhile, Brookfield CEO Brian Kingston told shareholders that the rent collection from office tenants was still at normal levels even as occupancy has dropped since the beginning of the pandemic. Kingston also noted retail property collections and mall foot traffic has yet to fully recover.
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