Brookfield Property Partners could go private in $6B deal

Parent company’s bid to take real estate giant private would be big discount from book value

National /
Jan.January 04, 2021 09:40 AM
Brookfield’s Brian Kingston and Bruce Flatt (Photos via iStock; Brookfield)

Brookfield’s Brian Kingston and Bruce Flatt (Photos via iStock; Brookfield)

After nearly eight years as a publicly traded company, Brookfield Property Partners could be going private.

Brookfield Asset Management, the real estate firm’s parent company, announced a proposal to buy the shares of Brookfield Property Partners that it does not already own at a value of $16.50 per share, or $5.9 billion. The deal would be a significant discount from the company’s book value per share of $27.02 per share, according to Yahoo Finance.

The deal, if approved, would represent a premium of 14 percent from its closing price on Dec. 31.

Toronto-based Brookfield Asset Management already owns about 65 percent of Brookfield Property Partners’ shares, according to the latter’s third quarter earnings call.

“The privatization will allow us to have greater flexibility in operating the portfolio and realizing the intrinsic value of BPY’s high-quality assets,” Nick Goodman, CFO of Brookfield Asset Management, said in a statement announcing the proposal.

The company’s existing shareholders have three options. In exchange for their shares, the they could receive $16.50 in cash, 40 cents of Brookfield Asset Management’s Class A shares or 66 cents of Brookfield Property Partners’ preferred units.

Brookfield Property Partners is one of the largest office landlords in New York City, with a portfolio of about 27 million square feet that includes the colossal One Manhattan West project it owns with Qatar Investment Authority.

The firm reported huge losses since the pandemic hit due to challenges with its portfolio of malls — it’s sitting on about 120 million square feet in retail real estate across the country. In the third quarter, it reported a $135 million net loss, while its rent collections averaged 70 to 75 percent, up from just 34 percent in the second quarter. The company has also looked to turn over some of its struggling malls to its lenders.

By taking the company private, the parent company could also keep a tighter lid on Brookfield Property Partners’ financials. Over the years, its accounting practices and valuations have come under scrutiny by financial news outlets, research firms and short sellers.

Brookfield Property Partners uses an accounting practice known as IFRS, which many international firms use, rather than GAAP, which is used by its American rivals. Under IFRS, the company does not have to rely on third party appraisers for its valuations and gives management much more discretion on its valuations compared to GAAP.

Brookfield Asset Management said it has presented its proposal to Brookfield Property Partners’ board of directors and general partner for review, and that it has asked the board to appoint a special committee to commission an independent valuation of the company’s shares.





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