Current Price – $19.3
Tender Price – $19.0 – $21.0
Upside – 9% (if priced at the upper limit)
Expiration Date – March 25th, 2019
This idea was shared by Brian
BPY launched $405m dutch tender at $19-$21 with odd-lot provision. Shares have recently sold-off and currently trade close to the lower limit. Tender is for approximately 2% of the company, however 48% of units are owned by Brookfield Asset Management, which does not intend to tender. Nevertheless proration is likely to be high.
For odd-lot positions downside risk is minimal – so simply buying and waiting till tender expiration for the price recovery might work-out. Tendering at premium levels and selling in the market if not accepted might also turn out ok – BPY is not likely to sell-off purely due to tender expiration.
BPY traded in the range of $20-$24 over the last five years with December sell-off being the exception (temporarily down to $15/share). Investors mainly hold BPY for the dividend yield and therefore equity prices have certain support levels. Dividends have been growing over the last years and the latest distribution marked another 5% increase. At current prices yield stands at 6.8%.
As this is a Canadian company and a Limited Partnership there might be adverse tax consequences (see tax section in the tender document for details). There is the potential for a K-1 for this security since it is structured as a Limited Partnership. Avoid the K-1 by investing in a related tender offer through the sister-security Brookfield Property REIT (BPR). The securities are economically equivalent, but BPR does not have the complicated tax situation.