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.
Can we do an odd lot in BPR and another odd lot inn BPY?
They are separate, but related, entities. One is a REIT and one is a Limited Partnership, so you would be able to tender to both entities.
What do the tender offering documents say about consequences for US tax payers?
BPY is a limited partnership so you could end up receiving a K-1 at the end of the year unless if you trade this in a retirement account and staying under the $1,000 UBTI limit. I’m no tax expert, so I’m only playing this through BPR given the limited tax consequences with buying the plain vanilla REIT structure.
https://bpy.brookfield.com/en/stock-and-distribution/tax-information
Per above link:
Unrelated Business Taxable Income (UBTI)
Brookfield Property Partners is not expected to generate UBTI, a concept relevant to
U.S. tax exempt investors. Brookfield Property Partners’ operations are carried out through wholly owned subsidiary corporations. Similarly, Brookfield Property Partners is not expected to generate debt financed UBTI.