Current Price: $10.97
Offer Price: $12.00
Expiration Date: 28th of August
In parallel to the BPYU, BPY has also launched a similar tender offer (17% of outstanding units at $12/unit) but without odd-lot provision. Given the much larger size of the company (compared to BPYU) and the results of the last year’s tender offer (significantly undersubscribed), it seems like the chances of BPY offer ending up undersubscribed again are quite high. At current prices, the situation offers a 9% upside if all tendered shares are accepted in the offer.
In their Q1 letter to shareholders (8th of May) BPY states that it expects the impact on the office portfolio to be temporary, while retail assets will have “the greatest impact from the COVID crisis, with the majority of our retail properties having been closed for over a month now”. Despite that, the company claims to be well-positioned to withstand any short term downfalls in cash flow due to its strong liquidity position and high-quality assets and overall states that its share price is “disconnected from the performance of our underlying assets”. The current buyback (and its size) seems to firmly back up this statement.
However, the risk of not getting all of the tendered shares accepted still remains and in light of the COVID-19 situation and its impact on the retail & office real estate industry, more investors might be incentivized to cash out compared to the last year. After all, the current offer comes at 35% discount to BPY pre-COVID trading price, while the Dow Jones US Retail REIT index is currently down 44%. Meanwhile, the largest office REIT Boston Properties (ticker: BPX) is down 41%.
- 85% of the balance sheet are premium retail and office portfolios (60%/40% FFO split).
- 15% – investments in various real estate funds (office, retail, hospitality, and manufactured housing).
BAM has a 55% economic interest in BPY and will not participate in the transaction. If the tender is fully subscribed, BAM ownership will increase to 63%. The only other major shareholders besides BAM is Qatar Investment Authority, which holds 7% stake.