Brookfield Property REIT (BPYU) – Tender Offer – $100 Upside

Current Price: $10.96

Offer Price: $12.00

Upside: $102 (for odd-lot accounts)

Expiration Date: 12th of August

Offer Document

 

On the 6th of July Brookfield Property REIT launched a tender offer for 16.6% of its outstanding class A shares at $12/share ($110m in total). It will likely end up oversubscribed, however, odd-lot accounts (99 shares and less) will be accepted on priority, which offers $102 profit at the moment.

The company is owned by Brookfield Asset Management (ticker: BAM) that holds 52.5% economic interest in BPYU including 5.5% in Class A shares and will not participate in the offer.

The offer is not conditioned on financing, while funds will be provided from an outstanding credit facility with BAM – $422m available on the 15th of June.

Major shareholders:

• Farallon Capital Management – 14%
• Vanguard – 8.8%
• Blackrock – 7.3%
• Fidelity Investments – 7%

Brookfield Property REIT is a subsidiary of a major commercial real estate company ($88bn assets) Brookfield Property Partners (ticker: BPY), intended to offer investors economic equivalence to BPY units but in the form of a US REIT security. BPYU owns only a subset of BPY’s portfolio (mostly core retail), however, its Class A units have been structured so that their economic return is equivalent to BPY units.

Both companies have done similar tender offers in Q1’19.

• BPYU bought close to 5% of its class A units at $20.30/unit. Proration stood at 56%
• BPY bought 2% of its outstanding units at $21/unit. The offer actually ended up being significantly undersubscribed – only 66% of the intended units were tendered.