Brookfield Asset Management Looks To Take CRE Subsidiary Private

brookfield asset management headquarters toronto
The Entrance To Brookfield's Toronto Headquarters

One of the world's biggest money managers wants to take its commercial real estate business off the public market.

Brookfield Asset Management is seeking, along with its institutional partners, to purchase all shares of subsidiary Brookfield Property Partners that it doesn't already own, BAM announced on Monday in a statement. BAM's offer to BPY shareholders values those shares at $5.9B.

BAM is offering to pay $16.50 in cash or exchange 0.40 shares in its own company for each share of BPY. Shareholders also have the option of receiving 0.66 of BPY preferred units under the new corporate structure with a liquidation preference of $25 per unit.

The $16.50 per share price represents a 14% premium on the value of BPY shares on the Nasdaq stock exchange as of the end of trading on Dec. 31, BAM said. At close on that day, BPY stock was valued at $14.47 per share, its lowest point in the month of December. At the opening of trading on Monday, BPY's value jumped to $16.94 per share.

Brookfield Property Partners acknowledged its parent company's offer in a separate Securities and Exchange Commission filing on Monday, in which it announced that it was forming an independent committee to review the offer.

BPY and its own subsidiaries, including Brookfield Properties, have about $88B in real estate assets under management, CNBC reports, although the actual value of properties is now challenging to judge. BPY's market capitalization stood at $15.8B as of Monday, which likely represents a significant discount relative to the value of its properties.

That discount may be part of the rationale behind BAM's decision to take BPY private. BAM Chief Financial Officer Nick Goodman said that the move would provide "greater flexibility in operating the portfolio and realizing the intrinsic value of BPY’s high-quality assets.”

Though some of BPY's retail properties are struggling so badly that it has walked away from loan payments and laid off 20% of its retail employees, it also has significant exposure to the more successful industrial sector.

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