Re: Official Bay Adelaide Centre Thread
This deal is about 1 and a half weeks old. But I guess it can give some insight into Brookfields current financial position.
REITs Falling Like Dominos: Brookfield/Blackstone Taking Out Trizec
Brookfield Properties Joins with Blackstone To Buy REIT, Will Split Assets, Sell Some To Other Investors
First Los Angeles-based Arden Realty, then Washington-based CarrAmerica. Now in one of the biggest REIT buyouts to date, Toronto-based Brookfield Properties Corp. (NYSE:BPO) is teaming with New York-based private equity investor The Blackstone Group to acquire Trizec Properties (NYSE:TRZ) and Trizec Canada (TSX:TZC) for $8.9 billion.
Under terms of the agreement announced today, Brookfield will acquire all outstanding shares of Trizec Properties not owned by Trizec Canada for US $29.01 per share. All outstanding subordinate voting shares and multiple voting share of Trizec Canada will be acquired for US $30.97 (Cdn $34.09). The cash price represents a 24% and 35% premium over the 10-day average closing price for Trizec Properties and Trizec Canada, respectively.
Trizec Properties owns and manages 61 office properties in the US. Approximately 40 million square feet of it is office space mostly concentrated in seven U.S. markets: Atlanta, Chicago, Dallas, Houston, Los Angeles, New York and Washington.
Trizec Canada, a public mutual fund corporation, holds interests in the US through holdings in Trizec Properties. It owns 38% of Trizec Properties as well as additional real estate assets in Canada and is controlled by Canadian billionaire investor Peter Munk, through his PM Capital Inc. Munk is also Chairman of Trizec Properties. Both TZC and PM Capital have voted in favor of the sale to Brookfield and Blackstone.
Brookfield will assume the management and operation of approximately 18.5 million square feet of properties located in New York, Washington, D.C., downtown Los Angeles and Houston. Blackstone will take over 5.4 million square feet of properties located in West Los Angeles, San Diego and some of the New York City properties.
As for the remaining 12.1 million square feet which includes properties located in Atlanta, Dallas, West Los Angeles, San Diego, Chicago, Charlotte and Minneapolis, Blackstone or other investors are expected to acquire them directly from Trizec Properties prior to closing.
Brookfield said the acquisition will be financed with property and corporate debt, contributions of equity of $1.3 billion by the REIT and various institutional partners selected by it with the balance of the equity furnished by Blackstone. Brookfield said it expects to raise approximately $450 million in equity from syndicating the deal to institutional partners.
Tim Callahan, Trizec Properties’ president and CEO, who will not be joining the combined management team, commented on the trend that is driving more publicly traded firms into the arms of private investors. Despite successfully repositioning the company's portfolio and substantially strengthening its balance sheet, Callahan noted, "Even though Trizec has made great strides and has delivered one of the best total returns to stockholders for office REITs during the past three years, the company continues to be undervalued in the public markets. In recognizing the underlying value of the company’s office portfolio, and especially, its operating platform, the transaction announced today accomplishes Trizec’s ultimate objective as a public company, which is to maximize stockholder value. While I am especially pleased with the significant accomplishments this company has made over the years, my only regret is that once this transaction closes, I will not have the opportunity to be part of the organization as it continues to evolve."
The acquisition is expected to close in the third or fourth quarter of 2006 during which time Trizec and Trizec Canada will continue to pay quarterly dividends. Morgan Stanley and JPMorgan were financial advisers to Trizec Properties. Trizec properties also retained JPMorgan's fairness opinion services and Hogan & Hartson LLP for legal services. Trizec Canada utilized RBC Capital Markets as both financial advisor and fairness opinion provider. Davies Ward Phillips & Vineberg LLP was a legal advisor for Trizec Canada.
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