Brookfield Asset Management (BAM-A-T) has increased its offer by about 10 per cent and now says it has an agreement with the management of Brookfield Property Partners LP (BPY-UN-T) to take its subsidiary private.

The new offer of $18.17 per unit (all figures US unless otherwise stated) would mean a payout of about $6.5 billion for the shares not already controlled by Brookfield Asset Management (BAM). It currently owns about 60 per cent of the outstanding shares.

The offer also factors in the appreciation in BPP’s class-A shares since Jan. 4, when the initial offer was tabled. It is a 26 per cent premium to the BPY unit price on Dec. 31, 2020, and a six per cent premium to the volume-weighted average price of BPY units on the Nasdaq since the announcement.

BAM’s original offer was valued at about $5.9 billion. BPY shares were down slightly Wednesday on the TSX, closing at CAD$22.35.

Brookfield Property Partners has a market cap of about $16.5 billion.

The firm’s independent directors have voted unanimously to approve the transaction. Its minority unitholders will also be asked to vote on the deal.

Options for unitholders

“We are pleased to have reached agreement with BPY’s independent directors on a transaction we believe is appealing to BPY unitholders in many aspects and allows for greater optionality in how we manage our portfolio of high-quality real estate assets,” said Nick Goodman, CFO of Brookfield Asset Management, in the announcement Friday morning.

“Not only can unitholders choose to receive a meaningful portion of their consideration in cash at a significant premium, but they will also have the option to remain invested in the future upside of our real estate business and alternative asset management franchise.”

For each of their BPY units, holders can elect to receive $18.17 in cash, 0.3979 of a Brookfield class-A share or 0.7268 of a BPY preferred unit, subject to pro-ration, for an aggregate consideration mix of approximately 50 per cent cash, 42 per cent Brookfield class-A shares and eight per cent BPY preferred units.

The transaction also remains subject to regulatory and legal approvals, including the Ontario Superior Court of Justice. If all approvals are received, BAM expects the transaction to close during Q3 2021.

Lazard Frères & Co. LLC, acting as independent valuator and financial adviser to the special committee established by BPY to review the offer, estimated the fair market value of a BPY unit was in the range of $14.00 to $18.50. This implied a total enterprise value of $67.6 to $72.1 billion for BPY’s assets.

Brookfield Property Partners owns or holds interests in some of the world’s most recognizable commercial real estate properties, including developments such as Canary Wharf in London and its Brookfield Place office and retail complex across from the World Trade Center site in New York City.

About Brookfield Asset Management and BPY

Toronto-based Brookfield Asset Management Inc. is a leading global alternative asset manager with US$600 billion of assets under management across real estate, infrastructure, renewable power, private equity and credit.

Brookfield offers a range of alternative investment products to investors around the world — including public and private pension plans, endowments and foundations, sovereign wealth funds, financial institutions, insurance companies and private wealth investors.

Brookfield Property Partners is a diversified global real estate company that owns, operates and develops one of the largest portfolios of office, retail, multifamily, industrial, hospitality, triple net lease, student housing and manufactured housing assets.

Its investment objective is to generate long-term returns on equity of 12 to 15 per cent based on stable cash flows, asset appreciation and annual distribution growth in-line with earnings growth.

BPY seeks to acquire high-quality assets in resilient, dynamic markets and pursue diversification across both geographic areas and real estate sectors. BPY’s portfolio features some of the world’s best-known commercial properties.