Brookfield Asset Management (NYSE:BAM) is looking to acquire the approximately 40% of Brookfield Property Partners (NASDAQ:BPY) it doesn't already own in a deal valued at around $5.9 billion.

Brookfield Asset Management is offering $16.50 per share in cash for the real estate investment trust (REIT) and plans to take it private. Unitholders, though, could also elect to redeem each of their shares for 0.40 of Brookfield Asset's Class A shares or 0.66 of Brookfield Property's preferred units that have a liquidation preference of $25 per unit. The cash value represents a 15% premium to Brookfield Property's closing price on Friday.

Empty shopping mall

Brookfield Property Partners' ownership of shopping malls has caused it to struggle. Image source: Getty Images.

In an interview with Bloomberg, Brookfield Asset Management CFO Nick Goodman said the market had continuously undervalued the underlying assets in the REIT's portfolio.

In a statement announcing the proffer, Goodman said, "The privatization will allow us to have greater flexibility in operating the portfolio and realizing the intrinsic value of [Brookfield Property's] high-quality assets."

The REIT has a diversified portfolio of properties spanning several industries, including office, retail, multifamily, industrial, hospitality, self-storage, and more. While such diversification typically would be seen as downside protection from any single class pulling down the overall performance, the COVID-19 pandemic has hurt large swaths of real estate across the board.

In particular, its exposure to shopping malls has caused it to struggle, leading it to partner with Simon Property Group (NYSE:SPG) to bail out retail tenants that declared bankruptcy. By acquiring the businesses, it kept them from liquidating and closing their stores, which could have created a domino effect leading to other storefronts to shut down.

Brookfield Property Partners has formed a committee of independent directors to study the buyout proposal and determine a unit valuation. Shares of the REIT were soaring almost 17% heading into midday trading on Monday.

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