Shares of Brookfield Property Partners ( BPY ) rose nearly 19% out of the gate on Jan. 4. The real estate investment trust (REIT) structured shares of the same entity, known as Brookfield Property REIT ( BPYU ), jumped about 15%. Both moves were directly related to an announcement from Canada's Brookfield Asset Management ( BAM -1.37% ), which effectively runs both the partnership and the REIT.
Brookfield Asset Management has offered to take Brookfield Property private, buying the shares it doesn't already own for total consideration of $5.9 billion. Unitholders can elect to receive a combination of Brookfield Asset Management stock (0.4 shares), cash, or preferred shares. The total per-share value of the deal is $16.50.
Brookfield Property Partners units fell roughly 20% in 2020, thanks to heavy concentrations in the mall and office sectors (combined around 85% of rents). Both have been hit hard by the coronavirus pandemic, so the price decline last year makes total sense. That said, Brookfield Asset Management has a long history of opportunistically investing in out-of-favor sectors and sticking with its acquisitions until things improve. With Brookfield Property Partners off by so much in 2020, it's likely that Brookfield Asset Management is looking to remove the complication of dealing with public markets while it waits for a turnaround or, perhaps, it is trying to buy assets it views as cheap. It wouldn't be shocking if it was a combination of these two factors, either.
It's obviously early in the acquisition process and the relationship between Brookfield Property and Brookfield Asset Management increases the complexity here. That said, it would be hard to suggest that investors sitting on a big loss in 2020 shouldn't be at least somewhat welcoming of the offer. On the other hand, after today's price gain, there's probably not much additional upside in Brookfield Property, but some notable downside if the deal falls through. That's worth keeping in mind as you consider Brookfield Asset Management's proposal.