Brookfield Property Partners L.P. BPY

RBC

[retiredcf]

Agree that this is good news for BPY.UN as most investors chose to hang onto their shares. Their $24 target is obviously in US$. GLTA

March 27, 2019

Brookfield Property Partners L.P.

Substantial Issuer Bid results: Sellers are scarce

Event:

Sector: Real estate, REITS & Hospitalities

Top Pick

NASDAQ: BPY; TSX: BPY.UN Price: USD 20.04
All values in USD unless otherwise noted.

Due to a low tender, BPY's SIB will repurchase $393MM of common equity, less than the $500MM offer to investors.

Sellers are scarce...

Late yesterday, BPY announced the results from its Substantial Issuer Bid ("SIB") which was conducted by way of Dutch Auction. By way of background, the offer was for $500MM of equity within a range of $19.00- $21.00 per unit or share. The offer was split between a $405MM offer for LP units (“BPY”) and a $95MM offer for Class “A” shares of Brookfield Property REIT (“BPR”).

As announced late last night:

1. BPY expects to accept for purchase 4,679,802 of its BPR shares at a purchase price of $20.30/share for an aggregate repurchase of $95MM; and

2. it expects to take up and purchase for cancellation 14,178,607 BPY LP unts at a purchase price of $21.00/unit for an aggregate repurchase of $298MM. The latter implies that insufficient LP units were tendered to allow for the full take-up of the $405MM offer. Thus, the take-up price is at the very top end of the range.

We find the latter specifically to be an interesting outcome in so far as:

1. through the offer period, BPY's units were trading for the most part, at or below the mid-point of the offer range;

2. BPY's units are very liquid; and

3. the structure of the offer was one that we believe was essentially free of "tax friction" for most BPY unitholders.

Valuation... (but Mr. Market is hesitant to "pay-up"?)

At the $21 take-up price, BPY's units trade at a sizable 28% discount to our $29 NAVPU and they offer a 6.3% cash yield. At last night's $20 closing price on the NASDAQ exchange, the units trade at a 31% discount to our NAVPU and offer a 6.6% cash yield.

We reiterate our Top Pick rating and $24 price target on BPY's units