This article is from the Australian Property Journal archive
THE independent board of Brookfield Prime Property Fund have unanimously recommended investors vote in favour of Brookfield Group’s takeover proposal.
Brookfield made a cash bid of $8.815 per unit to buy the remaining BPA units it does not own in April this year.
Chairman Allan McDonald said the independent directors noted the proposal provides superior value compared to other identified alternatives.
“If the proposal is not accepted by unitholders, the fund will continue its strategy which is focused on enhancing the performance of the portfolio through asset management initiatives. It should be noted that the fund is unlikely to have the capacity to increase the unit distribution rate further in the short to medium term because of the fund’s capital expenditure requirements, which we estimate to be in excess of $60 million over the next three years.
“Unitholders will continue to face limited liquidity because of Brookfield’s 80.47% holding in the fund – making it likely that the units will continue to trade at a significant discount to NAV,”
McDonald said the independent directors have considered a sale of properties and winding up the fund.
“On a wind up scenario, it is estimated that the net realisable value per unit is $8.66 (after fees and wind up costs) which is less than the cash consideration of $8.815 per unit of the proposal.
“It is worth noting that a wind up is not without risks. There is no certainty that the current value of the properties would be realised upon a wind up. The net sale prices realised from disposals may be less than the properties’ independent property valuations,”
“The prospect of a premium above valuation may be limited in particular for those assets 680 George Street, 50 Goulburn Street and 108 St Georges Terrace where co-owners carry existing pre-emption or first rights of refusal at valuation. This may limit the properties’ disposal values due to the valuation cap on sale price, the possible reduction in competitive tension and an increase in time required to dispose of the assets,” the chairman warned.
“In any event, Brookfield as 80% unitholder has indicated it would not currently support a wind-up,” McDonald added.
BPA currently owns a 50% interest in 680 George St and 50 Goulburn St in Sydney, American Express House at 12 Shelley St Sydney and a 50% stake in 108 St Georges Terrace Perth.
The portfolio is valued at $707.0 million with an occupancy rate of 91% and WALE by ownership and income was 4.7 years.
The most expensive asset in the portfolio is 680 George St and 50 Goulburn St Sydney, valued at $363 million followed by American Express House at $178 million and $166 million for the Perth office.
Australian Property Journal
