Upward momentum seems to be building for Brookfield Office Properties Inc (USA) (NYSE:BPO), which set a new 52-week high of $19.19 on May 14. In recent weeks, the company gave clear indications that it is further gearing up to partake in the potential rewards from the blooming prospects of the commercial real estate sector.
In an announcement this early June, the company said it has closed on up to $1 billion on commitments for financing two of the four office towers at its Lower Manhattan, NYC, property, the Brookfield Office Properties Inc (USA) (NYSE:BPO) Place. A bank consortium, whose members include Deutsche Bank, Royal Bank of Canada, Citibank, Bank of America and Wells Fargo, has committed an initial $800-million loan, with a provision for an additional $200 million.
Lower Manhattan’s kingpin
Brookfield Office Properties Inc (USA) (NYSE:BPO) has a total of six Lower Manhattan properties with a combined total of 13 million square feet, making it the biggest landlord in the New York area. Besides the Brookfield Office Properties Inc (USA) (NYSE:BPO) Place, which was a revamp of the former World Financial Center complex, the company likewise owns and manages One New York Plaza and One Liberty Plaza.
In May, it was also reported that Brookfield Office Properties Inc (USA) (NYSE:BPO) paired with mall owner General Growth Properties in bidding for 650 Madison Avenue, a 27-story office and retail building in one of the upscale shopping and office districts of Manhattan. The duo of New York-based Crown Acquisitions and Highgate, however, won the bid at $1.29 billion.
Larger domain looms in LA
While Brookfield Office Properties Inc (USA) (NYSE:BPO) missed this chance to reassert its dominance in the New York commercial real estate space, it seems well en route toward further broadening its footprint in Los Angeles. This June 14, the company, through DTLA Holdings, its direct, wholly owned subsidiary, commenced a cash tender offer to purchase all outstanding shares of preferred stock of Mpg Office Trust Inc (NYSE:MPG) at $25.00 per share.
This tender offer is pursuant to a merger agreement Brookfield and Mpg Office Trust Inc (NYSE:MPG) signed this April. Once the deal is consummated, DTLA Holdings, wherein Brookfield has 47% controlling interest, will own Wells Fargo Tower and three other MPG properties in LA, as well as the Bank of America Plaza and two other LA properties of Brookfield.
The pact likewise covers DTLA Holdings’ purchase of Mpg Office Trust Inc (NYSE:MPG)’s common stock, for which $3.15 per share was offered, a 21% premium to the closing price at the day prior to the announcement of the agreement. This price offer is also a 64% premium to the Mpg Office Trust Inc (NYSE:MPG)’s common stock closing price on the day that the company’s board approved engaging financial advisers for assistance in a potential strategic transaction.
Last bus for MPG Office
Mpg Office Trust Inc (NYSE:MPG) has been seeking such a deal since last year, but the result was paltry. The Blackstone Group L.P. (NYSE:BX) appeared to be casing the joint last July with its reported purchase of about 1.3 million Mpg Office Trust Inc (NYSE:MPG) common stock. However, The Blackstone Group L.P. (NYSE:BX) as it turned out is more inclined toward buyouts of distressed residential properties, for which its Invitation Homes unit has spent $4.5 billion in the purchase of 25,000 foreclosed single family homes since May last year. An IPO is now reportedly being considered for Invitation Homes.
Some MPG Office shareholders have expressed dissent over Brookfield’s bid as being too low. However, the LA landlord seems to be caught between a rock and a hard place. MPG Office has to have a buyer by this June, per one analysis, as some of the company’s major financial obligations are maturing, and even the recent divestment of some its assets hasn’t eased its precarious position and bankruptcy may be a possibility.
Final take: A mere shift does the trick?
Simplistic as it may sound as a final take, what the dissenting MPG Office shareholders can perhaps do is bite the offer and just shift positions to Brookfield Office. Like most value investors, they’d likely find the company’s current 8 P/E ratio quite attractive. The company’s recent financials indicate smooth sailing as well. In its most recent quarter, Brookfield Office exceeded analysts’ estimates as it posted funds from operations of $189 million or $0.33 per share, an improvement from the FFO of $154 million or $0.27 per share a year earlier.
The article A New York Landlord Is Stepping Up the Pace originally appeared on Fool.com.
Arturo Cuevas has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Arturo is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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