CALGARY, CANADA-Brookfield Properties Corp., based in New York City, is unloading its residential land and housing division into Fairfax, VA-based Brookfield Homes Corp, to create Brookfield Residential Properties Inc. The new firm, will have $2.5 billion in assets and an equity value of $1 billion.
According to a spokesperson the new firm will be headquartered in Calgary, and is seeking to list on both the Toronto and New York stock exchanges. This merger has been in negotiation for some time, as Brookfield Properties Corp. moves to focus more on office properties.
Alan Norris, who will be president and CEO of the new firm, says the new company will be the sixth largest residential platform in the United States and Canada. “Going forward we plan to focus on our residential platform for North America. Roughly one-third of it is in Alberta, one-third in California and the rest in various locations through North America. We have great diversification and cash flows from different spots, and new opportunities as well.”
Norris says the new company might consider additional acquisitions if the opportunities present themselves. “That is one of the advantages of our new capital base--we have more flexibility to consider such things.”
The Board of Directors of Brookfield Homes had formed a special committee to evaluate the merger. According to a spokesperson, the benefits included a stronger capital structure, which will better position the company to both withstand adverse business, financial and economic developments and take advantage of business opportunities. The company will also convert all of its 8% convertible preferred shares into common stock.
Brookfield Office Properties contributed its division to the new firm in exchange for promissory notes with an aggregate principal amount of nearly $480 million. The deal also includes 51.5 million Brookfield Residential common shares valued at $515 million, representing about 50.7% of the new firm, as converted common shares to be outstanding immediately after the closing date. After the close, these shares will be available to common shareholders at $10 per share. When complete, Brookfield Asset Management is expected to hold between 66% and 91% of the Brookfield Residential common shares on a fully-diluted basis.
Erika Morphy contributed to this story.
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