Brookfield Bets on a Return to the Office

Firm Frustrated at “Differing Views”

Brookfield Asset Management’s (BPY) Chief Executive Bruce Flatt says the equity market has undervalued the firm’s real estate portfolio. Post-pandemic, Brookfield predicts that office workers, mall-shoppers, and other people will return to physical gathering places. The firm is working on a $5.9 billion agreement to delist its property arm.

Flatt said that while there are clearly “differing views” about the future of real estate securities, he is looking to places like Shanghai, Dubai, and Australia to predict how US businesses will respond as the pandemic subsides. In these areas, where there are fewer COVID-19 cases than there are in the United States, workers have started returning to the office. Flatt believes the same will be true stateside once the pandemic is less severe.

Real Estate Listings Struggle on the Market

Even before the coronavirus pandemic shut down office buildings and shopping malls, shares of Brookfield Property Partners had been falling since 2017. If Brookfield goes through with its delisting, it will exchange public shareholders for private investors who may be more committed to thinking about the company’s long term future.

Since the pandemic’s start, Brookfield has faced unique real estate challenges like tenants unable to pay rent. The firm has cut its staff, explored selling off property, and renegotiated a $6.4 billion corporate loan. Still, the firm expects its office and mall properties will bounce back, which will help it regain ground in the future.

Brookfield Aims for Restructuring

Brookfield said it will pay $16.50 per share for the rest of its property arm which it does not own. If this plan is successful, Brookfield expects to own about 90% of its business—up from the 60% that it owns currently.

The next step for Brookfield would be restructuring its portfolio. Delisting would allow the company to do this without as much scrutiny from public investors.

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