Brookfield Properties Corp., owner of the World Financial Center in Lower Manhattan, and buyout firm Blackstone Group agreed to acquire Trizec Properties Inc. for $4.8 billion plus the assumption of $4.1 billion in debt, the second-largest takeover of a real estate investment trust.
Trizec, whose chairman is Canadian real estate mogul Peter Munk, would almost triple Toronto-based Brookfield's U.S. properties, especially in New York, Washington and Los Angeles, where Trizec has at least 15 properties. Half of Brookfield's 48-million-square-foot portfolio is in Canada.
The deal was announced one month after Trizec completed its acquisition of $1.6 billion in Southern California assets as part of a deal in which General Electric Co. bought Los Angeles-based Arden Realty Inc. and spun off some of the best assets to Trizec.
Brookfield "purposely bought Trizec because they liked the Arden properties," said analyst Craig Silvers of Bricks & Mortar Capital. "It's a good deal for Brookfield."
Trizec's Los Angeles buildings include Bank of America Plaza, Figueroa at Wilshire and Ernst & Young Plaza in downtown Los Angeles. Among Trizec's office properties on the Westside are World Savings Center in Brentwood and Westwood Center in Westwood.
The deal underscores investor interest in L.A. real estate and perhaps paves the way for private Santa Monica-based office landlord Douglas Emmett to go public soon. Real estate industry observers expect Douglas Emmett, which owns 11.5 million square feet on the Westside and in the San Fernando Valley, to announce an initial public offering by the end of the month.
Even though Trizec's shares have outperformed most other office REITs in the last year, "the company continues to be undervalued in the public markets," Tim Callahan, the Chicago-based company's chief executive, said Monday in a statement.
Takeovers of commercial U.S. REITs are increasing as investors bet companies will add office and warehouse space as the economy expands. REIT acquisitions have soared 87% to $52.3 billion this year from the same period in 2005, according to data compiled by Bloomberg.
A joint venture formed by Brookfield and Blackstone, both based in New York, would pay $29.01 a share for Chicago-based Trizec and $30.97 for its Canadian subsidiary. That's 18% more than Trizec's closing price Friday and 30% more for Trizec Canada.
The transaction is the second-biggest among REITs after General Growth Properties Inc.'s purchase of Rouse Cos. for $11.3 billion, including assumption of debt, in 2004, according to Bloomberg data.
Trizec manages 61 office complexes with 40 million square feet. The company had $4.7 billion in assets in 2005, according to its website. Trizec Canada owns 38% of Trizec Properties.
Shares of Brookfield rose 19 cents to $31.17, and Trizec shares jumped $4.08, or 17%, to $28.68, the highest since the REIT began trading in April 2002. Trizec Canada shares rose 7.36 Canadian dollars, or 28%, to 33.55 Canadian dollars in Toronto.