Brookfield Office Properties Inc, a major commercial real estate firm is set to acquire MPG Office Trust, another commercial property developer for around $180 million. The acquisition comes as Brookfield looks to expand its already growing business to the Los Angeles region.
According to Businessweek, Brookfield has offered $3.15 for each share of MPG. It will also begin a tender of $25 per share for each of MPG's preferred shares. Including debts, the deal is valued at 42.2 billion. Apparently, Brookfield is forming a separate fund, DTLA Holdings that will control and own MPG's assets after the acquisition and also look after the assets of Brookfield in Los Angeles. The purchase will make Brookfield the largest office property owners in Los Angeles.
MPG has been struggling with its debts for a long time now. Just before the housing crisis hit in 2007, MPG had invested in a lot of assets through loans and mortgages that it has still not been able to pay off. It has debts worth $1.9 billion as of December 31.
To cover the costs and rescue itself from complete bankruptcy, the trust has decided to go forward with the acquisition plan, reports Wall Street Journal.
"Following a lengthy and exhaustive search, we have found a strategic buyer who has the capital and the market presence to appreciate the potential long-term value of our assets," David Weinstein, chief executive of MPG, said to the Los Angeles Times.
However, the acquisition plan comes as a little surprise to some analysts as they thought that MPG would stand independent and keep selling off its assets to save business. Recently, MPG sold off the U.S. Bank tower in downtown Los Angeles to Overseas Union Enterprise Ltd. (OUE) for $367.5 million. MPG decided to sell as the mortgage loan taken to build the tower now stands at a massive $260 million and is set to mature by July 2013.
Now with Brookfield taking over all its debts and assets, MPG is liquidating. Brookfield's shares were up 1.95 percent on Thursday, April 25.
Commercial developers are hoping that demand for office spaces will grow in the coming few months, especially in Los Angeles. Demand in the LA market is driven by financial companies and tech firms. Brookfield hopes to make the most of the purchase.
