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Acquisition will gather blocks of skyscrapers

A Toronto commercial real estate company will purchase Trizec for $4.8-billion.

By ASSOCIATED PRESS
Published June 6, 2006

CHICAGO - Brookfield Properties Corp. said Monday it will acquire Trizec Properties and its Canadian arm for $4.8-billion in a commercial real estate deal creating one of North America's largest landlords.

Investment firm the Blackstone Group joined Brookfield in the purchase, which is expected to close in the third or fourth quarter. In addition to what is being paid for Trizec shares, Brookfield will assume $4.1-billion in Trizec debt.

The deal came with the U.S. office market strengthening even as residential real estate loses some of its sizzle.

Brookfield, based in Toronto, has 67 office buildings totaling 48-million square feet in downtown New York City, Boston and Washington, D.C., and cities in Canada. Trizec of Chicago is nearly as large, with 61 office properties totaling 40-million square feet in seven U.S. markets. Trizec used to own an office tower in downtown West Palm Beach, but sold the Esperante complex in 2003. The company's nearest property to the Tampa Bay area is in Atlanta.

Under the agreement, Brookfield will buy all outstanding shares of Trizec not owned by Trizec Canada for $29.01 per share in cash, an 18 percent premium over the stock's closing price this past Friday.

Brookfield will acquire all outstanding voting shares and multiple voting shares of Trizec Canada for $30.97 in cash, a 30 percent premium over the closing price of Trizec Canada's subordinate voting shares price on Friday.

Trizec Canada shareholders may be given the option to receive part of the payment in preferred shares of Brookfield properties. Holders of common units of Trizec Holdings Operating LLC, a Trizec subsidiary, will receive $29.01 per share in cash or can receive a common or preferred unit in the surviving limited liability company subsidiary.

The boards of Trizec, which was founded by Canadian multimillionaire Peter Munk, chairman of the world's largest gold producer, and Trizec's Canadian arm each approved the agreement.

Tim Callahan, president and CEO of Trizec Properties, said the deal was made because the company, while successful, continued to be undervalued by stock markets.

"In recognizing the underlying value of the company's office portfolio, and especially its operating platform, the transaction announced today accomplishes Trizec's ultimate objective as a public company, which is to maximize stockholder value," he said.

The purchase will give Brookfield a bigger property portfolio in Manhattan, where its holdings include the World Financial Center. Trizec's top buildings include the Grace Building and One New York Plaza in Manhattan, the Victor Building and 1200 K Street NW in Washington and Bank of America Plaza and Figueroa at Wilshire in Los Angeles.

Banc of America Securities analyst John Kim said he initially thought the purchase price was too high but concluded that the company's direct contribution in the joint venture will be $450-million, which it can fund with cash and a line of credit. "We believe Brookfield's acquisition fits well strategically," he said.

Times staff writer James Thorner contributed to this report.

[Last modified June 6, 2006, 05:47:26]