THE BR properties (BRPR3) is about to fill up after selling around 80% of its portfolio to Brookfield. While waiting for the transaction to be finalized — and for payment to arrive — the company already knows what it will do with the money.

The priority will be to amortize all debt issues, transforming the net debt position into a net cash position. But the company calculates that, without relevant new investments in the short term, the capital
social will become excessive. In practice, the cashier will be too fat.

Given the scenario, the BR Properties Board of Directors decided that the best thing to do was to return part of this amount to shareholders through a capital reduction of 1.125 billion reais without cancellation of shares. .

According to a material fact made public on Tuesday (6), the real estate company will convene an ordinary general meeting, scheduled for July 28, so that investors can deliberate on the proposed operation.

The company estimates that it will pay the equivalent of R$2.423298 per share, given just over 464.2 million shares (not including those held in cash), to shareholders.

If the proposal is approved, BR Properties will inform the procedure adopted for the subsequent redemption, as well as the exact amount, the date of payment and the moment when the shares will start trading “ex-redemption”.

There is one condition

It should be noted that the operation will only be possible if the transfer of part of the portfolio to the Canadian fund is approved by the Administrative Council for Economic Defense (Cade) and concluded.

Brookfield will pay around 5.9 billion reais for 12 of the company’s commercial properties in São Paulo, Rio de Janeiro and Brasilia, including JK Iguatemi’s Tower B, the most famous of them.

Under the terms of the negotiation, the company will receive 70% of the total sum upon closing of the acquisition of each of the properties. The remaining 30% will be paid 12 months after this date.

outgoing arabs given BR properties (BRPR3)

In addition to representing a significant step in the current Brazilian macroeconomic scenario, the transaction marks the departure of a large part of the capital of the Abu Dhabi sovereign wealth fund (ADIA) from the company.

ADIA invested in the asset six years ago through GP Capital Partners VI – which owns 60% of the company – but had already shown signs that it intended to sell its portfolio in the country.

According to information from Brazil Journal, the Arab fund has canceled positions in nearly 30 B3 companies and terminated the operations of the analysis team dedicated to Latin America.

Before receiving Brookfield’s proposal, the managers considered two options: take BR Properties private or sell the assets separately.

The first alternative was discarded as it would require the injection of capital into the business. The second would require a lot of negotiating effort and could result in offers only for the main assets in the portfolio.

Importantly, during the first quarter, the company’s shares operated at a 41% discount to net asset value (NAV). That is to say, the quotations were well below the intrinsic value of the company.

The transaction with the Canadian fund therefore came at the right time to buy out a large part of the portfolio all at once.