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Brookfield to Acquire London Assets

Zacks Equity Research

Brookfield Office Properties Inc. (BPO), a real estate investment trust (:REIT), has recently announced its decision to acquire a portfolio of premier office properties and a development site in London from Hammerson plc, a leading property development and investment company in the U.K. The purchase price of $829 million would be funded through the assumption of $106 million of debt, additional property-level debt, and from available cash resources.

The property portfolio set to be acquired by Brookfield comprises of four operating assets spanning 884,000 square feet at an initial yield of 6%. These include ‘125 Old Broad Street’ – a 328,000-square-foot class-A 26-story office tower that was completely redeveloped in 2008. Brookfield will own a 50% stake in this building, which is presently 98% leased to various tenants.    

The company would also buy ‘99 Bishopsgate’ – a 26-story building totaling 339,000 square feet of office space that was extensively redeveloped in 1995. The property (62% occupied) is located in close proximity to the Liverpool Street Station.

In addition, Brookfield would acquire ‘Leadenhall Court’ – a 109,000-square-foot office building fully leased to a single tenant; and other smaller assets such as ‘1 Puddle Dock’ and buildings on Shoreditch High Street.

Besides, the company has agreed to acquire ‘Principal Place’ development site, which could accommodate future construction of a 599,000-square-foot office tower, a 51-story 237,000-square-foot residential tower, and ancillary retail space. The property is strategically located between Liverpool Street and Shoreditch High Street rail stations and is likely to attract a strong tenant base.

Based in New York, Brookfield owns, develops and manages premier office properties in the U.S., Canada, and Australia. It also provides ancillary real estate service businesses, such as tenant service and amenities.

The company invests in high-growth and high barrier-to-entry markets that include New York, Washington D.C., Houston, Los Angeles, Denver, Seattle, Toronto, Calgary, Ottawa, Sydney, Melbourne, and Perth. Brookfield presently has ownership interests in 110 properties totaling 78 million square feet.

We presently have a Neutral recommendation for Brookfield, which currently has a Zacks #3 Rank, translating into a short-term Hold rating. We also have a Neutral recommendation and a Zacks #2 Rank (short-term Buy rating) for CoreSite Realty Corporation (COR), one of the competitors of Brookfield.

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