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Filed
pursuant to Rule 425 under the Securities Act of 1933, as
amended
Filed
by: Brookfield Properties Corporation
Subject
Company: Brookfield Homes Corporation
Exchange
Act File Number of Subject Company: 001-31524
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NEWS
RELEASE
BROOKFIELD
HOMES AND BROOKFIELD OFFICE PROPERTIES’ RESIDENTIAL UNIT TO COMBINE TO CREATE A
LEADING NORTH AMERICAN LAND AND HOUSING COMPANY
(All
figures are in U.S. dollars unless otherwise indicated)
NEW YORK and FAIRFAX, VIRGINIA, October 5, 2010 – Brookfield Properties
Corporation (BPO: NYSE, TSX) (“Brookfield Office Properties”) and Brookfield
Homes Corporation (BHS: NYSE) (“Brookfield Homes”) today announced that they
have entered into a definitive agreement to combine Brookfield Homes and the
North American residential land and housing division of Brookfield Office
Properties (“BPO Residential”) into Brookfield Residential Properties Inc.
(“Brookfield Residential”). The transaction will create a diversified
North American residential land and housing company with $2.5 billion of assets
and an equity value of approximately $1 billion. An application will be made to
list the common shares of Brookfield Residential on the New York and Toronto
stock exchanges.
“Brookfield
Residential Properties will be the sixth largest residential platform in North
America, with the financial strength and geographic diversity needed to thrive
in the marketplace, both today and in the future,” said Alan Norris, who will be
President and Chief Executive Officer of Brookfield Residential. “The company
will put proven, best-in-class operating skills to work in some of the most
attractive regions in North America.”
“We are
pleased to be bringing a strong and diversified residential land and
housing company to existing and potential shareholders and at the same time
creating a world-class, pure-play global office property company at Brookfield
Office Properties,” added Ric Clark, President and Chief Executive Officer of
Brookfield Office Properties.
Merits
of the Transaction
The Board
of Directors of Brookfield Homes formed a special committee of independent
directors to consider and negotiate the proposed transaction. The special
committee determined that the transaction is advisable and fair to the public
stockholders of Brookfield Homes. In unanimously recommending the transaction to
the board of directors and stockholders of Brookfield Homes, the Brookfield
Homes special committee noted that the transaction is expected to realize the
following key benefits to Brookfield Homes:
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strategic
opportunity to further enhance value through the creation of a diversified
North American residential land and housing
company;
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greater
financial flexibility and expected benefits from the combined cash flows
of Brookfield Homes and BPO
Residential;
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Brookfield
Residential will have a stronger capital structure, which will better
position the company to both withstand adverse business, financial and
economic developments and take advantage of business
opportunities;
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stockholders
of Brookfield Homes, through ownership of Brookfield Residential, will
participate in Brookfield Residential’s growth and any value created by
operating synergies, greater financial flexibility and improvements in
residential industry fundamentals;
and
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conversion
of substantially all of the 8% convertible preferred shares of Brookfield
Homes into common stock.
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The Board
of Directors of Brookfield Office Properties formed an independent committee to
assess the terms of the proposed transaction. The committee received an opinion
as to fairness of the transaction from a financial point of view. The committee
determined that the transaction is reasonable and fair to, and in the best
interests of, Brookfield Office Properties and unanimously recommended that
the Board of Directors of Brookfield Office Properties approve the
transaction. The Board of Directors of Brookfield Office Properties
believes that the transaction will further Brookfield Office Properties’
strategic repositioning as a pure-play global office company. Further, the
transaction structure provides Brookfield Office Properties with the certainty
of completing the sale of its residential business and all of its shareholders
will have the opportunity, through the rights offering process described below,
to participate in the ownership of Brookfield Residential. The rights offering
will remain open for 30 days and the rights will be listed on both the NYSE and
TSX.
Summary
of the Transaction
The
following is a summary of the key components of the transaction:
The
Contribution and Merger
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Brookfield
Office Properties will contribute BPO Residential to Brookfield
Residential in exchange for:
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promissory
notes with an aggregate principal amount of C$480 million;
and
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51.5
million Brookfield Residential common shares valued at $515 million,
representing approximately 50.7% of the Brookfield Residential as
converted common shares to be outstanding immediately after the closing
date.
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Brookfield
Homes will merge with a newly formed subsidiary of Brookfield
Residential. On the merger, each outstanding share of
Brookfield Homes common stock will be converted into 0.764900530 common
shares of Brookfield Residential, plus a cash amount in lieu of fractional
shares.
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Immediately
prior to the closing date, Brookfield Asset Management Inc. (“Brookfield
Asset Management”) will convert its shares of 8% convertible preferred
stock of Brookfield Homes in accordance with their terms into 35.4 million
shares of common stock of Brookfield Homes, increasing Brookfield
Asset Management’s ownership of Brookfield Homes common stock from 62% to
82%.
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In
aggregate, the approximately 65.1 million shares of common stock of
Brookfield Homes expected to be outstanding immediately prior to the
closing date of the merger will be converted into approximately 49.8
million Brookfield Residential common shares, representing approximately
49.1% of the as converted Brookfield Residential common shares to be
outstanding immediately after the closing
date.
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The
above figures assume that only Brookfield Asset Management converts its
9.9 million shares of 8% convertible preferred stock of Brookfield Homes,
which represent 99% of Brookfield Homes’ outstanding shares of convertible
preferred stock.
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Each
share of 8% convertible preferred stock of Brookfield Homes that is not
converted into Brookfield Homes common stock prior to the closing date
will be exchanged into one share of 8% convertible preferred
stock of Brookfield Residential with substantially the same terms and
conditions in all material respects as are currently applicable but
convertible into an aggregate of approximately 0.2 million Brookfield
Residential common shares following closing to reflect the exchange ratio
referenced above, representing approximately 0.2% of the Brookfield
Residential as converted common shares to be outstanding immediately after
the closing date .
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Following
successful completion of the transaction, Brookfield Asset Management is
expected to hold between 66% and 91% of the Brookfield Residential common
shares on a fully-diluted basis, depending upon how many shares are
acquired by other Brookfield Office Properties shareholders or
their assignees pursuant to the rights offering discussed
below.
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Brookfield
Office Properties Offering of Brookfield Residential Properties Common
Shares
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Subsequent
to closing of the transaction, Brookfield Office Properties will
distribute rights to its common shareholders, entitling them to acquire,
at $10 per share, the Brookfield Residential common shares that
Brookfield Office Properties will receive in exchange for its contribution
of BPO Residential. The offering price reflects the value
attributed to the equity of BPO Residential under the transaction.
Brookfield Asset Management has agreed to exercise the rights it receives
and to acquire any shares of Brookfield Residential that are not otherwise
subscribed for in the rights offering at the same price per share as in
the rights offering, thereby ensuring that Brookfield Office Properties
receives $515 million in aggregate for its shares of Brookfield
Residential. In combination with the C$480 million total principal amount
of notes, Brookfield Office Properties will have sold BPO Residential for
aggregate proceeds of approximately $1.2 billion, including $217
million of expected distributions from BPO Residential to be made
prior to closing, of which $177 million has already been received. There
is no fee payable to Brookfield Asset Management for this standby
commitment.
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Information
concerning the rights offering will be sent to Brookfield Office
Properties shareholders in due
course.
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The
Promissory Notes
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The
promissory notes issued by Brookfield Residential to Brookfield Office
Properties will be unsecured obligations divided into two tranches, a
C$265 million senior note and a C$215 million junior subordinated
note.
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The
senior note will bear a fixed rate of interest of 6.5%, payable quarterly,
and will be payable in full on December 31, 2015 with C$50 million being
payable on account of principal on the last business day of each of 2012,
2013 and 2014, with the balance of C$115 million payable on
December 31, 2015. The C$215 million junior subordinated note
will bear a fixed rate of interest of 8.5% payable quarterly, and will be
payable in full on December 31,
2020.
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On
January 1, 2016 and each anniversary thereafter, or at any time upon the
occurrence of an event of default under the junior note or change of
control of Brookfield Residential, Brookfield Office Properties will be
entitled to sell the junior note to Brookfield Asset Management at par.
Brookfield Asset Management will have the right to acquire the junior note
at par at any time. In exchange for its “put” right, Brookfield
Office Properties will pay Brookfield Asset Management a maintenance fee
of 200 bps per annum on the amounts outstanding under the junior
note.
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Brookfield
Residential may prepay the notes in whole or in part, at any time prior to
maturity, without penalty, provided that prepayments will first be applied
to pay down the senior note.
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Management
of Brookfield Residential
Upon
completion of the transaction, Alan Norris will become the President and Chief
Executive Officer of Brookfield Residential; Ian Cockwell will be Executive Vice
Chairman and Craig Laurie will be Executive Vice President and Chief Financial
Officer.
Process
Completion
of the transaction is subject to regulatory approval in the United States and
Canada, the approval of the holders of a majority of the outstanding Brookfield
Homes’ common stock and other customary closing
conditions. Brookfield Asset Management owns sufficient shares to
approve the transaction and has agreed to vote in favor of the transaction at
the Brookfield Homes’ stockholders meeting. Closing is anticipated to occur in
January of 2011.
Wells
Fargo Securities, LLC acted as financial advisor to the special committee of
independent directors of Brookfield Homes. Dorsey & Whitney LLP and Kaye
Scholer LLP acted as legal advisors to Brookfield Homes and to the special
committee of independent directors of Brookfield Homes,
respectively. Morgan Stanley & Co. Incorporated acted as
financial advisor to the special committee of independent directors of
Brookfield Office Properties and provided a fairness opinion to the special
committee and the board of directors of Brookfield Office Properties, and Davies
Ward Phillips and Vineberg LLP acted as legal advisors to the special
committee of independent directors. Torys
LLP acted as legal advisors to Brookfield Office Properties. Goodmans
LLP acted as legal advisors to Brookfield Residential.
Prior to
the vote of the Brookfield Homes’ stockholders, the parties will file a
registration statement with the U.S. Securities and Exchange Commission, which
will include a proxy statement/prospectus and other relevant documents
concerning the proposed transaction. At that time, shareholders of
Brookfield Homes will be urged to read the proxy statement/prospectus and any
other relevant documents filed with the SEC because they will contain important
information relating to Brookfield Homes, BPO Residential and the proposed
transaction. The document can be obtained free of charge at the
website maintained by the SEC at www.sec.gov. In
addition, you may obtain documents filed with the SEC by Brookfield Homes,
including periodic reports and current reports, free of charge by requesting
them in writing from Brookfield Homes, 8500 Executive Park Avenue, Suite 300,
Fairfax, Virginia 22031, Attention: Linda T. Northwood, or by telephone at (858)
481-2567; e-mail: investorrelations@brookfieldhomes.com.
The
respective directors and executive officers of Brookfield Homes, Brookfield
Office Properties and Brookfield Residential and other persons may be deemed to
be participants in the solicitation of proxies in connection with the proposed
transaction. Information regarding Brookfield Homes’ directors and
executive officers is available in its proxy statement filed with the SEC on
February 26, 2010. Other information regarding the participants in
the proxy solicitation and a description of their direct and indirect interests,
by security holdings or otherwise, will be included in the proxy
statement/prospectus and other relevant materials to be filed with the SEC when
they become available.
Supplemental
Information Package
Investors,
analysts and other interested parties can access Brookfield Residential’s
Supplemental Information Package on Brookfield Homes’ website.
Investors,
analysts and other interested parties can access Brookfield Office Properties’
Supplemental Information Package on its website.
Brookfield Office
Properties Profile
Brookfield
Office Properties owns, develops and manages premier office properties in the
United States, Canada and Australia. Its portfolio is comprised of interests in
108 properties totaling 77 million square feet in the downtown cores of New
York, Washington, D.C., Houston, Los Angeles, Toronto, Calgary, Ottawa, Sydney,
Melbourne and Perth, making it the global leader in the ownership and management
of office assets. Landmark properties include the
World Financial Center in Manhattan, Brookfield Place in Toronto, Bank
of America Plaza in Los Angeles, Bankers Hall in Calgary, Darling Park in Sydney
and City Square in Perth. The company’s common shares trade on the NYSE and TSX
under the symbol BPO. For more information, visit www.brookfieldofficeproperties.com.
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Contact: Melissa
Coley, Vice President, Investor Relations and Communications
telephone:
(212) 417–7215; email: melissa.coley@brookfield.com
Brookfield
Homes Corporation Profile
Brookfield
Homes Corporation is a land developer and homebuilder. Brookfield Homes entitles
and develops land for its own communities and sell lots to third parties.
Brookfield Homes also designs, constructs and markets single-family and
multi-family homes primarily to move-up homebuyers. Brookfield Homes’ portfolio
includes over 26,000 lots owned and controlled in the Northern California;
Southland / Los Angeles; San Diego / Riverside; and Washington D.C. Area
markets.
Contact: Linda Northwood,
Director, Investor Relations
telephone:
858-481-2567; email: lnorthwood@brookfieldhomes.com
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This
news release shall not constitute an offer to sell or the solicitation of an
offer to buy any securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful. The securities referenced
herein have not been registered under the United States Securities Act of 1933,
as amended, or any state securities laws, and may not be offered or sold within
the United States absent registration or an applicable exemption from the
registration requirements of such Act or laws.
Note: Certain statements in this
press release that are not historical facts, including, without limitation,
information concerning the potential merger with BPO Residential and the
benefits thereof, and those statements preceded by, followed by, or that include
the words “believe”, “planned”, “anticipate”, “should”, “goals”, “expected”,
“potential,” “estimate,” “targeted,” “scheduled” or similar expressions,
constitute “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. Undue reliance should not be placed on
forward-looking statements because they involve known and unknown risks,
uncertainties and other factors, which may cause the actual results to differ
materially from the anticipated future results expressed or implied by such
forward-looking statements. There can be no assurance that the proposed
transaction will be consummated or that the anticipated benefits will be
realized. The proposed transaction is subject to various regulatory approvals
and the fulfillment of certain conditions, and there can be no assurance that
such approvals will be obtained and/or such conditions will be met. All
forward-looking statements in this press release are subject to a number of
rules and uncertainties. Factors that could cause actual results or events to
differ materially from those set forward in the forward-looking statements
include, but are not limited to: failure to obtain required regulatory and
shareholder approvals; failure to realize anticipated benefits of the merger;
changes in general economic, real estate and other conditions; mortgage rate
changes; availability of suitable undeveloped land at acceptable prices; adverse
legislation or regulation; ability to obtain necessary permits and approvals for
the development of land; availability of labor or materials or
increases in their costs; ability to develop and
market master-planned communities successfully; confidence levels of
consumers; ability to raise capital on favorable terms; adverse weather
conditions and natural disasters; relations with the residents
of communities; risks associated with increased insurance costs or
unavailability of adequate coverage and ability to obtain surety bonds;
competitive conditions in the homebuilding industry, including product and
pricing pressures; and additional risks and uncertainties referred to in
Brookfield Homes ’Form 10-K and other SEC filings and in Brookfield Office
Properties’ Annual Information Form under the heading “Business of Brookfield
Properties – Company and Real Estate Risks” and in its most recently filed
interim report under the heading “Management’s Discussion and Analysis”, many of
which are beyond their control. Other than as required by law,
Brookfield Homes undertakes no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or
otherwise.