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Try and follow this….

This is on the heals of todays earnings…

My comments in bold

Brookfield Properties Corp. (BPO, BPO.T) will pay principal shareholder Brookfield Asset Management Inc. (BAM) A$1.6 billion (US$1.4 billion) for an interest in 16 Australian office properties as the company announced plans to get out of the residential real-estate business.

BAM owns 51% of BPO

The company will be renamed Brookfield Office Properties as it will hold just office properties.

Currently of all the REIT’s, office properties are showing the fastest rebound

Meanwhile, Brookfield Properties said it swung to a second-quarter profit amid higher revenue as its funds from operations–a key profit measure for real-estate investment trusts–rose, helped by an investment gain. Chief Executive Ric Clark said the company saw “noticeable improvement in leasing activity,” especially in the New York and Washington markets.

REITs struggled mightily during the recession, and many haven’t recovered. Brookfield owns and operates office properties, which were some of the hardest hit as unemployment remains high.

BPO has well below market vacancy rates in every market it operates in (see page 29 of presentation below)

Brookfield will fund the Australian deal–which includes properties in Melbourne, Perth and Sydney–with available liquidity of $1.3 billion and a $750 million loan bridge loan from Brookfield Asset. Meanwhile, Brookfield Properties said it may sell its stake in Brookfield Office Properties Canada (BOX.UN.T).

Brookfield Properties also said it will discuss with Brookfield Homes Corp. (BHS) about combining its residential assets with Brookfield Homes, 82% owned by Brookfield Asset.

This is a no event as we have said before that we feel they will reduce this stake to 51% (along the same lines as BAM’s 51% ownership in BPO) and was the very reason for its IPO of BOX.

>BPO Australian Transaction (click to open .pdf)

Looking down the road, these are the type of deals we can expect our little GGO to be involved in. Advantageous strategic deals with friendly financing terms. Whether it be selling assets or adding assets to its base, GGO is going to now have a global reach with the implied balance sheet of an organization with billions of liquidity. BAM/BPO and their various affiliates will be able to tap existing relationships for GGO to grow its business. Will it happen right away? No. Baby steps. GGO has to begin to complete projects and reinvigorate ones that have been neglected the past two years while the Chapter 11 process played out.

I simply state this to counter those who have thrown GGO onto the scrap heap already. Does anyone really think BAM will invest near half a billion in GGO and simply toss it away? Do they? Do we think Ackman has no interest in its success? Me either.

With the obvious stated (their desire to see it succeed) we then need to look at the “how will they make it succeed”. I think watching how BAM/BPO do business and how they create value for shareholders gives us a blueprint. It is a good one….