Merrill Lynch Takeover Will Impact Brookfield's NAV

Bank of America's (BAC) acquisition of Merrill Lynch (MER), will have a negative impact on Brookfield Properties Corp. (BPO) net asset value, according to Blackmont Capital analyst Gail Mifsud.

She maintained her "buy" rating and lowered her price target on Brookfield from C$23 to C$20 after running two scenarios to gauge the impact of the takeover on Brookfield's NAV.

In the first scenario, Merrill Lynch terminates 100% of the 3.35 million square feet in 2013 would reduce Brookfield's net operating income by $130-million. In the second scenario, Brookfield's direct exposure to Merrill stands at 1.6 million square feet, resulting in a hit of C$62-million. 

In a note to clients, Ms. Mifsud said:

This negatively impacts NAV by C$2.60 to C$5.50/share.  Our NAV prior to this announcement stood at C$23.28.

Ms Mifsud, whose revised target of C$20 is a reasonable mid-point in these two analyses, given that MER leases expire in 2013, said the uncertainty cast by the Merrill deal combined with turmoil in the financial services industry will hurt Brookfield's stock price and present as buying opportunity.