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Notice to Holders of the 6.125% Senior Notes Due 2022, 6.125% Senior Notes Due 2023 and 6.375% Senior Notes Due 2025 of Brookfield Residential Properties Inc.

August 12, 2019

Brookfield Residential Properties Inc. (“BRPI”) is commencing today a solicitation of consents from holders of its outstanding 6.125% Senior Notes due 2022 (the “2022 Notes”), 6.125% Senior Notes due 2023 (the “2023 Notes”) and 6.375% Senior Notes due 2025 (the “2025 Notes” and, together with the 2022 Notes and the 2023 Notes, the “Notes”) to approve amendments (the “Proposed Amendments”) to the indentures relating to each series of Notes (the “Indentures”). 

The Proposed Amendments would permit BRPI and its subsidiaries to undertake a proposed reorganization transaction.  The proposed reorganization would facilitate operational and administrative synergies by combining all of the direct U.S. investments of our parent Brookfield Asset Management Inc. (“BAM”) into one corporate group.  

Pursuant to the Reorganization Transaction, BRPI would contribute the capital stock of our U.S. holding company Brookfield Residential US Corporation (“BRUSC”) to a subsidiary of BAM, Brookfield U.S. Inc. (“BUSI”), and receive a minority economic interest in the capital stock of BUSI.  BUSI owns BAM’s U.S. asset management business (fee-related earnings) and BAM’s U.S. direct investments in managed listed entities and private funds.

BUSI would  in turn contribute the capital stock of BRUSC it receives from BRPI to a newly-formed limited liability company (“New LLC”) in exchange for an approximately 90% economic interest in New LLC.  A wholly-owned subsidiary of BRPI (“New GP”) would be the managing member of, and hold a 10% economic interest in, New LLC.  A subsidiary of BUSI would contribute the capital stock of two subsidiaries, which own and operate land assets in Phoenix and the Pacific Northwest as part of the Homebuilder Finance platform, to New LLC in exchange for a small economic interest in New LLC. 

The terms of the Proposed Amendments include:

  • The Reorganization Transaction and certain related agreements would be permitted;
  • BRUSC would upon consummation of the Reorganization Transaction become a co-issuer of the 2023 Notes and the 2025 Notes (and remain a co-issuer of the 2022 Notes);
  • BRPI would provide to Holders consolidating actual or pro forma financial information for BRPI and its Restricted Subsidiaries together with its quarterly and annual consolidated financial statements, which following the Reorganization Transaction would reflect its investment in BUSI and BUSI’s ownership interest in New LLC;
  • The financial definitions ofConsolidated Net Income and Consolidated Tangible Net Worth in the Indentures would exclude the impact ofBUSI’s ownership interest in New LLC; and
  • Payments made by New LLC to BUSI as dividends or to repurchase capital stock would be subject to the covenant on Restricted Payments in the Indentures, subject to certain exceptions.

BRUSC would remain a Restricted Subsidiary (as defined in the Indentures), and New GP, New LLC and Land Banking would become Restricted Subsidiaries, of BRPI upon consummation of the Reorganization Transaction.  BRUSC is currently a co-issuer of the 2022 Notes and a guarantor of the 2023 and 2025 Notes.  Upon consummation of the Reorganization Transaction, it would remain a co-issuer of the 2022 Notes and become a co-issuer of the 2023 and 2025 Notes. 

Only holders of record of a series of Notes as of 5:00 p.m., New York City time, on August  12, 2019 (the “Record Date”), are eligible to deliver consents to the Proposed Amendments for such series in the consent solicitation.  The consent solicitation will expire at 5:00 PM on September 6, 2019. 

The consent solicitation will be made solely on the terms and subject to the conditions set forth in the Consent Solicitation Statement, to be provided to the holders of the Notes.  BRPI may, in its sole discretion, terminate, extend or amend the consent solicitation at any time as described in the Consent Solicitation Statement.

This notice is for information purposes only and is neither an offer to sell nor a solicitation of an offer to buy any security. This notice is also not a solicitation of consents with respect to the Proposed Amendments or any securities. No recommendation is being made as to whether holders of Notes should consent to the Proposed Amendments. The solicitation of consents is not being made in any jurisdiction in which, or to or from any person to or from whom, it is unlawful to make such solicitation under applicable law.

Certain information included or incorporated in this press release or the Consent Solicitation Statement may constitute forward-looking statements and information within the meaning of applicable securities laws.

These forward-looking statements reflect the current beliefs of BRPI’s management and are based on assumptions and information currently available to the management of BRPI.  In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “expect,” “plan,” “anticipate,” “believe,” “intend,” “estimate,” “predict,” “forecast,” “outlook,” “potential,” “continue,” “should,” “likely,” “project,” “future” or the negative of these terms or other comparable terminology. 

You should not place undue reliance on forward-looking statements and information because they involve assumptions, known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of BRPI to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements and information.