We continue to execute our business strategy in an environment of active capital markets and healthy operating activity, said Brian Kingston, chief executive officer. The resilience, diversification and growth in our cash flows have been demonstrated by seven consecutive quarters of year-over-year per-unit Company FFO growth, during which time we have also increased our distribution payout by more than 10%.
Financial Results
| Three months ended March 31, | |||||
| (US$ Millions, except per unit amounts) | 2017 | 2016 | |||
| Net income(1) | $ | 187 | $ | 440 | |
| Company FFO(2) | $ | 237 | $ | 217 | |
| Net income per LP unit(3) | $ | (0.21 | ) | $ | 0.32 |
| Company FFO per unit(4) | $ | 0.34 | $ | 0.31 | |
(1) Consolidated basis includes amounts attributable to non-controlling interests.
(2) See "Basis of Presentation" and Reconciliation of Non-IFRS Measures in this press release for the definition.
(3) Represents basic net income attributable to holders of LP units. IFRS requires the inclusion of preferred units that are mandatorily convertible into LP units at a price of
(4) Company FFO per unit is calculated based on 706.9 million and 711.2 million units outstanding for the three months ended March 31, 2017 and 2016, respectively. See reconciliation of basic net income in the "Reconciliation of Non-IFRS Measures" section in this press release.
Net income for the quarter ended March 31, 2017 was
Company FFO was
Operating Highlights
Our core office operations generated Company FFO of
Occupancy in our core office portfolio finished the quarter at 91.5% on 2.1 million square feet of total leasing. New leases were signed at average rents approximately 25% higher than expiring leases in the quarter. We also continued to advance our development pre-leasing with an agreement with Freshfields at 100 Bishopsgate in
Our core retail operations generated Company FFO of
Core same-property retail occupancy finished the first quarter of 2017 at 94.7%, with average suite-to-suite rent spreads of 20% for leases commencing in the trailing 12 months. Tenant sales (excluding anchors) increased by 0.9% on a trailing 12-month basis to
Our opportunistic investments generated Company FFO of
| Three months ended March 31, | ||||||
| (US$ Millions) | 2017 | 2016 | ||||
| Company FFO by segment | ||||||
| Core Office | $ | 156 | $ | 149 | ||
| Core Retail | 110 | 111 | ||||
| Opportunistic | 83 | 73 | ||||
| Corporate | (112 | ) | (116 | ) | ||
| Company FFO(1) | $ | 237 | $ | 217 | ||
(1) See "Basis of Presentation" and "Reconciliation of Non-IFRS Measures" below in this press release for the definitions and components.
Strategic Initiatives
Dispositions
During the first quarter, we advanced a number of our capital recycling initiatives:
- Entered into a contract to sell our 51% interest in 245 Park Avenue in a transaction that values the building at
$2.2 billion , resulting in net proceeds of over$650 million . - Completed the sale of 50% of our Principal Place office building in
London for 346 million, resulting in net proceeds of 243 million. - Sold five
U.S. suburban multifamily assets for approximately$168 million ($48 million at BPYs share). - Sold The Shoppes at Gateway for
$108 million ($54 million at BPYs share). - Sold two
U.S. industrial properties for$74 million ($22 million at BPYs share). - Sold an opportunistic office building in
California for$36 million ($11 million at BPYs share).
New Investments
The proceeds raised from asset sales were used to invest in our active development pipeline and to fund new acquisitions, including:
- A portfolio of 135 manufactured housing communities in the
U.S. for a total of$2.2 billion ($565 million at BPYs share). - An 8.7-million-square-foot portfolio of office and industrial assets in the
U.S. for$870 million ($128 million at BPYs share). - Subsequent to quarter-end, a 13-property student housing portfolio in the
U.K. for 298 million (76 million at BPYs share). - An office building at One Post Street in
San Francisco for$245 million ($80 million at BPYs share). $135 million ($34 million at BPYs share) in convertible preferred units in Hospitality Investors Trust, a hospitality company that owns 141 select-service hotels in theU.S. - The Alexander, a 276-unit multifamily asset in
Alexandria, VA for$70 million ($13 million at BPYs share). - 13 self-storage properties in the
U.S. for$57 million ($14 million at BPYs share). - A 50% interest in the net lease of 1100 Avenue of the
Americas inNew York .
In addition, subsequent to quarter-end, we advanced initiatives to fully integrate our core office operations and simplify our structure by:
- Entering into a definitive agreement with Brookfield Canada Office Properties (BOX) pursuant to which BPY would acquire the approximately 17% equity interest in BOX that we do not own for
C$32.50 cash per unit. - Entering into a definitive agreement to acquire the remaining 19.5% public float of Brookfield Prime Property Fund that BPY does not own, for a price of
A$8.815 /unit.
Both transactions are subject to unitholder approval.
Balance Sheet Update
We also executed on the following transactions to increase our balance sheet flexibility by increasing liquidity and extending the maturity of our debt:
- Refinanced 200 Liberty Street in
New York City for$550 million for a 10-year term at a fixed rate of 4.5%. - Subsequent to quarter-end, refinanced Wells Fargo North tower in
Los Angeles for$470 million at a blended floating rate of L+3.06% for a two-year period plus three one-year extension options. - Refinanced 28 U.S. industrial assets for
$475 million , resulting in net proceeds of$159 million ($48 million at BPYs share), for a four-year term at a floating rate of L+1.95%. - Refinanced a 13-property
U.K. student housing portfolio for 280 million for an average six-year term at a blended fixed rate of 3.85%. - Issued perpetual preferred shares for a total of
C$275 million with proceeds used to redeem our on-demand Class AAA Preference Shares Series K and a portion of the Series J. - Subsequent to quarter-end, issued perpetual preferred shares for a total of
C$275 million with proceeds to be used to redeem our on-demand Class AAA Preference Shares Series G and remaining Series J.
Unit Repurchase Program
Utilizing the in-place Normal Course Issuer Bid, the Partnership purchased 4,417,150 of its Limited Partnership units in the first quarter of 2017 at an average price of
Distribution Declaration
The Board of Directors has declared the quarterly distribution of
The quarterly distributions are declared in
Additional Information
Further details regarding the operations of the Partnership are set forth in regulatory filings. A copy of the filings may be obtained through the website of the SEC at www.sec.gov and on the Partnerships SEDAR profile at www.sedar.com.
The Partnerships quarterly letter to unitholders and supplemental information package can be accessed before the market open on May 5, 2017 at http://bpy.brookfield.com. This additional information should be read in conjunction with this press release.
Basis of Presentation
This press release and accompanying financial information make reference to net operating income (NOI), same-property NOI, funds from operations (FFO), Company FFO (Company FFO) and net income attributable to unitholders.
Company FFO and net income attributable to unitholders are also presented on a per unit basis. NOI, same-property NOI, FFO, Company FFO and net income attributable to unitholders do not have any standardized meaning prescribed by International Financial Reporting Standards (IFRS) and therefore may not be comparable to similar measures presented by other companies. The Partnership uses NOI, same-property NOI, FFO, Company FFO and net income attributable to unitholders to assess its operating results. These measures should not be used as alternatives to Net Income and other operating measures determined in accordance with IFRS but rather to provide supplemental insights into performance. Further, these measures do not represent liquidity measures or cash flow from operations and are not intended to be representative of the funds available for distribution to unitholders either in aggregate or on a per unit basis, where presented.
NOI is defined as revenues from commercial and hospitality operations of consolidated properties less direct commercial property and hospitality expenses. As NOI includes the revenues and expenses directly associated with owning and operating commercial property and hospitality assets, it provides a measure to evaluate the performance of the property operations.
Same-property NOI is a subset of NOI, which excludes NOI that is earned from assets acquired, disposed of or developed during the periods presented, or not of a recurring nature, and from opportunistic assets. Same-property NOI allows the Partnership to segregate the performance of leasing and operating initiatives on the portfolio from the impact to performance from investing activities and one-time items, which for the historical periods presented consist primarily of lease termination income.
FFO is defined as income, including equity accounted income, before realized gains (losses) from the sale of investment property (except gains (losses) related to properties developed for sale), fair value gains (losses) (including equity accounted fair value gains (losses)), depreciation and amortization of real estate assets, income tax expense (benefit), and less non-controlling interests of others in operating subsidiaries and properties. FFO is a widely recognized measure that is frequently used by securities analysts, investors and other interested parties in the evaluation of real estate entities, particularly those that own and operate income producing properties. The Partnerships definition of FFO includes all of the adjustments that are outlined in the National Association of Real Estate Investment Trusts (NAREIT) definition of FFO. In addition to the adjustments prescribed by NAREIT, the Partnership also makes adjustments to exclude any unrealized fair value gains (or losses) that arise as a result of reporting under IFRS, and income taxes that arise as certain of its subsidiaries are structured as corporations as opposed to real estate investment trusts (REITs). These additional adjustments result in an FFO measure that is similar to that which would result if our partnership was organized as a REIT that determined net income in accordance with generally accepted accounting principles in
Company FFO is defined as FFO before the impact of depreciation and amortization of non-real estate assets, transaction costs, gains (losses) associated with non-investment properties, imputed interest and the FFO that would have been attributable to unitholders shares of GGP Inc. (GGP), if all outstanding warrants of GGP were exercised on a cash-less basis. The Partnership believes this adjustment appropriately reflects its full economic interest in GGP based on the common shares and warrants owned by the Partnership, as such warrants are currently exercisable. The adjustment also includes dilution adjustments to undiluted FFO as a result of the net settled warrants. Company FFO, similar to FFO discussed above, provides a performance measure that reflects the impact on operations of trends in occupancy rates, rental rates, operating costs and interest costs. In addition, the adjustments to Company FFO relative to FFO allow the Partnership insight into these trends for the real estate operations, by adjusting for non-real estate components.
Net income attributable to unitholders is defined as net income attributable to holders of general partnership units and limited partnership units of the Partnership, redeemable/exchangeable and special limited partnership units of Brookfield Property L.P. and limited partnership units of
Brookfield Property Partners
Brookfield Property Partners is one of the worlds largest commercial real estate companies, with approximately
Brookfield Property Partners is the flagship listed real estate company of Brookfield Asset Management, a leading global alternative asset manager with approximately
Please note that BPYs previous audited annual and unaudited quarterly reports have been filed on EDGAR and SEDAR and can also be found at http://bpy.brookfield.com. Hard copies of the annual and quarterly reports can be obtained free of charge upon request.
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