Brookfield Property Partners Reports First Quarter 2021 Results

BROOKFIELD NEWS, May 07, 2021 (GLOBE NEWSWIRE) -- Brookfield Property Partners L.P. (NASDAQ: BPY; NASDAQ: BPYU; TSX: BPY.UN) (BPY or the "Partnership") today announced financial results for the quarter ended March 31, 2021 .

While we continue to experience challenges in certain of our operations and markets due to the ongoing consequences of the pandemic and global economic slowdown, we remain encouraged by a recovery in activity in select sectors within our business, said Brian Kingston, CEO of Brookfield Property Partners .

Financial Results

Net income for the quarter ended March 31, 2021 was $731million or $0.25 per LP unit compared to a loss of $373million or $(0.49) per LP unit for the same period in 2020. This quarter benefited from gains in our office portfolio and LP investments.

Company FFO (CFFO) was $125 million for the quarter ended March 31, 2021 , compared to $309 million in the prior-year period. The prior year period benefited from higher transaction income, and CFFO was largely impacted this quarter by residual effects of the economic slowdown on our retail and hospitality operations.

Operating Highlights

Our Core Office business generated CFFO of $140 million for the quarter ended March 31, 2021 compared to $135 million in the same period in 2020. Results this quarter benefited from incremental condominium sales income and lower interest expense, offset in part by lower parking revenue and portfolio occupancy.

Core Office leasing activity in the first quarter totaled 894,000 square feet, which were completed at rents significantly higher than expiring leases in the period. Occupancy in the portfolio decreased 120 basis points to 88.8%, with a remaining weighted average lease term of 8.6 years.

Our Core Retail business generated CFFO of $108 million for the quarter ended March 31, 2021 compared to $195 million in the comparable period in 2020. The prior year period benefited from $30 million in transaction income from the sale of investment positions, and results this quarter were impacted most notably by lower occupancy.

Our Core Retail operations leased approximately 5.9 million square feet over the past 12 months with initial rents that were consistent with expiring rents. Our properties were 91.5% leased at March 31, 2021 , a decrease of 100 basis points from the prior period. On a year-over-year basis, in-place rents were up 2.5%¹.

Our LP Investments generated CFFO and realized gains of $188 million for the quarter ended March 31, 2021 , compared to earnings of $76 million in the comparable period in 2020. Results this quarter benefited from realized gains from the sale of mature and stable assets, as well as the disposition of a non-property investment position. CFFO was negatively impacted from continued pressure on our hospitality assets due to the global economic slowdown.

(1) See "Basis of Presentation" and "Reconciliation of Non-IFRS Measures" below in this press release for the definitions and components.

Dispositions

In the first quarter, we completed $1.1 billion of gross asset dispositions at our share, at prices that were in aggregate significantly higher than our IFRS carrying values. These sales generated approximately $244 million in net proceeds to BPY.

Dispositions completed in the first quarter include:

• Sold 50% interest in Bay Adelaide North office tower in Toronto for $581 million , generating net proceeds of $133 million to BPY.
• Monetized a portion of our Indian office portfolio via a Mumbai -listed IPO, resulting in a realized gain of $69 million to BPY.
• Sold interest in retailer Forever 21, resulting in a realized gain of $63 million to BPY.
• Completed the sale of our Northeast U.S. life sciences office portfolio at a gross sales price of $3.4 billion , generating approximately $100 million in net proceeds to BPY.

Balance Sheet Update

To increase liquidity and extend the maturity of our debt, during the first quarter we executed the following financing transactions:

• Refinanced ICD Brookfield Place office tower in Dubai for $626 million for a 7.5-year term at an interest rate of EIBOR +3.50%, generating net proceeds of $66 million to BPY.
• Refinanced One and Three Allen Center in Houston for $470 million for a 5-year term at an interest rate of LIBOR +2.97%.
• Refinanced Gas Company Tower in Los Angeles for $465 million for a 5-year term at an interest rate of LIBOR +3.07%.
• Refinanced Kenwood Towne Centre in Cincinnati, Ohio for $210 million for a 3-year term at an interest rate of LIBOR +3.40%.
• Subsequent to quarter-end, extended maturity on a $1.1 billion , 15-property Core Retail mortgage loan for an additional three-year term at an interest rate of LIBOR +3.25%.

Ended the quarter with $5.3 billion of group-wide liquidity, including $1.5 billion of cash on hand, $2.1 billion of corporate and subsidiary credit facilities and $1.7 billion of undrawn construction facilities.

Privatization Agreement from Brookfield Asset Management

On April 1, 2021 , Brookfield Asset Management ("BAM") and BPY announced an agreement for BAM to acquire 100% of the limited partnership units of BPY for a price for each unit of $18.17 in cash, 0.3979 of a BAM Class A Shares or 0.7268 of a BPY preferred unit, subject to pro-ration (or approximately $6.5 billion payable to the unitholders of BPY other than BAM and its affiliates). Assuming the acquisition is approved by BPY's minority unitholders and the other approvals and conditions are obtained and satisfied, we expect the transaction to close in the third quarter.

Distribution Update

Pursuant to the terms of the agreement governing the proposed transaction with BAM, holders of BPY units will not receive further quarterly distributions.

The distribution reinvestment plan (the DRIP) of BPY will be terminated effective May 7, 2021 . Each participant will receive a DRS statement for all BPY units held under the DRIP and a cash payment for any fractional unit based upon the closing price of the BPY units (in U.S. dollars) on the Nasdaq Stock Market on May 6, 2021 . Participants seeking further information with respect to their entitlements under the DRIP may contact the plan agent under the DRIP, AST Trust Company (Canada) . Participants who hold BPY units through a broker, investment dealer, financial institution or other intermediary should contact such intermediary for further information.

The Board of Directors has declared quarterly distributions on the partnerships Class A Series 1, Series 2 and Series 3 preferred units of $0.40625 per unit, $0.39844 per unit and $0.35938 , respectively, payable on June 30, 2021 to holders of record at the close of business on June 1, 2021 .

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¹ In-place rents reflect retail tenants <10K square feet.

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. 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 and realized gains (Company FFO and realized gains) and net income attributable to unitholders.

Company FFO and realized gains, and net income attributable to unitholders are also presented on a per unit basis. NOI, same-property NOI, FFO, Company FFO and realized gains, 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 realized gains, 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 the Partnership was organized as a REIT that determined net income in accordance with generally accepted accounting principles in the United States (U.S. GAAP), which is the type of organization on which the NAREIT definition is premised. The Partnerships FFO measure will differ from other organizations applying the NAREIT definition to the extent of certain differences between the IFRS and U.S. GAAP reporting frameworks, principally related to the recognition of lease termination income. FFO provides a performance measure that, when compared year-over-year, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and interest costs.

Company FFO and realized gains 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 on equity accounted investments, realized gains in the Partnerships LP Investment segment and the Partnerships share of BSREP III. Realized LP Investment gains represent income earned on investing activity when fund investments are realized, inclusive of associated change in carried interest to be due at a future date to the general partner of the relevant Brookfield Asset Management-sponsored funds. The Partnership accounts for the investment in BSREP III as a financial asset and income (loss) of the fund is not presented in the Partnerships results. Distributions from BSREP III, recorded as dividend income under IFRS, are removed from investment and other income for Company FFO and realized gains presentation.

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. , limited partnership units of Brookfield Office Properties Exchange LP and Class A shares of Brookfield Property REIT Inc. Net income attributable to unitholders is used by the Partnership to evaluate the performance of the Partnership as a whole as each of the unitholders participates in the economics of the Partnership. In calculating net income attributable to unitholders per unit, the Partnership excludes the impact of mandatorily convertible preferred units in determining the average number of units outstanding as the holders of mandatorily convertible preferred units do not participate in current earnings. The Partnership reconciles this measure to basic net income attributable to unitholders per unit determined in accordance with IFRS which includes the effect of mandatorily convertible preferred units in the basic average number of units outstanding.

About Brookfield Property Partners

Brookfield Property Partners , through Brookfield Property Partners L.P. and its subsidiary Brookfield Property REIT Inc. , is one of the worlds prem