“Our active capital recycling strategy and same-property growth from our core businesses continue to generate meaningful earnings growth; we have delivered five consecutive quarters of year-over-year Company FFO per unit increases for our shareholders,” said Brian Kingston, chief executive officer. “As we approach the final months of the year we are well-positioned to achieve the majority of our strategic objectives for 2016.”
Financial Results
| Three months ended Sept. 30, |
Nine months ended Sept. 30, |
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| (US$ Millions, except per unit amounts) | 2016 | 2015 | 2016 | 2015 |
| Net income(1) | $1,616 | $435 | $2,625 | $2,609 |
| Company FFO(2) | $232 | $218 | $699 | $597 |
| Net income per LP unit(3) | $1.61 | $0.25 | $2.37 | $2.62 |
| Company FFO per unit(4) | $0.33 | $0.31 | $0.98 | $0.84 |
| (1) Condolidated basis – includes amounts attributable to non-controlling interests. | ||||
| (2) See "Basis of Presentation" and “Reconciliation of Non-IFRS Measures” in this press release for the definition. | ||||
| (3) Represents basic net income attributable to holders of LP units. IFRS requires the inclusion of preferred units that are mandatorily convertible into LP units at a price of
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| (4) Company FFO per unit is calculated based on 710.9 million units and 711.1 units outstanding for the three and nine months ended September 30, 2016 (2015 - 712.6 million and 712.7 million), respectively. See reconciliation of basic net income in the "Reconciliation of Non-IFRS Measures" section in this press release. | ||||
Net income for the quarter ended September 30, 2016 was
Company FFO was
Operating Highlights
Our core office operations generated Company FFO of
Occupancy in our core office portfolio finished the quarter at 91.4% on 2.4 million square feet of total leasing, bringing the year-to-date total to 5.3 million square feet. New leases were signed at average rents approximately 17% higher than expiring leases in the quarter. We also continued to advance our development pre-leasing with a 140,000-square-foot lease signed at Brookfield Place Calgary with the Bank of
Our core retail operations generated Company FFO of
Core same-property retail occupancy finished the third quarter of 2016 at 95.5%. Signed leases in the quarter totaled 11 million square feet, with average suite-to-suite rent spreads of 21% for leases commencing in 2016 and 2017. Tenant sales (excluding anchors) increased by 1.4% on a trailing 12-month basis to
Our opportunistic investments generated Company FFO of
| Three months ended Sept. 30, |
Nine months ended Sept. 30, | |||
| (US$ Millions) | 2016 | 2015 | 2016 | 2015 |
| Company FFO by segment | ||||
| Core Office | $149 | $163 | $448 | $452 |
| Core Retail | 108 | 109 | 327 | 321 |
| Opportunistic | 90 | 66 | 273 | 177 |
| Corporate | (115) | (120) | (349) | (353) |
| Company FFO(1) | $232 | $218 | $699 | $597 |
| Net income attributable to unitholders by segment | ||||
| Core Office | $141 | $112 | $495 | $1,966 |
| Core Retail | 9 | 162 | 413 | 334 |
| Opportunistic | 335 | 104 | 509 | 253 |
| Corporate | 770 | (185) | 438 | (501) |
| Net income attributable to unitholders(1),(2) | $1,255 | $193 | $1,855 | $2,052 |
| (1) See "Basis of Presentation" and "Reconciliation of Non-IFRS Measures" below in this press release for the definitions and components. | ||||
| (2) Unitholders refers to holders of general partner units and limited partner units of the Partnership, limited partner units of Brookfield Property L.P., and limited partner units of
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Strategic Initiatives
Dispositions
During the third quarter, in addition to those previously discussed, we advanced a number of our capital recycling initiatives through the sales of:
- 11 suburban multifamily assets in the
U.S. for approximately$534 million ($107 million at BPY’s share). - One Shelley Street in
Sydney forA$525M , generating net proceeds of approximately$250 million . - Three retail malls for
$170 million ($64 million at BPY’s share). - Interests in over 30 industrial assets and entitled land parcels representing gross values of approximately
$800 million ($240 million at BPY’s share).
In addition to these closed transactions, we also advanced further asset sales through entering into contracts to sell:
- Our 50% ownership in 324 Queen Street in
Brisbane for approximatelyA$66 million . - The Moor Place office building in the
City of London for £271 million, generating net proceeds of approximately$170 million .
New Investments
The proceeds raised from asset sales were used to invest in our active development pipeline and to fund new acquisitions, including:
- 3 Spring Street in
Sydney forA$74 million . - An 87% interest in Studio Plaza – a multifamily development site in
Silver Spring, MD , for$23 million .
- In our opportunistic investing strategy:
- The Hotel Nine Zero, a 190-key hotel in downtown
Boston , for$102 million ($27 million at BPY’s share). - The second tranche of assets in an office portfolio in suburban
Maryland for$129 million ($32 million at BPY’s share). - Maple Tree Place, a 500,000-square-foot retail and office complex in
Williston, VT , for$90 million ($23 million at BPY’s share). - And, subsequent to quarter-end, The Shops at Somerset Square, a 115,000-square-foot lifestyle shopping center in
Glastonbury, CT for$42 million ($21 million at BPY’s share).
- The Hotel Nine Zero, a 190-key hotel in downtown
Balance Sheet Update
To increase our balance sheet flexibility by increasing liquidity and extending the maturity of our debt, we executed on the following during the quarter:
- Refinanced an office tower in
Los Angeles with a senior and mezzanine note totaling$450 million , both with a 5-year term and bearing interest at a blended fixed average of 4.35%, a decrease of 75 basis points from the previous maturing loan which was repaid. - Refinanced three Australian office assets for
A$340M for a 4-year term at a floating rate of BBSY + 1.90%. - Refinanced 102 self-storage properties with a senior note and two mezzanine notes totaling
$750 million ($195 million at BPY’s share) with 5-year terms and bearing interest at a blended average of 4.7%.
Unit Repurchase Program
Utilizing the in-place Normal Course Issuer Bid, the Partnership purchased 469,143 of its Limited Partnership units in the third quarter of 2016 at an average price of
Distribution Declaration
Our Board of Directors has declared the quarterly distribution of
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 Partnership’s SEDAR profile at www.sedar.com.
The Partnership’s quarterly Letter to Unitholders and Supplemental Information Package can be accessed before the market open on November 2, 2016 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 Partnership’s 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
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