All dollar references are in
We saw consistent improvement in our operations over the course of the third quarter and, while there may be temporary setbacks as different regions reach different stages of recovery, we are confident that the worst of the economic shutdown is now behind us, said Brian Kingston, Chief Executive Officer. "Our staff has done an amazing job preparing our buildings for safe re-opening and each day it is gratifying to see more office workers, retailers, customers and visitors returning to our properties around the globe."
Financial Results
Company FFO (CFFO) was
Net income for the quarter ended September 30, 2020 was a loss of
| Three months ended Sep. 30, | Nine months ended Sep. 30, | ||||
| (US$ Millions, except per unit amounts) | 2020 | 2019 | 2020 | 2019 | |
| Net income(1) | $(135) | $870 | $(2,020) | $1,606 | |
| Company FFO and realized gains(2) | $164 | $324 | $665 | $1,053 | |
| Company FFO(2) | $161 | $324 | $648 | $966 | |
| Net income per LP unit(3)(4) | $(0.24) | $0.46 | $(1.98) | $0.90 | |
| Company FFO and realized gains per unit(4)(5) | $0.16 | $0.34 | $0.68 | $1.09 | |
| (1) | Consolidated basis includes amounts attributable to non-controlling interests. |
| (2) | See "Basis of Presentation" and Reconciliation of Non-IFRS Measures in this press release for the definition and components. |
| (3) | Represents basic net income attributable to holders of LP units. IFRS requires the inclusion of preferred shares that are mandatorily convertible into LP units at a price of
|
| (4) | Net income attributable to holders of LP units and Company FFO and realized gains per unit are reduced by preferred dividends of
|
| (5) | Company FFO and realized gains per unit are calculated based on 933.5 million (2019 950.1 million) and 937.5 million (2019 957.6 million) units outstanding for the three and nine months ended September 30, 2020, respectively. |
Operating Highlights
Our Core Office business generated CFFO of
Core Office leasing activity in the third quarter totaled 644,000 square feet, which were completed at rents 13% higher on average than expiring leases in the period. Occupancy in the portfolio decreased 160 basis points to 90.7%, with a remaining weighted average lease term of 8.3 years.
Our Core Retail business generated CFFO of
Our Core Retail operations leased approximately 6.5 million square feet over the past 12 months with comparable rent spreads of 5%. Our properties were 93.4% leased at September 30, 2020, a decrease of 1.6% from the prior year. On a year-over-year basis, in-place rents were up 1.4%1.
Our LP Investments generated CFFO and realized gains of
______________________________
1 In-place rents reflect retail tenants <10K square feet
| Three months ended Sep. 30, | Nine months ended Sep. 30, | |||
| (US$ Millions) | 2020 | 2019 | 2020 | 2019 |
| Company FFO and realized gains: | ||||
| Core Office | $141 | $150 | $402 | $477 |
| Core Retail | $97 | $201 | $432 | $555 |
| LP Investments | $26 | $74 | $94 | $326 |
| Corporate | $(100) | $(101) | $(263) | $(305) |
| Company FFO and realized gains(1) | $164 | $324 | $665 | $1,053 |
| (1) | See "Basis of Presentation" and "Reconciliation of Non-IFRS Measures" below in this press release for the definitions and components. |
Dispositions
In the third quarter, we completed
Subsequent to quarter-end, we entered into sales contracts on two transactions at higher values than our IFRS carrying values. Completion of these shortly will generate approximately
- One London Wall Place in
London for 480 million ($620 million ), representing a 3.8% cap rate. We acquired the remaining half of this property from our joint venture partner in November of last year and are selling the entire property now at a strong return.
- Simply Self Storage portfolio for
$1.225 billion .
New Investments
- We reorganized our investment in the Atlantis which resulted in our ownership increasing from 33% to 41.5%. With the assistance of the Bahamian government, we have established a COVID-19 bubble at the Atlantis which will allow us to once again welcome visitors to the resort on or after December 15, 2020. We have procured rapid testing facilities which will be located on-site and will test all of our employees, and guests will be tested prior to boarding their flights. The Atlantis Bubble will follow the Cleveland Clinic protocols, allowing our guests to enjoy all of the resorts beach, water park, casino and other entertainment options. We plan to start flying planes to the resort beginning December 15 from east coast locations, including
New York ,Toronto and Montreal.
Balance Sheet Update
To increase liquidity and extend the maturity of our debt, during the third quarter we executed the following financing transactions:
- Refinanced One Manhattan West in
New York for$1.8 billion for a seven-year term at a fixed-rate, weighted-average coupon of 2.94%. Net proceeds of$138 million were generated for BPY. - Refinanced EY Plaza in
Los Angeles for$305 million with a five-year term at a floating interest rate of LIBOR +3.25%. Net proceeds of$19 million were generated for BPY. - Refinanced 22 Front Street in
Toronto forC$52.5 million ($39.4 million ) with a five-year term at a floating rate of Canadian Dollar Offered Rate (CDOR) +2.5%. Net proceeds ofC$38 million ($29 million ) were generated for BPY and the cost of debt reduced by over 300 bps. - Extended debt maturity at Brookfield Place Calgary East for a further two years at a floating rate of approximately LIBOR +3%.
- Extended mortgage maturities on five Core Retail assets totaling approximately
$1.2 billion at a blended interest rate of 3.74%. - Issued
C$500 million in 5-year medium term notes at a fixed interest rate of 3.93%. Proceeds are being used to fund recently completed and future green initiatives. - Subsequent to quarter-end, refinanced Oakbrook Center in
Chicago for$475 million with a two-year (three years fully extended) term at a floating interest rate of LIBOR +3.50%.
Ended the quarter with
Unit Repurchases
On September 2, 2020, through a substantial issuer bid ("SIB"), we purchased 35.5 million of BPY's limited partnership units from the public for a price of
Utilizing our in-place normal course issuer bid (NCIB), we purchased 9,949,466 of BPY units in the third quarter of 2020 at an average price of
Board of Directors Update
The Board of Directors of BPY is pleased to announce the appointment of a new director, Michael Warren. Mr. Warren is the Global Managing Director of Albright Stonebridge Group, a premier strategic advisory firm advising senior executives on their mission-critical business priorities across the globe. He serves on the boards of Commonfund, Walker and
Concurrent with Mr. Warren's appointment, the Board also announced the resignation of director Scott Cutler, who will be joining the board of affiliate company Brookfield Renewable Partners (NYSE, TSX: BEP). Mr. Cutler has been an integral member of the BPY board since February 2019 and we thank him for his various contributions and dedication and wish him well in his new role at BEP.
Distribution Declaration
The Board of Directors has declared a quarterly distribution on the partnerships LP units of
The quarterly distributions on the LP units are declared in
The Board of Directors has also declared quarterly distributions on the partnerships Class A Series 1, Series 2 and Series 3 preferred units 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 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 November 6, 2020 at 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 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)
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