Brookfield Properties Corporation (BPO: NYSE, TSX) today announced that
net income for the year ended December 31, 2009 was $317 million or
$0.72 per diluted share, compared with $221 million on a comparative
basis with last year excluding a one-time gain of $479 million
associated with the conversion of the company’s U.S. properties held
outside the U.S. Fund to a REIT. In 2008, including this item, total net
income was $700 million or $1.77 per diluted share. Net income for the
three months ended December 31, 2009 totaled $181 million or $0.35 per
diluted share, compared to a loss of $21 million on a comparative basis
excluding the one-time tax gain. Including this item, total net income
was $458 million or $1.16 per diluted share during the same period in
2008.
Funds from operations ("FFO") for the year ended December 31, 2009 was
$648 million or $1.48 per diluted share, compared to $626 million or
$1.59 per share in 2008. FFO for the three months ended December 31,
2009 was $222 million or $0.43 per diluted share, compared with $191
million or $0.49 per diluted share during the same period in 2008.
Commercial property net operating income for the year was $1,322
million, compared to $1,308 million in 2008. Commercial property net
operating income for the fourth quarter of 2009 was $338 million,
compared with $317 million during the fourth quarter of 2008.
Residential operating income for the year was $114 million compared to
$144 million in 2008. The fourth quarter of 2009 generated $74 million
of residential income compared to $46 million in the fourth quarter of
2008, as the Canadian housing markets rebounded exceptionally well from
a slow early 2009.
The current quarter includes a one-time gain of $50 million on asset
sales and joint ventures in Washington, DC. In addition to the tax gain
referenced above, the prior period also included a net impairment loss
of $140 million taken on the company’s assets in Minneapolis.
During 2009, Brookfield Properties leased 4.6 million square feet of
space in its managed portfolio at an average net rent of $21 per square
foot, which represents a 24% improvement versus the average expiring net
rent of $17 per square foot. Additionally, the company has improved its
three-year lease rollover exposure by 330 basis points since the start
of the year. Brookfield’s managed portfolio occupancy rate finished the
year at 95.0%.
HIGHLIGHTS OF THE FOURTH QUARTER
Increased the corporate revolving credit facility to $438 million
from $413 million subsequent to the fourth quarter and from $388 million
since the beginning of the year. Brookfield Properties total liquidity
stands at $2 billion, representing cash and cash equivalents and
available credit.
Leased 1.4 million square feet of space in the company’s managed
portfolio. Renewals represent 55% of the total with new leases
representing the remainder. Fourth quarter leasing highlights include:
Washington, DC -- 437,000 square feet
--
A 10-year, 167,000-square-foot new lease with the Internal Revenue
Service at 77 K Street
--
A 15-year, 54,000-square-foot new lease with The Louis Berger Group at
1250 23rd St.
New York -- 325,000 square feet
--
A 15-month, 118,000-square-foot lease renewal with Merrill Lynch at
Newport Tower
--
A 10-year, 71,000-square-foot lease renewal and expansion with Arch
Insurance at One Liberty Plaza
Toronto -- 277,000 square feet
--
A 10-year, 74,000-square-foot renewal and expansion with CI
Investments at 2 Queen St. East
--
A 7-year, 43,000-square-foot renewal and expansion with Baker &
McKenzie at Bay Wellington Tower
Los Angeles -- 149,000 square feet
--
A 12-year, 121,000-square-foot lease renewal with Ernst & Young at
Ernst & Young Plaza
Minneapolis -- 77,000 square feet
--
A 7-year, 68,000-square-foot lease renewal with Fish and Richardson at
RBC Plaza
Generated $103 million in cash proceeds from two Washington, DC
assets. Edge Fund assumed a 90% interest in 1625 Eye St. for $203.4
million, or $587 per leasable square foot, with Brookfield maintaining a
10% interest and property management and leasing responsibilities.
Brookfield sold One Bethesda Center in Bethesda, Maryland for $71
million.
Refinanced First Canadian Place in Toronto with C$310 million,
five-year first mortgage bonds. The financing was completed at a fixed
rate of 5.367%. Proceeds from the financing were used to repay the
existing first mortgage bonds and will pay for costs associated with the
building’s repositioning program. In total, over $1 billion of
financings were completed in 2009.
Generated C$275 million of proceeds through issuance of preferred
shares, Class AAA Series N at C$25 per share, subsequent to the
fourth quarter. Due to strong investor demand, the issuance was upsized
from an initial C$150 million to C$275 million.
Achieved LEED Gold certification at Republic Plaza, Denver, 53 State
Street and 75 State Street, Boston through environmental initiatives
and upgrades including: exterior building site maintenance; water and
energy conservation; use of environmentally preferred products for
cleaning and alterations; waste stream management; and enhanced indoor
environmental quality. LEED (Leadership in Energy and Environmental
Design) is a third-party certification program and the nationally
accepted benchmark for the design, construction and operation of
high-performance green buildings.
GUIDANCE
Brookfield Properties announced that full-year 2010 diluted funds from
operations prior to lease termination income, special fees and gains is
in the range of $660 million to $700 million or $1.25 to $1.33 per share
with a mid-point of $675 million or $1.28 per share. The primary
assumptions used for the mid-point of this guidance range are:
--
portfolio-wide average rental rates consistent with 2009;
--
commercial net operating income growth on a same property basis of
approximately 1%;
--
similar margins on residential land sales and increased margins on
home sales as compared to 2009;
--
2010 sales of approximately 2,000 lots and 950 homes; and
--
an exchange rate that assumes $0.95 United States to $1.00 Canadian
and a LIBOR rate of 1.50%.
DIVIDEND DECLARATION
The Board of Directors of Brookfield Properties declared a quarterly
common share dividend of $0.14 per share payable on March 31, 2010 to
shareholders of record at the close of business on March 1, 2010.
Shareholders resident in the United States will receive payment in U.S.
dollars and shareholders resident in Canada will receive their dividends
in Canadian dollars at the exchange rate on the record date, unless they
elect otherwise. Common shareholders have the option to participate in
the company’s Dividend Reinvestment Program, in which all or a portion
of cash dividends can be automatically reinvested in common shares. The
quarterly dividends payable for the Class AAA Series F, G, H, I, J, K, L
and N preferred shares were also declared payable on March 31, 2010 to
shareholders of record at the close of business on March 15, 2010.
OUTLOOK
"Aided by a strategy anchored in a strong respect for the cyclical
nature of financial and real estate markets, 2009 was another solid year
for Brookfield Properties both financially and operationally," stated
Ric Clark, CEO of Brookfield Properties Corporation. "We are beginning
to see positive signs within the office industry, and given our
high-quality tenant base, our 95% occupancy rate and our low near-term
lease rollover exposure, we are well positioned to benefit as the
economic recovery takes hold."
Net Operating Income and FFO
This press release and accompanying financial information make reference
to net operating income and funds from operations on a total and per
share basis. Net operating income is defined as income from property
operations after operating expenses have been deducted, but prior to
deducting financing, administrative and income tax expenses. Brookfield
Properties defines FFO as net income prior to extraordinary items,
one-time transaction costs, income taxes, depreciation and amortization,
and certain other non-cash items. The company uses net operating income
and FFO to assess its operating results. Net operating income is
important in assessing operating performance and FFO is a relevant
measure to analyze real estate, as commercial properties generally
appreciate rather than depreciate. The company provides the components
of net operating income and a full reconciliation from net income to FFO
with the financial information accompanying this press release. The
company reconciles FFO to net income as opposed to cash flow from
operating activities as it believes net income is the most comparable
measure. Net operating income and FFO are both non-GAAP measures which
do not have any standard meaning prescribed by GAAP and therefore may
not be comparable to similar measures presented by other companies.
Forward-Looking Statements
This press release, particularly the "Guidance" and "Outlook" sections,
contain forward-looking statements and information within the meaning of
applicable securities legislation. Although Brookfield Properties
believes that the anticipated future results, performance or
achievements expressed or implied by the forward-looking statements and
information are based upon reasonable assumptions and expectations, the
reader 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 the company to differ materially from
anticipated future results, performance or achievement expressed or
implied by such forward-looking statements and information. Accordingly,
the company cannot give any assurance that its expectations will in fact
occur and cautions that actual results may differ materially from those
in the forward-looking statements. Factors that could cause actual
results to differ materially from those set forth in the forward-looking
statements and information include, but are not limited to, general
economic conditions; local real estate conditions, including the
development of properties in close proximity to the company’s
properties; timely leasing of newly-developed properties and re-leasing
of occupied square footage upon expiration; dependence on tenants’
financial condition; the uncertainties of real estate development and
acquisition activity; the ability to effectively integrate acquisitions;
interest rates; availability of equity and debt financing; the impact of
newly-adopted accounting principles on the company’s accounting policies
and on period-to-period comparisons of financial results, including
changes in accounting policies to be adopted under International
Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Board; and other risks and factors described from
time to time in the documents filed by the company with the securities
regulators in Canada and the United States, including in the Annual
Information Form under the heading "Business of Brookfield Properties --
Company and Real Estate Industry Risks," and in the company’s annual
report under the heading "Management’s Discussion and Analysis." The
company undertakes no obligation to publicly update or revise any
forward-looking statements or information, whether as a result of new
information, future events or otherwise, except as required by law.
Conference Call
Analysts, investors and other interested parties are invited to
participate in the company’s live conference call reviewing 2009 fourth
quarter and full-year results on Friday, February 5, 2010 at 11:00 a.m.
eastern time. Scheduled speakers are Ric Clark, Chief Executive Officer;
Steve Douglas, President; and Bryan Davis, Chief Financial Officer.
Management’s presentation will be followed by a question and answer
period.
To participate in the conference call, please dial 866.814.1921, pass
code 1424023 five minutes prior to the scheduled start of the call. Live
audio of the call will also be available via webcast at www.brookfieldproperties.com.
A replay of this call can be accessed through March 7, 2010 by dialing
888.266.2081, pass code 1424023. A replay of the webcast, as well as a
podcast download, will be available at www.brookfieldproperties.com
for one year.
Supplemental Information
Investors, analysts and other interested parties can access Brookfield
Properties’ Supplemental Information Package before the market open on
February 5, 2010 at www.brookfieldproperties.com
under the Investor Relations/Financial Reports section. This additional
financial information should be read in conjunction with this press
release.
Brookfield Properties Profile
Brookfield Properties owns, develops and manages premier office
properties. Its current portfolio is comprised of interests in 110
properties totaling 75 million square feet in the downtown cores of New
York, Washington, D.C., Houston, Los Angeles, Toronto, Calgary and
Ottawa, making it one of the largest owners of commercial real estate in
North America. Landmark assets include the World Financial Center in
Manhattan, Brookfield Place in Toronto, Bank of America Plaza in Los
Angeles and Bankers Hall in Calgary. The company’s common shares trade
on the NYSE and TSX under the symbol BPO. For more information, visit www.brookfieldproperties.com.
CONSOLIDATED BALANCE SHEET
(US Millions) December 31, 2009 December 31, 2008
Assets
Commercial properties $ 14,953 $ 14,901
Commercial development 1,313 1,225
Residential development 1,259 1,196
Receivables and other 1,952 918
Intangible assets 517 637
Restricted cash and deposits 101 116
Cash and cash equivalents 176 157
Assets related to discontinued operations (i) 299 290
$ 20,570 $ 19,440
Liabilities and shareholders’ equity
Commercial property debt $ 11,319 $ 11,505
Accounts payable and other liabilities 1,100 1,241
Intangible liabilities 581 707
Future income tax liability 208 174
Liabilities related to discontinued operations (ii) 174 217
Capital securities - corporate 1,009 882
Capital securities - fund subsidiaries 415 711
Non-controlling interests - fund subsidiaries 511 212
Non-controlling interests - other subsidiaries 64 68
Preferred equity - subsidiaries 363 313
Preferred equity - corporate 304 45
Common equity 4,522 3,365
$ 20,570 $ 19,440
(i) Includes $277 million of commercial properties
and $22 million of other assets associated with discontinued operations
at December 31, 2009 (December 31, 2008 -- $271 million and $19 million,
respectively).
(ii)Includes commercial property debt of $156 and
$18 million of other liabilities associated with discontinued operations
at December 31, 2009 (December 31, 2008 -- $199 and $18 million,
respectively).
CONSOLIDATED STATEMENT OF INCOME
Three months ended Dec. 31 Full year ended Dec. 31
(US Millions, except per share amounts) 2009 2008 2009 2008
Total revenue $ 816 $ 715 $ 2,676 $ 2,773
Net operating income
Commercial property operations $ 338 $ 317 $ 1,322 $ 1,308
Residential development operations 74 46 114 144
Interest and other 10 23 44 67
422 386 1,480 1,519
Expenses
Interest
Commercial property debt 127 160 531 625
Capital securities - corporate 14 12 53 57
Capital securities - fund subsidiaries (9 ) (53 ) (26 ) (70 )
General and administrative 32 30 111 118
Non-controlling interests
Fund subsidiaries 7 (7 ) 31 (22 )
Other subsidiaries 2 4 11 20
Depreciation and amortization 126 146 495 539
Future income taxes (6 ) (479 ) 66 (429 )
Gains and other items -- (24 ) (45 ) (24 )
Net income from continuing operations $ 129 $ 597 $ 253 $ 705
Discontinued operations 52 (139 ) 64 (5 )
Net income $ 181 $ 458 $ 317 $ 700
Net income per share - diluted
Continuing operations $ 0.25 $ 1.50 $ 0.57 $ 1.77
Discontinued operations 0.10 (0.34 ) 0.15 --
$ 0.35 $ 1.16 $ 0.72 $ 1.77
Funds from operations per share - diluted
Prior to discontinued operations $ 0.42 $ 0.48 $ 1.43 $ 1.53
Discontinued operations 0.01 0.01 0.05 0.06
$ 0.43 $ 0.49 $ 1.48 $ 1.59
RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS
Three months ended Dec. 31 Full year ended Dec. 31
(US Millions) 2009 2008 2009 2008
Net income $ 181 $ 458 $ 317 $ 700
Add (deduct) non-cash and extraordinary items
Depreciation and amortization 126 146 495 539
Future income taxes (6 ) (479 ) 66 (429 )
Discontinued operations (45 ) 144 (40 ) 29
Non-controlling interests in above items (37 ) (54 ) (154 ) (189 )
Gains and other items -- (24 ) (45 ) (24 )
Amortization of debt discount(i) 3 -- 9 --
Funds from operations $ 222 $ 191 $ 648 $ 626
(i) Represents the amortization of debt discount
which formed a component of the $39 million dilution gain in connection
with the restructuring of the U.S. Office Fund in Q2 2009. The $39
million gain was not included in FFO.
FUNDS FROM OPERATIONS PER DILUTED SHARE
Three months ended Dec. 31 Full year ended Dec. 31
(US Millions, except per share amounts) 2009 2008 2009 2008
Funds from operations $ 222 $ 191 $ 648 $ 626
Preferred share dividends (5 ) (1 ) (7 ) (3 )
Funds available to common shareholders 217 190 641 623
Weighted average shares outstanding 504.8 391.1 432.2 393.2
Funds from operations per share $ 0.43 $ 0.49 $ 1.48 $ 1.59
