Brookfield Property Partners L.P.
Investor Meeting September 29, 2016
Brookfield Property Partners L.P. Investor Meeting September 29, - - PowerPoint PPT Presentation
Brookfield Property Partners L.P. Investor Meeting September 29, 2016 Table of Contents Our Business 3 Brian Kingston, Senior Managing Partner, Chief Executive Officer Core Office 17 Ric Clark, Senior Managing Partner, Chairman Urban
Brookfield Property Partners L.P.
Investor Meeting September 29, 2016
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Our Business 3
Brian Kingston, Senior Managing Partner, Chief Executive Officer
Core Office 17
Ric Clark, Senior Managing Partner, Chairman
Urban Multifamily 35
Lowell Baron, Managing Partner, Head of Multifamily
Retail Business 47
Ashley Lawrence, Senior Vice President, Asset Management – Retail
Opportunistic Investment Strategy 64
Brian Kingston, Senior Managing Partner, Chief Executive Officer
Financial Update 75
Bryan Davis, Managing Partner, Chief Financial Officer
Wrap-up / Q&A 89
Brian Kingston, Senior Managing Partner, Chief Executive Officer
Table of Contents
Our Business – Brian Kingston
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Brookfield Property Partners L.P. (BPY)
Opportunistic Value-Add Core Core-Plus
Through Participation in Brookfield Private Funds Direct
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Current yield backed by stable cash flow from a diversified portfolio
5-8% annual distribution growth Capital appreciation of our asset base
Opportunistic Core Office & Retail
appreciation
properties with significant value-add
10% to 12% Total Returns 20% Total Returns
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acquire high-quality assets at a discount to replacement cost
with the best risk-adjusted returns
assets in order to build long-term value for unitholders
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reduced balance sheet concentration in public securities from 80% to 30%
Canary Wharf and increase our interest to 50%
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1) Represents BPY’s fully diluted interest in GGP
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Canada $8B United States $70B UK & Europe $4B Australia $9B Brazil $4B
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Canada $7B United States $105B UK & Europe $23B Brazil $3B Australia $7B Middle East - $0.1B India - $1.2B China - $0.5B
1) Figure represents AUM of Brookfield Property Group. BPY’s proportionate total assets have grown to approxim ately $66 billion
2013 TODAY
PRIMARY
Traditional real estate sectors that have deep public and private institutional capital markets
Core Office Core Retail Multifamily Core Office Core Retail Multifamily Logistics
ESTABLISHED
Alternative real estate sectors that have deep public and private capital markets
Suburban Office Alternate Retail Suburban Office Alternate Retail Hotels Net Leases
NON-TRADITIONAL
Some public market presence and analyst coverage but highly fragmented and largely privately held
Self-Storage Manufactured Housing Student Housing
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gateway markets around the world
United States
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Total Assets ($ billions)
Total Equity ($ billions) Company FFO ($ millions)
TODAY 2013 Distribution per Unit ($) Value per Unit ($) 113% 69% 67%
12% 20%
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Enhance the flexibility of our balance sheet
In 2016:
interest costs by 55bps and extending maturity to 2019
capital securities
Recycle capital
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Stabilize occupancy in Core Office and Retail portfolios
Brookfield Place Calgary
Share price to reflect value of business
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Core Office – Ric Clark
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Brookfield Place, New York City Canary Wharf, London Potsdamer Platz, Berlin Brookfield Place, Toronto Darling Park, Sydney Brookfield Place, Perth 19
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We offer a full suite of real estate services for our tenants, assuring them
“…Of our top 20 office tenants, 75% are in Brookfield buildings in more than one city and 50% are in buildings in more than three cities, which speaks to the consistency and quality
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PROPERTIES
OCCUPANCY
PORTFOLIO SIZE
AVERAGE LEASE TERM
CITIES
EMPLOYEES
COUNTRIES
AVERAGE ANNUAL LEASING VOLUME
50% 18% 16% 14%
$ 500 $ 1,000 $ 1,500 $ 2,000 2013 2014 2015 2016
NET OPERATING INCOME
(US$ in millions)
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U.S. UK Australia Canada Other
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1) Forecast to reflect increm ental NOI at Brookfield Place New York
0% 2% 4% 6% 8% 10% 12% 14% Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
SAME PROPERTY NOI GROWTH
(in natural currency)
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Property City Interest Sold Net Proceeds
(US$ Millions)
Cap Rate World Square Retail Sydney 100% $ 200 4.2% Royal Centre Vancouver 100% 220 3.3% Principal Place London 50% 360 4.0% Two Ballston Plaza Greater Washington, DC 100% 60 5.6% Potsdamer Platz Berlin 25% 170 3.4% One New York Plaza New York City 33% 550 4.6% King Street Wharf Sydney 100% 30 4.9% One Shelley Street Sydney 100% 250 5.1% Total $ 1,840
4.2%
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COMPETITIVE ADVANTAGE
and asset manage a large-scale mixed-use trophy estate that spans
maturing closed-end fund and required transaction assurance of a well-capitalized buyer with strong lending and JV equity relationships
STRONG MARKET FUNDAMENTALS
German cities
telecommunications (TMT) sector tenants particularly strong with 40% of total leases executed
VALUE ENHANCEMENT MEASURES
condo conversion exercise; Brookfield’s plan is to aggressively re- lease as rentals to tap into existing apartment demand on the estate
compared to acquisitions
in strategic markets
– Anchor leases for 40-50% prior to launch – Maximum price construction contracts – Construction financing with term extensions – JV equity partners once project is substantially de-risked – Limit development capital to <10% of total assets
high-growth markets
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UNDER DEVELOPMENT
AVERAGE YIELD-ON-COST
INCREMENTAL NOI
PRE-LEASED
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Project City
(000’s)
Pre- Leased Date of Completion Cost1
(US$ millions)
Yield Principal Place London 621 84% Q4 2016 $ 510 8% L’Oreal Brazil HQ Rio de Janeiro 197 100% Q1 2017 40 12% London Wall Place London 505 73% Q2 2017 270 7% Brookfield Place East Calgary 1,400 81% Q3 2017 620 7% 655 New York Avenue Washington, DC 766 70% Q3 2018 290 7% 100 Bishopsgate London 938 38% Q4 2018 1,140 7% 1 Bank Street London 715 40% Q2 2019 330 7% One Manhattan West New York 2,117 30% Q4 2019 1,060 6% Total 7,259 56% $ 4,260 7%
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1) At BPY’s proportionate share
$ 0 $ 100 $ 200 $ 300 2017 2018 2019 2020 2021
Brazil UK Canada U.S.
(US$ in millions) 30
Project City
Manhattan West New York 2,296 ICD Brookfield Place Dubai 1,079 10 Bank Street London 857 Shell Centre London 317 North Quay London 2,400 One Park Place London 680 Wood Wharf – Phase 1 London 338 Bay Adelaide Centre North Toronto 825 Total 8,792
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2017-19 timeframe
following Brexit outcome
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1) Data on this slide attributable to BPY’s Core Office business in Houston, Calgary and Perth
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Urban Multifamily – Lowell Baron
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Creating a long-term, best-in-class urban multifamily business complementary and with similar characteristics to Brookfield’s established, highly regarded global
Initial strategy includes a build-to-core model, leveraging urban infill parcels owned within the office business as well as newly sourced transactions Acquiring single assets or portfolios will become a major avenue of growth for the right opportunities and at the right time
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Recapitalizes Fairfield
2010/11 2012 2013 2014 2015
Acquires 4,900 unit portfolio for $500 million Acquires 4,275 unit portfolio for $290 million Acquires 3,962 unit portfolio in Manhattan for $1 billion Privatizes AEC for $2.5 billion - 14,200 unit portfolio Properties 4 23 70 90 150 Units 1,270 6,680 19,010 26,700 42,060 GAV (US millions) $140 $715 $1,980 $4,030 $7,400 Commits $300 million to second Value-Add fund Commits $50 million to first Value-Add fund Construction begins on Manhattan West residential tower (879 units) Acquires four development projects in US representing 2,350 units
Scale of Operations1
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PROPERTIES
OCCUPANCY
~1,600
EMPLOYEES Seattle Sacramento San Francisco San Jose Los Angeles Inland Empire Denver Dallas Metro San Antonio Houston Miami / Ft. Lauderdale / West Palm Beach Atlanta Washington, DC Metro New Y
Boston Metro Las Vegas Phoenix Detroit Cleveland/ Columbus Indianapolis Charlotte
1) Only includes U.S. assets
Raleigh/Durham T ampa Charlottesville Virginia Beach
~38,000
UNITS
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Sources: McKinsey & Com pany, MIT and Edward Glaeser (Harvard Econom ics Professor)
Urbanization
to 75% by 2050
Global Growth
to 90% by 2050
Concentrated Wealth
less urbanized countries
Social Connectivity
and networking; (2) Attractions, entertainment, shopping and restaurants; (3) Public transit and walkability; (4) Access to medical care and services for seniors
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Source: NAREIT (data through 2015)
Sector Compounded Annual Returns Since 1994 Returns/Risk (Sharpe Ratio) Since 1994
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Source: Axiom etrics
Apartment Rent Growth
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Apartment Occupancy Rates
Source: Axiom etrics
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Sources: U.S. Census Bureau, Green Street Advisors
U.S. Homeownership Rate
69.0% 68.9% 68.8% 68.2% 67.8% 67.4% 66.9% 66.2% 65.5% 65.1% 64.5% 63.8% 63.0% 62.8% 62.3% 62.5% 62.7%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Long Term Average – 64%
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San Francisco and Seattle
friendly and have a diversified economy
Seattle Portland San Francisco San Jose Los Angeles San Diego Denver Dallas Austin Houston Miami Atlanta Washington, DC New York City Boston
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Project City
# of Units
Date of Completion Cost1
(US$ millions)
Yield For Rent Three Manhattan West Manhattan 473 Q1 2018 $ 414 5% Greenpoint Landing - G Brooklyn 341 Q1 2019 273 6% Camarillo Ventura County 446 Q3 2019 128 7% Newfoundland London 636 Q4 2019 322 4% For Sale Principal Place London 329 Q1 2019 249 N/A Shell Centre London 597 Q3 2019 219 N/A Total 2,822 $ 1,605 5%
1) At BPY’s proportionate share
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Project City
# of Units
Date of Completion Cost1
(US$ millions)
Yield For Rent Wood Wharf Phase I London 677 Q4 2019 $ 245 5% Greenpoint Landing - F Brooklyn 400 Q3 2020 364 6% 1810 Main Houston 286 Q2 2019 81 7% Westcreek Houston 409 Q4 2020 166 7% Dallas Hi-Line Dallas 426 Q4 2020 164 7% Studio Plaza Silver Spring 343 Q1 2019 106 7% Total 2,541 $1,126 6%
1) At BPY’s proportionate share
Retail Business – Ashley Lawrence
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PROPERTIES
OCCUPANCY
PORTFOLIO SIZE
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Sources: GGP Strategy & Analytics, Nielsen Local, 2014-2015. 400,489 respondents
50 100 150 Millenials (18-34) Gen Xers (35-49) Baby Boomers (50-65) Silents (Over 65)
PROPENSITY TO SHOP AT LEAST ONCE EVERY 3 MONTHS (100 = Average Shopper)
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Source: GGP
80% 82% 84% 86% 88% 90% 92% 94% 96% 98% 100% Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
SAME-PROPERTY OCCUPANCY
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$ 500 $ 525 $ 550 $ 575 $ 600 2012 2013 2014 2015
TENANT SALES/PSF
(<10 SF)
Source: GGP
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Source: GGP 1) Percentage of GGP’s reported Com pany NOI
Top Properties 2016 Sales/psf % of NOI1 Top 10 $792 23% Top 30 $727 48% Top 50 $677 67% Top 100 $598 96% Total $583 100%
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“The decline of certain big-box retailers has unlocked the
spaces into more productive uses, including full-service restaurants, chef-driven food halls, high-end grocers, fitness centers and movie theaters.”
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1) At BPY’s fully-diluted interest
Property City Interest Sold Net Proceeds
(US$ Millions)1
Fashion Show Las Vegas, NV 50% $ 282 Eastridge Mall San Jose, CA 100% 74 Pioneer Place (office) Portland, OR 100% 40 One Stockton San Francisco, CA 49.8% 11 522 Fifth Avenue New York, NY 10% 6 Owings Mills Mall Owings Mills, MD 50% 4 Newgate Mall Salt Lake City, UT 100% 3 Total $ 420
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1) At BPY’s proportionate cost
Project City Description Stabilized Year Cost1
(US$ millions)
Return Ala Moana Center Honolulu Anchor Repositioning 2018 $ 15 9-10% Staten Island Mall New York Expansion 2019 60 8-9% Other Various Redevelopment 2017-18 70 6-8% Under construction $ 145 7-9% The SoNo Collection Norwalk Ground-up development 2020 80 8-10% Other Various Redevelopment TBD 75 8-9% Total under construction and in planning $ 300 8-9%
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PROPERTIES
IN-LINE OCCUPANCY
PORTFOLIO SIZE
GROSS ASSET VALUE
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returns of 9-11%
with high population densities and significant value creation opportunities
Shoppes at Carlsbad Redevelopment Completion Q2 2018
Opportunistic Investments – Brian Kingston
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and where capital is scarce
public-to-private, socioeconomic headwinds
returns
synergies
Counter- Cyclical / Contrarian Investments Multi-faceted / Structured Transactions Proprietary Investments
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Farmington Hills, Michigan Grand Rapids Michigan Brighton, Massachusetts
TRANSACTION MERITS
previous owners/operator
to recent portfolio transactions in the sector
demand
GROWTH OPPORTUNITY
base
markets where public REITs are not active
EXPERIENCED MANAGEMENT
Grand Rapids, Michigan
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CONTRARIAN THESIS
political instability and uncertain near-term economic landscape
relationships with both portfolio owner and owner’s majority shareholder
economic indicators in medium- to long-term
HIGH-QUALITY ASSETS
delivered, high-quality assets
and Rio de Janeiro
STABILITY + GROWTH
streams to investment-grade multinational tenants
investment basis
A lfa Laval São Paulo Cidade Jardim São Paulo JK Complex – Towers D & E São Paulo
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Fund Strategy/Sector(s) Year(s) Size
($US Millions)
BPY (%) Target Return1 BPY’s Equity2
($US Millions)
BSREP II Opportunistic/ Diversified 2015 $ 9,000 26 20%+ $ 1,350 BSREP I Opportunistic/ Diversified 2012 4,350 31 20%+ 1,850 VAMF Series Value-Add/ Multifamily 2011-15 1,900 34 14-16% 300 BREF Series Debt/ Diversified 2004-14 3,125 27 12-13% 200 Other direct 500 Total
$ 4,200
1) Targeted gross internal rate of return (“IRR”) – There can be no assurance that the funds will achieve returns within the targeted range or within a com parable range or will be able to avoid losses 2) Represents BPY’s invested equity to-date
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NEW SECTORS
manufactured housing portfolio in North America
same-store NOI growth every quarter for last 20 years
NEW MARKETS
International Financial Center complex in Seoul, South Korea
enant roster of large, multinational corporations – many ‘repeat customers’ in Brookfield’s global portfolio
strategy and repositioning of retail and hotel offerings
PLATFORM EXPANSION
India, in advanced negotiations to acquire a 4.2msf portfolio of prime office and retail properties in Mumbai
high-quality infrastructure and location
platform integration and repositioning to ‘Live-Work-Play’ community
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2017 2018 2019 2020
$1 $ 2 $ 3 $ 4
CUMULATIVE RETURN OF CAPITAL ($ billions)
BSREP II Other BSREP I
Financial Update – Bryan Davis
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Launched BPY Used BPY equity to acquire Brookfield Office Properties and converted our passive investment in Canary Wharf into a control position Raised capital through sales of interests in mature assets and developments to fund our capital commitments to: 1) Active developments 2) Funds 3) Repayment of corporate debt Continued to raise capital from high demand assets and markets to redeploy into higher yielding opportunities
2014 2013
2015 2016
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1) Reflects m andatorily convertible preferred shares as equity ($1.8 billion, 70 m illion units) 2) Diluted IFRS value per unit
(US$ millions, except per unit amount)
2013
BPO & Canary Allocation
Organic Growth
Today Assets Office $ 6,200 $ 6,700 $ (6,000) $ 4,900 $ 11,800 Development 1,000 2,500 3,500 Retail 7,600 1,300 8,900 Opportunistic 1,200 2,000 1,000 4,200 16,000 6,700 (1,500) 7,200 28,400 Corporate debt 500 1,500 (1,500) 1,600 2,100 Capital securities 1,250 1,250 Other liabilities 600 1,000 1,600 Equity $ 13,650 $ 5,200 $ − $ 4,600 $ 23,450 Units outstanding1 540 241 781 Value per unit2 $ 25 $ 30
Net Proceeds
(US$ Millions)
Cap Rate 2016 2,000+ 4.0% 2015 2,000 4.5% 2014 1,000 5.5% Total $ 5,000+ 4.5%
units to fund the privatization of Canary Wharf
demand:
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and created $800+ million in value
– Pipeline in Canary Wharf – Development sites in London, New York, Washington, DC, Rio de Janeiro
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($ in millions)
U.S. Europe Brazil India China Total Hospitality $ 360 $ 740 $ 1,100 Multifamily 850 850 Retail 350 250 200 800 Office 200 40 240 250 730 Industrial 400 250 50 700 Triple net lease 400 400 Mezzanine 170 170 Self-storage 150 150 Student housing 150 150 Total $ 2,880 $ 1,180 $ 490 $ 250 $ 250
($ in millions expect per unit amounts)
Capital FFO Appreciation Total
Core Office and Retail $ 19,000 6% 4–6% 10–12% Opportunistic 4,500 7% 11–13% 18–20% $ 23,500 6% 6–9% 12–15% T arget Earnings per unit $1.90 $2.10 $4.00
Funds attractive distribution per unit of…
$1.12
and distribution growth targets between…
5–8%
Provides capital to re-invest into platforms for future growth
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$1.11
$1.80 2014 2015
$1.18 $1.32+
2016 2021
$2.00
Same store growth of 2-3% – $220m Active developments – $160m Reinvestment of capital at higher returns – $100m
New York and reallocation of capital to higher-returning Opportunistic strategies
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9%
2015
$1.18
2016 2021
$2.00 $1.60 $1.06
90% 80%
($ per unit)
Funds from operations $ 2.00 Average annual realized gains 0.35 Second generation leasing costs (0.35) Sustaining capital expenditures (0.15) Annual non-cash rents (0.10) Adjusted AFFO $1.75
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7%
$1.32 $1.12
85%
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are continuing to work toward our long-term goal:
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53% 50%
($ in millions)
Repay unsecured bonds $ (400) Reduce corporate and subsidiary debt (1,600) $ (2,000)
38% 25%
($ in millions)
Reduce corporate and subsidiary debt (4%) Planned refinances (4%) Swap to fixed in floating rate markets (3%) Convert construction financing to permanent (2%) (13%)
economic conditions and investment strategy support it
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(£ in millions)
T
£ 7,100 Local currency debt (3,400) Reduces our capital at risk prior to hedging £ 3,700 Currency hedges (2,900) Net exposure to the Pound £ 800 Reduced % of total equity exposed to Pound from 12% to ….
5%
Wrap-up / Q&A – Brian Kingston
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capital or re-positioning, to generate core-plus returns
constrained markets – 10 msf of core office and multifamily developments and expected to produce +/- 15% levered returns over next 5+ years – Significant shadow pipeline, with minimal invested capital that will be well-positioned for the next development cycle
Management-sponsored real estate funds
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shareholders:
$ 23 Year 1 Year 2 Year 5 Year 10 Current Yield
(5-8% distribution growth)
+
Appreciation
(Multiple of 8-11% FFO growth)
Investment
(as of NYSE closing on 9/27/16)
$ 16
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Today $ 38
$ 77 $ 42
$ 7 $ 12 $ 23 $ 23 13%
Q&A
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This presentation contains “forward-looking information” w ithin the meaning of Canadian provincial securities law s and applicable regulation and “forward looking statements” w ithin the meaning of “safe harbor” provisions of the United States Private Security Litigation Reform Act of 1995. Forw ard-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, include statements regarding our operations, business, financial condition, expected financial results, performance, prospects,
subsequent periods, and include w ords such as “expects”, “anticipates”, “plans”, “believes”, “estimates”, “seeks”, “intends”, “targets”, “projects”, “forecasts”, “likely”, or negative versions thereof and other similar expressions, or future or conditional verbs such as “may”, “will”, “should”, “would” and “could”. Forw ard-looking statements include, w ithout limitation, statements about the quality of our assets and the resiliency of the cash flow they will generate, our target distribution grow th, the performance of our assets and their potential for capital appreciation, our financial and operating objectives and strategies to achieve those objectives, our ability to recycle capital from stabilized or non-strategic assets and realize capital from our fund investments, our ability to allocate capital and capitalize on investment opportunities, the potential grow th of our business and related revenue streams, grow th to be achieved by increasing occupancy, the prospects for increasing our cash flow from c ontinued achievement of targeted returns on our investments and development and re-development pipeline, the anticipated cost and value of our development and re-development pipeline, the impact of Brexit and the energy market dow nturn on our business and the availability of financing and our financing strategy.
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Although w e believe that our 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 forw ard-looking statements and information because they involve know n and unknow n risks, uncertainties and other factors, many of w hich are beyond our control, w hich may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements and information. Factors that could cause actual results to differ materially from those contemplated or implied by forw ard-looking statements include, but are not limited to: risks incidental to the
countries in w hich we do business; the ability to enter into new leases or renew leases on favorable terms; business competition; dependence on tenants’ financial condition; the use of debt to finance our business; the behavior of financial markets, including fluctuations in interest and foreign exchanges rates; uncertainties of real estate development or redevelopment; global equity and capital markets and the availability of equity and debt financing and refinancing w ithin these markets; risks relating to our insurance coverage; the possible impact of international conflicts and other developments including terrorist acts; potential environmental liabilities; changes in tax law s and other tax related risks; dependence
therefrom; operational and reputational risks; catastrophic events, such as earthquakes and hurricanes; and other risks and f actors detailed from time to time in our documents filed w ith the securities regulators in Canada and the United States. We caution that the foregoing list of important factors that may affect future results is not exhaustive. The forward-looking statements represent our view s as of the date of this presentation and should not be relied upon as representing our view s as of any date subsequent to the date of this presentation. When relying on our forward-looking statements or information, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Except as required by law , w e undertake no obligation to publicly update or revise any forward-looking statements or information, w hether written or oral, that may be as a result of new information, future events or otherwise.
This presentation contains references to net operating income (“NOI”) and funds from operations (“FFO”) w hich 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 entities. We define FFO 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. We believe that these are useful supplemental measures that may assist investors in assessing the financial performance and the cash anticipated to be generated by our business. NOI and FFO should not be considered as the sole measure of our performance and should not be considered in isolation from, or as a substitute for, analysis of our financial statements prepared in accordance with IFRS. See “Reconciliation of Non-IFRS Measures” in our most recent annual report on Form 20-F and our 6-K filed on August 11, 2016 for a more detailed discussion including a reconciliation to the most directly comparable IFRS measures.
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All amounts are in U.S. dollars unless otherw ise specified. Unless otherw ise indicated, the statistical and financial data in this document is presented as of June 30, 2016.
Brookfield Property Partners L.P. 2016
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