Brookfield Property Partners C O R P O R AT E P R O F I L E N O V E M BER

Transcription

1 Brookfield Property Partners C O R P O R AT E P R O F I L E N O V E M BER

2 Table of Contents Overview of Brookfield Property Partners ( BPY ) Page 4 Organic Growth Page 11 Operating Segments Page 20 Developments and Redevelopments Page 32 Appendix Structure and Governance Page 39 2

3 BPY is Brookfield Asset Management s ( Brookfield ) primary vehicle to make investments across all strategies in real estate Our goal is to be the leading global owner and operator of high-quality real estate, generating an attractive total return for our unitholders comprised of: 1 Current yield supported by stable cash flow from a diversified portfolio of assets 2 5% 8% annual distribution growth 3 Capital appreciation of our asset base 3

4 Overview of Brookfield Property Partners 4

5 Global Owner, Developer and Operator of Diversified, High-Quality Real Estate $86B 1 TOTAL ASSETS 1 $28B UNITHOLDER EQUITY $0.315 QUARTERLY DISTRIBUTION / UNIT 2 6.0% DISTRIBUTION YIELD Investment Portfolio Characteristics Core Office 150 premier office properties totaling 99 million square feet (msf) in gateway markets around the world as well as 11 msf of core office and multifamily development projects currently underway Core Retail 125 best-in-class retail properties totaling 122 msf throughout the United States LP Investments High-quality assets with operational upside across office, retail, multifamily, industrial, hospitality, triple net lease, self storage, student housing and manufactured housing sectors 1) As of September 30, 2018 and on a proportionate basis. 2) Based on BPY s 9/28/18 closing price of $20.89 on the Nasdaq Stock Market. 5

6 Investment Segments Stable cash flows on core portfolios enhanced by investment in opportunistic strategies Core Office and Core Retail LP Investments Brookfield Place, New York Fashion Show Mall, Las Vegas Conrad Hotel, Seoul Targeting 10% to 12% Total Returns Approximately 80% of BPY s balance sheet Invested in high-quality, well-located trophy assets and development projects Targeting 20% Total Returns Approximately 20% of BPY s balance sheet Invested in mispriced portfolios and/or properties with significant value-add 6

7 Global Investor with Local Expertise ~$171B Total RE AUM 1 30 Offices ~17K Operating Employees 2 CANADA $8.2B EUROPE & MIDDLE EAST $28.4B UNITED STATES 3 $119.3B ASIA PACIFIC $12.5B BRAZIL $2.4B 1) At the Brookfield Property Group level which includes assets of BPY and Brookfield-managed funds. 2) Employee figures are as of December 31, ) AUM in the Bahamas are included within our US AUM figure. 7

8 Proven Investment Approach Value-oriented, counter-cyclical investors Specialize in executing multi-faceted transactions that allow us to acquire high-quality assets at a discount to replacement cost Leverage our business units and operational expertise to enhance the value of our investments Flexibility to allocate capital to the sectors and geographies with the best risk-adjusted returns at various points in the real estate cycle Continually recycle capital from stabilized assets to higheryielding opportunities in order to build long-term value for unitholders 8

9 Conservative Financing Strategy We finance our investments predominantly with asset-level, non-recourse debt We raise debt in local currency with primarily fixed interest rates We source the lowest-cost capital to fund growth Recycle capital from stabilized assets Consider issuing equity if expected returns exceed our cost of capital We target a distribution payout ratio of 80% of Company Funds From Operations ( CFFO ) which combined with realized gains from our LP investments allows us to retain sufficient cash flow for tenant improvements, leasing costs and organic growth Our investment-grade corporate credit rating provides financing flexibility The quality and diversification of our assets support our target of achieving long-term proportionate debt-to-capital of up to 50% 9

10 Brookfield Property REIT (BPR) Brookfield Property REIT is a publicly traded U.S. REIT (Nasdaq: BPR) externally managed by BAM. It is a subsidiary of Brookfield Property Partners (BPY) and was created to offer economic equivalence to BPY in the form of a U.S. REIT security. BPR Shares & BPY Units Share an Identical Economic Interest BPR BPY Details Distributions Distributions are identical in amount and timing Exchangeable N/A Class A BPR shares are exchangeable for a BPY unit or the equivalent value in cash Liquidation Value Liquidations values are equalized Voting Rights N/A Voting control for both BPR and BPY is aligned as BPR s majority shareholder is BPY Structure/Index Eligibility Delaware Corp.; 1099 Issuer Bermudabased LP; K1 Issuer As a U.S.-domiciled REIT, BPR is eligible for many equity indexes that exclude LPs Majority Owner BPY BAM BPY owns ~75% of the outstanding shares of BPR and BAM owns ~53% of BPY 10

11 Organic Growth 11

12 BPY s Unique Growth Drivers Strong global operating capabilities enable us to acquire real estate in need of leasing, capital or repositioning, to generate core-plus returns Extensive development pipeline assembled over time in dynamic, supply-constrained markets Access to opportunistic real estate returns through ability to invest in Brookfield-sponsored property funds 12

13 Track Record of Earnings and Distribution Growth $1.50+ $1.36 $1.44 9% CAGR Earnings and distribution growth for five consecutive years since launch $1.11 $1.18 $1.06 $1.12 $1.18 $1.26 6% CAGR Annual CFFO growth of 9% Annual distribution growth of 6% $1.00 Reduced payout ratio from 90% of CFFO to our target of 80% CFFO Distribution (per unit) 13

14 Growth in LP Investment Gains We have earned realized gains from our LP investments in private funds $0.66 $0.67 In the early years, these gains were from the sale of individual assets or smaller portfolios $0.37 As these funds mature, and investmentlevel business plans are executed, the pace and size of realizations will increase $0.08 $ LTM Realized Gains on LP Investments (per unit) 14

15 Future Earnings Growth Achieve annual CFFO growth for the next 5 years with target of 7%-9% $2.15+ Realize significant earnings from our LP investments including, on average, $500 million in annual realized gains $1.70+ $1.45+ $1.26 Earnings provide ample coverage for distributions Earnings growth will support distribution growth in line with target of 5%-8% annually 15

16 Main Drivers of Earnings Growth Annual CFFO growth between 2017 and 2022 continues to be driven by: Achieving same property growth of 2-3% Completion of active developments on time and budget: In US$ millions $1.18 $600 Cumulative Development NOI $500 $400 $300 $200 $100 $ Office Retail Urban multifamily Condo sales 16

17 Payout Ratio Target payout ratio leaves sufficient retained cash to protect distribution levels, sustain properties and fund future growth in support of our five-year business plan: In US$ millions 2022 Forecasted CFFO $ 2,300 Annual realized gains from LP investments 600 Annual earnings $ 2,900 Distributions at target payout (1,800) Available to maintain properties and fund growth $ 1,100 17

18 Looking forward, we are positioned to increase earnings from leasing and development activities in our core office and retail businesses... and to realize value from the capital we have invested in our LP investments 18

19 BPY = Compelling Investment Opportunity % CAGR $ 48 $ 22 15% CAGR $ 35 $ 9 An investment today has the potential to offer a very attractive return to shareholders Yield backed by cash flow from a portfolio of high-quality assets $ 20 $ 6 $ 6 $ 20 $ 20 $ 55 Entry point at discount to average analyst NAV of $27.49 per unit Potential for significant appreciation Today Narrowing Discount 1,2,3 Current Discount 1,2 Opportunity to further enhance return if discount to NAV erodes Investment Current Yield Appreciation 1) Using forecasted 2022 CFFO 2) Distributions assumed at 80% of forecasted 2022 CFFO 3) Using consensus NAV implied multiple 19

20 Operating Segments 20

21 Core Office Portfolio Iconic assets in gateway markets Darling Park, Sydney Brookfield Place, New York Brookfield Place, Toronto Canary Wharf, London 21

22 Core Office Portfolio 150 premier office properties totaling approximately 99 msf in gateway cities around the globe, including: New York, London, Toronto, Los Angeles, Houston, Sydney, Washington, DC and Berlin Portfolio is 92.9% leased with an average remaining lease term of 8.3 years Embedded 8.2% mark-to-market opportunity on expiring leases Properties generally financed with non-recourse, asset-level debt We offer an integrated, multifaceted real estate business with comprehensive operating and real estate management capabilities Our diversified global structure gives us a competitive advantage in the marketplace as we are able to leverage relationships across geographies and business lines Of our top 20 office tenants, 11 are tenants in Brookfield buildings in more than one city; 7 are tenants in at least three cities 22

23 Core Retail Portfolio Trophy retail assets that mirror the quality of our office properties The Woodlands Mall, Houston Ala Moana, Honolulu Jordan Creek, Des Moines Miami Design District 23

24 Core Retail Portfolio 125 best-in-class malls and urban retail properties totaling over 122 msf throughout the United States 95.6% NOI-weighted occupancy Initial rent spreads of 11.6% for leases commencing in the trailing 12 months Highly productive stores with $744 NOI-weighted tenant sales/sf 24

25 Class A+ Shopping Centers Our class A+ mall portfolio represents approximately 8% of the high-quality retail space in the United States, including 3 of the top 5 assets. 1 Although total retail space in the U.S. is likely to contract in the coming years, high-quality malls continue to demonstrate meaningful outperformance and serve as the centerpiece of all retail activity in the U.S. The declining performance of traditional department stores has created opportunities to recapture square footage within our existing centers and improve their productivity by introducing more dining, entertainment and fitness venues as well as e-retailer pop-up and permanent stores. Development and redevelopment initiatives in our core retail portfolio total $1.7 billion of which $1.2 billion is currently under construction with a further $500 million in the pipeline. The projects have expected ROIs of between 6-8%. Inserting new technology into our malls has been a major driver to elevate the shopping experience from retail and dining to entertainment and leisure 1) Source: CNBC.com article from 1/29/18. 25

26 E-commerce vs Brick-and-Mortar? NOT a Zero-Sum Game E-Commerce Brick-and-Mortar ONE Channel Online-to-offline examples Amazon Bonobos Rent the Runway 93% of all retail sales are owed all or in part to brick-and-mortar presence 1 1) Source: U.S. Census Bureau 26

27 LP Investments Acquiring mispriced assets with upside to earn outsized returns The Diplomat Resort & Spa, Florida BR7 Office Portfolio, Sao Paulo Center Parcs, UK Roosevelt Landing, New York 27

28 LP Investments Acquire high-quality assets at a discount to replacement cost or intrinsic value Invest on a Value Basis Leverage Brookfield Platform Execute multifaceted transactions that utilize structuring capabilities Seek contrarian investments via market dislocations and other inefficiencies Focus on geographies and sectors where Brookfield has informational, operational and other competitive advantages Utilize Brookfield s relationships to originate proprietary investments Target large-scale investments Execute clearly defined strategies for operational improvement: Enhance Value through Operating Capabilities Leasing: increasing occupancy and rental rates Development: expanding or redeveloping/repositioning properties Achieve opportunistic returns through NOI growth 28

29 Case Study: IDI Gazeley projected to return 30% Gross IRR in 5 years Assembled a 42M SF global logistics business through the acquisition of 3 industrial companies in North America and Europe 50M SF AREA LEASED 16% RENT INCREASED 30M SF COMPLETED DEVELOPMENT 88 95% CHANGE IN OPERATING OCCUPANCY % PROJECTED GROSS IRR 3.1x PROJECTED GROSS MOC 29

30 Case Study: Simply Self Storage returned 46% Gross IRR in 2.5 years Acquired 90-asset, 6.8M SF portfolio and operating company in early 2016 and grew business to over 200 assets totaling ~16M SF 32% VALUE INCREASED PSF $1.3B $162M GROSS SALE PRICE 1 NET PROCEEDS TO BPY 2 46% GROSS IRR 2.6x GROSS MOC 1) Partial sale of business 2) Includes proceeds from portfolio refinancing following transaction 30

31 Opportunistic Real Estate Funds Track Record Fund Inception Total Equity BPY Stake Projected Gross IRR Projected Gross MOC RE Opportunity Fund I % 1.9x RE Opportunity Fund II % 2.1x GGP Acquisition Closes RE Turnaround Fund % 2.3x Strategic Real Estate Partners I 2012 $4.5B 30% 25.0% 2.7x Strategic Real Estate Partners II 2015 $9.0B 25% 19.0% 2.2x Total 26.0% 2.2x 31

32 Developments and Redevelopments 32

33 Development Strategy We opportunistically pursue developments to: Earn premium risk-adjusted returns compared to acquisitions (~ bps spread) Upgrade our portfolio with new, trophy assets in key strategic markets Development strategy seeks to limit risk: Typically secure anchor leases for 40% 50% of space before launching project Execute guaranteed maximum price contracts to reduce construction risk Bring in JV partners once project is substantially de-risked Limit developments to less than 10% of total assets Prominent, large-scale projects primarily in the high-growth markets of London and New York City Active office and multifamily projects expected to produce approximately $320 million of incremental NOI upon completion 33

34 Projects Delivered Over the Past 24 Months 4.2M SF PREMIER OFFICE SPACE 5 Manhattan West New York One Blue Slip Brooklyn 1,200 APARTMENT UNITS Principal Place London The Eugene New York London Wall Place London 34

35 Projects On Schedule for Delivery in M SF PREMIER OFFICE SPACE Camarillo Los Angeles ICD Brookfield Place Dubai 1 Bank Street London ~3,500 APARTMENT UNITS 655 New York Ave Washington DC 100 Bishopsgate London 1 Manhattan West New York 35

36 Active Development Projects Office % Pre-Leased SF 000s ($M) Total Cost 1 Yield on Cost Date of Completion Date of Accounting Stabilization 655 New York Avenue, Washington, DC 71% % Q Q One Manhattan West, New York 84% 2, % Q Q Bank Street, London 40% % Q Q Bishopsgate, London 67% 938 1,140 7% Q Q ICD Brookfield Place, Dubai 6% 1, % Q Q Bay Adelaide North, Toronto 64% % Q Q Wood Wharf Office, London 42% % Q Q Subtotal 58% 6,883 $3,429 7% Multifamily Camarillo (California) % Q Q Greenpoint Landing Bldg. G, New York % Q Q Studio Plaza, Silver Spring (Maryland) % Q Q Wood Wharf 8 Water St. & 2 George St., London % Q Q Newfoundland, London % Q Q Greenpoint Landing Bldg. F, New York % Q Q Principal Place Residential, London % Q Q Southbank Place, London % Q Q Wood Wharf 10 Park Drive, London % Q Q Wood Wharf One Park Drive, London % Q Q Subtotal 3,903 $2,282 Total Active Developments 10,786 $5,711 1) In US$ Millions and represents BPY s share of investment. 2) Represents condominium/market sale developments. Anticipated return on cost and date of completion are presented instead of yield on cost and date of accounting stabilization, respectively, for these developments. 36

37 Redevelopment Strategy We leverage our affiliated design, construction, operations, leasing and real estate management teams to perform a 360-degree assessment of a property s refurbishment and repositioning potential We time our initial capital investment to maximize returns (e.g. upon an anchor tenant s relocation announcement) We are able to charge higher rents and subsequently earn higher returns on our investment following the repositioning effort Our integrated capabilities provide the opportunity to redevelop high-quality, well-located assets that have leasing challenges or CapEx needs 37

38 Case Study 5 Manhattan West, New York Acquisition $700M Capital $350M Levered IRR 34% 450 W. 33 rd St. 5 Manhattan West Skin in the Game Owned parcels of undeveloped land adjacent to 450 W. 33 rd St. since the 1980s and acquisition opportunity required quick response A Submarket on the Cusp Tenants seeking alternatives to expensive, aging midtown buildings are migrating to areas more proximate to their employee populations An Attractive Alternative With over 25 million sf of traditional HQ office product being delivered to the submarket, 5MW s warehouse layout and vibe attracted tech and new media tenants A Stunning Transformation A unique new building centered at the nexus of Chelsea, traditional Midtown, and the Hudson Yards District New York City s next great mixed-use neighborhood 38

39 Appendix Structure and Governance 39

40 Corporate Structure Brookfield Asset Management (BAM) 30% 60% 53% 68% Brookfield Infrastructure Partners (BIP) Brookfield Renewable Partners (BEP) Brookfield Property Partners (BPY) Brookfield Business Partners (BBU) Core Office Core Retail LP Investments Core office assets Canary Wharf Core-plus funds Class A U.S. Mall Portfolio Real estate opportunity funds Value-add multifamily funds Real estate finance funds Other direct investments 40

41 Governance BPY and BPR have an established Master Services Agreement with Brookfield Brookfield provides executive oversight of BPY/BPR and services relating to the origination of acquisitions, financings, business planning and supervision of day-to-day management and administration activities Management fee, on an annualized basis, equal to 0.5% of the total capitalization of BPY/BPR, subject to a minimum fee of $50 million Equity enhancement distributions, on an annualized basis, equal to 1.25% of the increase in BPY/BPR s market capitalization over the initial capitalization of approximately $11.5 billion Credit applied for management fees paid on investment in Brookfield-sponsored funds Incentive distributions based upon increases in distributions paid to unitholders over pre-defined thresholds 15% participation by Brookfield in distributions over $1.10 per unit 25% participation by Brookfield in distributions over $1.20 per unit Credit applied for incentive fees paid on investments in Brookfield-sponsored funds BPY/BPR s general partner has a majority of independent directors BPY/BPR s governance is structured to provide alignment of interests with unitholders 41

42 Favorable Structure As a global real estate investor, we have structured BPY to provide flexibility to pursue its strategy and to limit negative tax consequences to our unitholders BPY is a Bermuda-based, publicly-traded partnership that owns or has interests in holding corporations primarily in the U.S., Canada, Australia, Western Europe, Brazil, India and South Korea Structure is favorable relative to Master Limited Partnerships (MLPs), and we are committed to structuring our activities to avoid generating UBTI and ECI 1 BPY s Structure Type of Entity UBTI 1 ECI 1 U.S. Tax Slip Issued 1 Canadian Tax Slip Issued 1 Bermuda-based, publicly-traded partnership No No K1 T5013 1) BPY does not provide legal or tax advice to any third party and as such strongly recommends that each prospective investor review all documentation with their legal and tax advisors. 42

43 Contacts Contact Title Address Phone Number Brian Kingston Chief Executive Officer (212) Bryan Davis Chief Financial Officer (212) Matt Cherry SVP, Investor Relations & Communications (212)

44 Important Cautionary Notes All amounts are in U.S. dollars unless otherwise specified. Unless otherwise indicated, the statistical and financial data in this document is presented as of September 30, This presentation contains forward-looking information within the meaning of applicable securities laws and regulations. Forward-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, opportunities, priorities, targets, goals, ongoing objectives, strategies and outlook, as well as the outlook for North American and international economies for the current fiscal year and subsequent periods, and include words 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. Forward-looking statements include, without limitation, statements about target earnings and distribution growth, the growth potential of our existing and new investments, return on invested capital, gains on mark-to-market releasing and occupancy, targeted same-store growth and returns on redevelopment and development projects, the availability of suitable investment opportunities, and the availability of financing and our financing strategy. Although we 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 forwardlooking statements and information because they involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, which 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 forward-looking statements include, but are not limited to: risks incidental to the ownership and operation of real estate properties including local real estate conditions; the impact or unanticipated impact of general economic, political and market factors in the countries in which 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 within 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 laws and other tax related risks; dependence on management personnel; illiquidity of investments; the ability to complete and effectively integrate acquisitions into existing operations and the ability to attain expected benefits therefrom; operational and reputational risks; catastrophic events, such as earthquakes and hurricanes; and other risks and factors detailed from time to time in our documents filed with 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. 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, we undertake no obligation to publicly update or revise any forward-looking statements or information, whether written or oral, that may be as a result of new information, future events or otherwise. In considering investment performance information contained herein, prospective investors should bear in mind that past performance is not necessarily indicative of future results and there can be no assurance that comparable results will be achieved, that an investment will be similar to the historic investments presented herein (because of economic conditions, the availability of investment opportunities or otherwise), that targeted returns, diversification or asset allocations will be met or that an investment strategy or investment objectives will be achieved. This presentation includes estimates regarding market and industry data that is prepared based on its management's knowledge and experience in the markets in which we operate, together with information obtained from various sources, including publicly available information and industry reports and publications. While we believe such information is reliable, we cannot guarantee the accuracy or completeness of this information and we have not independently verified any third-party information. This presentation makes reference to net operating income ( NOI ), funds from operations ( FFO ), and Company funds from operations ( CFFO ). NOI, FFO and CFFO 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, FFO and CFFO 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. For further reference, specific definitions of NOI, FFO, and CFFO are available in the Partnership s press releases announcing its financial results each quarter. 44