09.02.2007 11:30:00
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Brookfield Properties Reports Strong 2006 Growth
Brookfield Properties Corporation (BPO: NYSE, TSX) today announced net
income of $135 million or $0.56 per diluted share and funds from
operations ("FFO”)
of $443 million or $1.87 per diluted share for the year ended December
31, 2006.
After leasing 6.2 million square feet during 2006, Brookfield Properties’
portfolio-wide occupancy rate finished the year at 95.1%.
FINANCIAL RESULTS
Three months ended Dec. 31
Year ended Dec. 31
(US Millions, except per share information)
2006
2005
2006
2005
Net income
$ 21
$
47
$ 135
$
164
- per diluted share
$ 0.08
$
0.20
$ 0.56
$
0.69
Funds from operations before special fees
$ 125
$
108
$ 443
$
405
- per diluted share
$ 0.52
$
0.46
$ 1.87
$
1.72
Funds from operations
$ 125
$
138
$ 443
$
435
- per diluted share
$ 0.52
$
0.59
$ 1.87
$
1.85
Net income for the year ended December 31, 2006 was $135 million or
$0.56 per diluted share compared to $164 million or $0.69 per diluted
share in 2005. The 2006 results included a one-time non-cash adjustment
for a change in the Canadian corporate tax rate of approximately C$18
million or $0.07 per diluted share, as well as a significant increase in
depreciation and amortization with the acquisition of the Trizec
portfolio. Funds from operations for the year ended December 31, 2006
increased 9% to $443 million or $1.87 per diluted share compared to $405
million or $1.72 per diluted share in 2005. The comparable 2005 amount
represents the $1.85 of funds from operations recorded last year less
$30 million or $0.13 per share of special fees received.
Net income for the three months ended December 31, 2006 totaled $21
million or $0.08 per diluted share compared to $47 million or $0.20 per
diluted share during the same period in 2005. For the three months ended
December 31, 2006, funds from operations totaled $125 million or $0.52
per diluted share up from $108 million or $0.46 per diluted share during
the same period in 2005. The comparable 2005 amount represents the $0.59
of funds from operations recorded last year less $30 million or $0.13
per share of special fees received.
Commercial property net operating income for the year was $840
million compared to $674 million in 2005 and $313 million for the
fourth quarter of 2006, up from $190 million during the same period in
2005. This increase was due to the contribution from the O&Y and Trizec
portfolio acquisitions, which were completed in the fourth quarters of
2005 and 2006, respectively.
Residential development operations contributed $144 million of net
operating income in 2006, a significant increase over the $106 million
contributed in 2005. This operation’s net
operating income has continued to increase since the beginning of 2005
as the company’s Alberta operations benefited
from the continued expansion of activity in the oil and gas industry in
that province.
STOCK SPLIT
On February 7, 2007, the Board of Directors approved a three-for-two
stock split. The stock split will be in the form of a stock dividend.
Shareholders will receive one Brookfield Properties common share for
each two common shares held. Fractional shares will be paid in cash at
the prevailing market price. The stock dividend will be payable on March
30, 2007 to shareholders of record at the close of business on March 15,
2007.
Brookfield Properties is undertaking the stock split to ensure its
shares remain accessible to individual shareholders, and to further
enhance the liquidity of the company’s shares.
The dividend will have no unfavorable tax consequences in the United
States or in Canada, and will not dilute shareholders' equity.
SIGNIFICANT EVENTS OF THE FOURTH QUARTER Completed the acquisition of Trizec, adding approximately 29
million square feet of premiere office properties and infrastructure to
the company’s portfolio, expanding the company’s
presence in New York and Washington, D.C., and adding the new markets of
Houston and Los Angeles. These markets are consistent with Brookfield
Properties’ strategy to invest in cities with
strong financial services, government and energy sector tenants.
Brookfield Properties provided 45% of the equity for the approximate
$7.5 billion acquisition, which was acquired in Brookfield Properties’
U.S. Office Fund and with a joint venture partner.
Raised $1.25 billion of equity in a secondary offering of common
shares. The proceeds from this offering were used to repay outstanding
indebtedness taken on to finance the company’s
$857 million equity investment in its U.S. Office Fund, created to
invest in the acquisition of Trizec, and the repayment of lines of
credit to ensure the company is in a position to acquire further assets
should opportunities of interest become available.
Acquired a 100% interest in the Herald block in downtown Calgary
for C$45 million. One of Calgary's premier downtown development sites,
the property is nearly 66,000 square feet in area with development
density for approximately 1.1 million square feet of office space. The
Herald site is at the center of Calgary’s
downtown core and is within one block of each of Brookfield Properties’
core office assets, Fifth Avenue Place, Petro-Canada Centre and Bankers
Hall. The site currently contains four small buildings totaling 130,000
square feet of rentable area as well as underground parking and a small
surface parking lot with excellent access to public transportation via
the adjacent LRT line.
Broke ground on the 77 K Street development in Washington, D.C.
The building will be an 11-story, state-of-the-art, Class A office
property featuring dramatic views of the U.S. Capitol. The building is
adjacent to Union Station, Washington’s main
commuter hub, and the District’s busiest
Metro station. The total project cost is estimated to be $125 million or
$390 per square foot. The project is structured as a 50-50 joint venture
between Brookfield Properties and ING Clarion with Brookfield Properties
acting as general partner and development manager. Upon completion,
which is expected in 2008, the building will be managed by Brookfield
Properties.
Signed 3.1 million square feet of leases including an early
renewal with the Public Works (Federal Government of Canada) for 926,000
square feet at Place de Ville I and II in Ottawa and a new lease with
EnCana Oil & Gas for 453,000 square feet at Republic Plaza, Denver.
Fully pre-leased Bankers Court development. Subsequent to the
year-end, Compton Petroleum Corporation, an Alberta-based public oil and
gas company, leased an additional 22,000 square feet at Bankers Court
development project for a ten-year term, bringing office occupancy in
Bankers Court to 100%. Compton will occupy a total of 152,000 square
feet on floors 3 through 9, and Fraser Milner Casgrain, a national
Canadian law firm, will occupy 101,000 square feet on floors 10 through
15 when the building opens in 2008.
OUTLOOK "Coming off a solid fourth quarter of office
leasing and a strong performance from our residential division, we
remain excited about the future,” stated Ric
Clark, President & CEO of Brookfield Properties Corporation. "Brookfield
Properties will continue to be an active participant in the next
exciting phase of the real estate cycle given our strong balance sheet,
proven acquisitions strategy and over 17 million square foot office
development pipeline.” Net Operating Income and FFO
This press release and accompanying financial information make reference
to net operating income and funds from operations ("FFO") 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, non-cash items and depreciation and
amortization. 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
statements 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 "Outlook”
section, contains 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 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 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; including the acquisition
of Trizec Properties, Inc. and Trizec Canada Inc.; 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; 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,” in the company’s
annual report under the heading "Management’s
Discussion and Analysis,” as well as the
risks described in the company’s final
prospectus dated December 14, 2006, filed with Canadian securities
regulators and forming a part of a registration statement on Form F-10
filed with the Securities and Exchange Commission under the heading "Risk
Factors.” 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.
Dividend Declaration
The Board of Directors of Brookfield Properties declared a quarterly
common share dividend of $0.19 per share payable on March 30, 2007 to
shareholders of record at the close of business on March 1, 2007.
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. The quarterly dividends payable for the Class AAA
Series F, G, H, I, J and K preferred shares were also declared payable
on March 30, 2007 to shareholders of record at the close of business on
March 15, 2007.
Conference Call
Brookfield Properties’ 2006 year-end investor
conference call can be accessed by teleconference on Friday, February 9,
2007 at 11:00 a.m. Eastern time at 866-578-5747; pass code 92450931. The
call will be archived through March 11, 2007 by dialing 888-286-8010,
pass code 46391385. The conference call is also being Webcast at www.brookfieldproperties.com.
Supplemental Information
Investors, analysts and other interested parties can access Brookfield
Properties’ Supplemental Information Package
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
One of North America's largest commercial real estate companies, the
corporation owns, develops and manages premier office properties. The
office properties portfolio is comprised of interests in 116 properties
totaling 76 million square feet in the downtown cores of New York,
Boston, Washington, D.C., Los Angeles, Houston, Toronto, Calgary and
Ottawa. Landmark assets include the World Financial Center in Manhattan,
BCE Place in Toronto, Bank of America Plaza in Los Angeles and Bankers
Hall in Calgary. The corporation also holds interests in over 17 million
square feet of high-quality, centrally-located development properties in
its major markets. The corporation’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, 2006
December 31, 2005
Assets
Commercial properties
$ 15,287
$
7,430
Commercial developments
735
224
Residential developments
706
391
Receivables and other
974
830
Intangible assets
853
125
Restricted cash and deposits
507
316
Cash and cash equivalents
188
64
Marketable securities
-
58
Assets held for sale(i)
64
75
$ 19,314
$
9,513
Liabilities
Commercial property debt
$ 11,185
$
5,216
Accounts payable and other liabilities
923
500
Intangible liabilities
919
126
Future income tax liability
584
188
Liabilities related to assets held for sale(ii) 36
51
Capital securities – corporate
1,093
1,101
Capital securities – fund subsidiaries
803
-
Non-controlling interests – fund
subsidiaries
266
-
Non-controlling interests – other
subsidiaries
67
59
Preferred equity - subsidiaries
326
329
Shareholders' equity
Preferred equity - corporate
45
45
Common equity
3,067
1,898
$ 19,314
$
9,513
(i) Includes $61 million of commercial
properties and $3 million of other assets related to assets held
for sale at December 31, 2006 (December 31, 2005 - $75 million and
nil, respectively).
(ii) Includes $34 million of commercial
property debt and $2 million of other liabilities associated with
liabilities related to assets held for sale at December 31, 2006
(December 31, 2005 - $51 million and nil, respectively).
CONSOLIDATED STATEMENT OF INCOME
Three months ended Dec. 31
Year ended Dec. 31
(US Millions, except per share amounts)
2006
2005
2006
2005
Total revenue
$ 680
$
469
$ 1,923
$
1,529
Net operating income
Commercial property operations
313
190
840
674
Residential development operations
51
45
144
106
Interest and other
14
6
44
37
378
241
1,028
817
Expenses
Interest
207
85
483
327
General and administrative
23
15
67
48
Transaction costs
15
-
15
-
Fund interests
(33)
-
(33)
-
Non-controlling interests
4
4
21
16
Depreciation and amortization
136
46
281
161
Future income taxes
4
42
91
103
Net income from continuing operations
$ 22
$
49
$ 103
$
162
Discontinued operations
(1)
(2)
32
2
Net income
$ 21
$
47
$ 135
$
164
Net income per share – diluted
Continuing operations
$ 0.08
$
0.21
$ 0.42
$
0.68
Discontinued operations
-
(0.01)
0.14
0.01
$ 0.08
$
0.20
$ 0.56
$
0.69
Funds from operations per share –
diluted
Continuing operations
$ 0.51
$
0.59
$ 1.84
$
1.81
Discontinued operations
0.01
-
0.03
0.04
Property disposition gains
-
0.19
-
$ 0.52
$
0.59
$ 2.06
$
1.85
RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS
Three months ended Dec. 31
Year ended Dec. 31
(US Millions)
2006
2005
2006
2005
Net income
$ 21
$
47
$ 135
$
164
Depreciation and amortization(i) 137
49
284
168
Future income taxes(ii) 6
42
107
103
Non-cash component of fund interests
(45)
-
(45)
-
Funds from operations and gains
$ 119
$
138
$ 481
$
435
Transaction costs
15
-
15
-
Non-controlling interests in transaction costs(iii) (9)
-
(9)
-
Property disposition gains
-
-
(44)
-
Funds from operations
$ 125
$
138
$ 443
$
435
(i)Includes depreciation and
amortization from discontinued operations of $1 million and $3
million for the three and twelve months ended December 31, 2006,
respectively (2005- $3 million and $7 million, respectively). (ii)Includes future income
taxes from discontinued operations of $2 million and $16 million
for the three and twelve months ended December 31, 2006,
respectively (2005 – nil and nil,
respectively). (iii)Represents non-controlling
interest in transaction costs which have been added back to net
income. These costs included merger integration costs and employee
transition costs. Net of non-controlling interests,
Brookfield Properties’ share of these
costs was $6 million. FUNDS FROM OPERATIONS PER DILUTED SHARE
Three months ended Dec. 31
Year ended Dec. 31
(US Millions except per share amounts)
2006
2005
2006
2005
Funds from operations
$ 125
$
138
$ 443
$
435
Preferred share dividends
(1)
-
(3)
(2)
Funds available to common shareholders
$ 124
$
138
$ 440
$
433
Weighted average shares outstanding
241.1
233.6
235.3
234.2
Funds from operations per share
$ 0.52
$
0.59
$ 1.87
$
1.85
DISCONTINUED OPERATIONS
Three months ended Dec. 31
Year ended Dec. 31
(US Millions except per share amounts)
2006
2005
2006
2005
Property disposition gains
-
-
$ 44
-
Revenue
4
9
20
34
Operating expenses
(2)
(5)
(10)
(17)
2
4
54
17
Interest expense
-
(3)
(3)
(8)
Funds from discontinued operations and gains
2
1
51
9
Depreciation and amortization
(1)
(3)
(3)
(7)
Future income taxes
(2)
-
(16)
-
Discontinued operations
(1)
(2)
32
2
Net income per share – discontinued
operations
-
$
(0.01)
$ 0.14
$
0.01
COMMERCIAL PROPERTY NET OPERATING INCOME
Three months ended Dec. 31
Year ended Dec. 31
(US Millions)
2006
2005
2006
2005
Revenue from continuing operations
$ 496
$
269
$ 1,382
$
1,051
Recurring fee income
12
6
32
22
Non-recurring fee income
-
30
5
30
Total commercial property revenue
508
305
$ 1,419
$
1,103
Operating expenses
(195)
(115)
(579)
(429)
Net operating income
$ 313
$
190
$ 840
$
674
RESIDENTIAL DEVELOPMENT NET OPERATING INCOME
Three months ended Dec. 31
Year ended Dec. 31
(US Millions)
2006
2005
2006
2005
Revenue
$ 158
$
158
$ 460
$
389
Operating expenses
(107)
(113)
(316)
(283)
Net operating income
$ 51
$
45
$ 144
$
106
FUND INTERESTS
Three months and year ended Dec. 31
(US Millions)
2006
2005
Interest on debt securities
$ 7
-
Interest on redeemable equity interests
4
-
Non-controlling interests
1
-
12
-
Non-cash component of fund interests
(45)
-
Total fund interests expense
$ (33)
-
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