Brookfield Announces Distribution Of U.S. Home Building Business.Business Editors NEW YORK--(BUSINESS WIRE)--Oct. 29, 2002 Investors, analysts and other interested parties can access Brookfield's (NYSE NYSE See: New York Stock Exchange :BPO BPO Business Process Outsourcing BPO Benevolent & Protective Order (of Elks of the USA) BPO Benzoyl Peroxide BPO Business Process Optimization BPO Broker Price Opinions BPO Buffalo Philharmonic Orchestra ) (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :BPO) Supplemental Information Package regarding this transaction on Brookfield's website under the Investor Information/Financial Reports section at www.brookfieldproperties.com. Brookfield's third quarter investor conference call can be accessed by teleconference on October 29, 2002 at 3:00 p.m. EST P.M. also p.m. or p.m. abbr. post meridiem Usage Note: By definition, 12 a.m. at 1-800-482-2225. Should the toll-free number not be available in your area, the call may be accessed by dialing 1-303-224-6997. The archived teleconference may be accessed by dialing 1-888-211-2648 with reservation number 2431897. Should the toll-free number not be available in your area, please access the archived call by dialing 1-703-925-2474. Alternatively, the conference call can be accessed by Webcast on the Brookfield website at www.brookfieldproperties.com. Brookfield Properties Brookfield Properties Corporation TSX: BPO NYSE: BPO is a Toronto-based North American commercial real estate company. Brookfield Asset Management owns 50% of its outstanding common shares. Corporation (NYSE:BPO) (TSX:BPO) today announced that it intends to distribute its U.S. residential home building business to its common shareholders, subject to regulatory approval. In preparation for this, the U.S. home building business is being reorganized re·or·gan·ize v. re·or·gan·ized, re·or·gan·iz·ing, re·or·gan·iz·es v.tr. To organize again or anew. v.intr. To undergo or effect changes in organization. and is currently operating under the name Brookfield Homes Corporation ("Brookfield Homes"). This transaction is intended to allow Brookfield to focus on its core business of owning and operating premier office properties in select North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. city centers, and to maximize the value of Brookfield's U.S. residential home building operations for shareholders. Brookfield Homes intends to file a registration statement in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and a non-offering prospectus in Canada on or about October 31, 2002 to prepare for a distribution of its common shares. Background Given the positive results of Brookfield's U.S. home building operations over the past five years, an extensive review of the strategic fit of the U.S. home building operations in Brookfield was conducted. The board of directors of Brookfield determined that it is in the best interest of shareholders to separate the U.S. home building business from the commercial property business, based on three major factors: -- The separation will enhance Brookfield's ability to focus on its core commercial property business, and is a response to the market's perceived preference for "pure play" commercial property companies; -- Brookfield believes that the value of its U.S. home building operation is not fully recognized in the market price of its common shares and that shareholder value will be enhanced operating it as a separate public company; and -- As a separate public company, Brookfield Homes will have the ability to raise capital on its own, and respond to opportunities in the home building industry, independent of a commercial property-focused company. The Transaction Brookfield Properties Corporation shareholders of record on December 20, 2002 will receive a special distribution equivalent to one fifth of a Brookfield Homes share for each Brookfield share that they own. This distribution will be made on December 31, 2002. The value of the special dividend, based on a book value of US$322 million of equity, will be US$2.00 per Brookfield share. Brookfield will convene CONVENE, civil law. This is a technical term, signifying to bring an action. a special meeting of shareholders on December 16, 2002 to approve a reduction in the stated capital stated capital See legal capital. of the corporation's common shares in order to minimize the tax impact on the distribution to shareholders. Brookfield Homes will apply for a listing of its common shares on the NYSE under the symbol "BHC BHC benzene hexachloride. BHC, ?-BHC see benzene hexachloride. ." Brookfield's largest shareholder, Brascan Corporation (NYSE:BNN BNN Boston Neighborhood Network BNN Boundary Network Node (IBM) BNN Back-Propagation Neural Network BNN Biological Neural Network BNN Bart's Neverending Network (public-service TV network in The Netherlands) ) (TSX:BNN), has indicated that it will continue to hold its approximate 50% interest in Brookfield Homes upon it becoming a public company, and that it may increase its interest in the future. Despite the expectation of this spin-off The situation that arises when a parent corporation organizes a subsidiary corporation, to which it transfers a portion of its assets in exchange for all of the subsidiary's capital stock, which is subsequently transferred to the parent corporation's shareholders. on December 31, 2002, the board of directors of Brookfield may terminate the distribution in the event that the board determines that it is no longer in the best interest of the shareholders of Brookfield. Financial Impact Brookfield - Balance Sheet The pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma balance sheet of Brookfield, reflecting the completion of this transaction, is expected to be as follows:
Unaudited - US$ millions Sept 30, Distribut- Pro forma
2002(1) ion Sept. 30,
Impact 2002
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Assets
Commercial properties $5,553 $5,553
Development properties 1,051 (101) 950
Residential housing inventory 723 (723) -
Receivables and other 759 56 815
Cash and cash equivalents 197 197
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$8,283 $7,515
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Liabilities
Commercial property debt $4,587 $4,587
Residential construction financing 353 (353) -
Accounts payable and other liabilities 574 (93) 481
Shareholders' Interests
Interests of others in properties 129 129
Preferred shares - corporate and
subsidiaries 579 579
Common shares 2,061 (322) 1,739
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$8,283 $7,515
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(1) Certain figures have been reclassified
Brookfield Homes - Balance Sheet
The balance sheet of Brookfield Homes is expected to be
approximately as follows:
US GAAP - US$millions Proforma Proforma
Sept. 30, 2002 Dec. 31, 2001
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Assets
Housing and land inventory $675 $633
Investment in housing and land joint ventures 112 94
Receivables 45 66
Cash and cash equivalents 2 1
Deferred tax asset 45 57
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$879 $851
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Liabilities & Equity
Project specific financings $298 $284
Accounts payable and other liabilities 93 50
Subordinated debt 143 215
Interests of others in assets 23 15
Stockholder's equity 322 287
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$879 $851
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Funds from Operations Funds From Operations (FFO) Used by real estate and other investment trusts to define the cash flow from trust operations; earnings with depreciation and amortization added back. After distribution of the U.S. residential home building business to shareholders, the expectation of funds from operations of the combined business will be unchanged. Management's estimate for 2003 funds from operations of Brookfield Properties will be US$2.15 per share, and a further US$0.48 per share for Brookfield Homes. This is consistent with the funds from operations target of US$2.60 per share provided by Brookfield's management for 2003. The comparable funds from operations per share estimates for 2002 are US$1.88 for commercial property operations, which implies a growth rate of 14% for 2003, and US$0.44 for the home building operations, which implies a growth rate of 10%. The summary of funds from operations per share estimates is as follows:
Funds from Operations Per
Brookfield Properties Share(1) 2002E(2) 2003E(2) Growth
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Brookfield Properties $1.88 $2.15 14%
Brookfield Homes 0.44 0.48 10%
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$2.32 $2.63 13%
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(1) Funds from operations is defined as GAAP net income before
non-cash taxes and depreciation
(2) Prior to lease termination income and gains.
Outlook Ric Clark, President & CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Brookfield, commented that "this transaction solidifies our position as a premier North American office property company and allows shareholders who retain their proportionate pro·por·tion·ate adj. Being in due proportion; proportional. tr.v. pro·por·tion·at·ed, pro·por·tion·at·ing, pro·por·tion·ates To make proportionate. share of Brookfield Homes to participate more directly in the successful home building company we have built over the past five years." It is expected that the new board of directors of Brookfield Homes will consist of seven directors, including four independent directors, Bruce Bruce, Scottish royal family descended from an 11th-century Norman duke, Robert de Brus. He aided William I in his conquest of England (1066) and was given lands in England. Flatt, Gordon Arnell and Ian Cockwell, who will also serve as Chief Executive Officer. Ian Cockwell currently holds the position of President and Chief Executive Office of the Residential Operations of Brookfield. "This is an excellent opportunity for Brookfield Homes to create value for shareholders, building on our existing management expertise and well established franchise in the U.S. residential markets," concluded Cockwell. Brookfield Properties Corporation Brookfield Properties Corporation, with a stock market value of $9 billion in assets, owns, develops and manages premier North American office properties. The Brookfield portfolio comprises 50 commercial properties and development sites totaling 45 million square feet, including landmark properties such as the World Financial Center in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of and BCE BCE abbr. 1. Bachelor of Chemical Engineering 2. Bachelor of Civil Engineering BCE Abbreviation for before the Common Era. Place in Toronto. Brookfield is inter-listed on the New York and Toronto Stock Exchanges Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. under the symbol BPO. For more information, visit the Brookfield Properties website at www.brookfieldproperties.com. Brookfield Homes Corporation Brookfield Homes Corporation is a U.S.-based residential home builder which builds homes and develops land in master-planned communities and infill in·fill n. 1. The use of vacant land and property within a built-up area for further construction or development, especially as part of a neighborhood preservation or limited growth program. 2. locations. The company markets, designs and develops single-family and multi-family homes primarily to move-up and luxury buyers and also develops land which is sold to other home builders. The company's operations are currently in four markets: the San Francisco Bay Area “Bay Area” redirects here. For other uses, see Bay Area (disambiguation). The San Francisco Bay Area, colloquially known as the Bay Area or The Bay ; Southland/Los Angeles; San Diego/Riverside; and Northern Virginia Northern Virginia (NoVA) consists of Arlington, Fairfax, Loudoun, and Prince William counties and the independent cities of Alexandria, Falls Church, Fairfax, Manassas, and Manassas Park. . Note: This press release contains "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of Section 27A of the Securities Act of 1933, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , and Section 21E of the Securities Exchange Act of 1934, as amended. The words "believe," "expect," "anticipate," "intend," "estimate," and other expressions which are predictions of or indicate future events and trends and which do not relate to historical matters, identify forward looking statements. Reliance should not be placed on forward-looking statements 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. Factors that could cause actual results to differ materially from those set forward in the forward-looking statements include general economic conditions, local real estate conditions, timely re-leasing of occupied square footage upon expiration EXPIRATION. Cessation; end. As, the expiration of, a lease, of a contract, or statute. 2. In general, the expiration of a contract puts an end to all the engagements of the parties, except to those which arise from the non- fulfillment of obligations created , interest rates, availability of equity and debt financing Debt Financing When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay and other risks detailed from time to time in the documents filed by the companies with the securities regulators in Canada and the United States The United States and Canada share a unique legal relationship. U.S. law looks northward with a mixture of optimism and cooperation, viewing Canada as an integral part of U.S. economic and environmental policy. . Brookfield Properties Corporation and Brookfield Homes Corporation undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. |
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