Brookfield Reports 13% Increase In Third Quarter Funds From Operations.Business Editors NEW YORK--(BUSINESS WIRE)--Oct. 29, 2002 Brookfield (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): Properties Remain 96% Leased Investors, analysts and other interested parties can access Brookfield's Supplemental Information Package 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 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 (BPO: NYSE, TSX) today announced operating results for the third quarter ended September 30, 2002.
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Results of Operations For the 3 Months Ended For the 9 Months Ended
September 30 September 30
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(US$ millions, except
per share information)
Increase 2002 2001 Increase 2002 2001
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Funds from operations
prior to lease
termination income and
gains 12% $ 100 $ 89 11% $ 288 $ 259
FFO per share prior to
lease termination
income and gains 13% $0.59 $0.52 13% $1.69 $1.50
Funds from operations
and gains 31% $ 117 $ 89 11% $ 340 $ 307
FFO and gains per share 33% $0.69 $0.52 12% $2.00 $1.79
Net income 40% $ 74 $ 53 16% $ 214 $ 187
Net income per share 40% $0.42 $0.30 15% $1.22 $1.06
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FINANCIAL HIGHLIGHTS For the three months ended September 30, 2002, 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. , prior to lease termination income and gains, increased to $100 million or $0.59 per share, compared with $89 million or $0.52 per share for the same period in 2001. Total funds from operations and gains for the three months ended September 30, 2002 increased 31% to $117 million or $0.69 per diluted share, compared to $89 million or $0.52 per diluted share for the same period in 2001 and included a $20 million gain on the sale of a 50% interest in Bankers Hall Bankers Hall is a building complex located in downtown Calgary, Alberta, which includes twin 52-storey office towers (197 metres high), designed by the architectural firm Cohos Evamy in postmodern architectural style. in Calgary. Net income per share on a diluted basis for the three months ended September 30, 2002 was $0.42, compared to $0.30 per share for the same period in 2001. Ric Clark, President and 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, said, "With a strong balance sheet, long-term lease contracts and substantial financial flexibility, we are well positioned to weather the current economic slowdown and take advantage of opportunities which we believe will present themselves in this environment." The Board of Directors of Brookfield declared a quarterly common share dividend of US$0.10 per share, payable December 31, 2002 to shareholders of record at the close of business on December 20, 2002. Shareholders resident 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. 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 date of record, unless they elect otherwise. MAJOR INITIATIVES IN THE THIRD QUARTER OF 2002 Announced the creation of Brookfield Homes Corporation. Brookfield intends to distribute its U.S. residential home building business, Brookfield Homes Corporation, to shareholders on December 31, 2002, subject to regulatory approval. Given the success and consistently positive results of Brookfield's U.S. home building operations over the past five years, an extensive review of the strategic fit of this business within Brookfield was conducted. The board of directors and management 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. Brookfield intends to accomplish the spin-off by way of a special share distribution equivalent to $2.00 per Brookfield share, expected to be completed on December 31, 2002. Brookfield Homes will apply for a listing on the NYSE, and subsequent to the distribution, is expected to trade under the symbol "BHC BHC benzene hexachloride. BHC, ?-BHC see benzene hexachloride. ." Acquired a 51% interest amounting to 1.2 million square feet in Three World Financial Center in Lower Manhattan Lower Manhattan is the southernmost part of the island of Manhattan, the main island and center of business and government of the City of New York. Lower Manhattan is generally defined as the area delineated on the north by Chambers Street, on the west by the Hudson River (North from Lehman Brothers Lehman Brothers Holdings Inc. (NYSE: LEH), founded in 1850, is a diversified, global financial services firm. It is a participant in investment banking, equity and fixed income sales, research and trading, investment management, private equity, and private banking. for $158 million. The 52-story tower is home to the world headquarters of co-owner American Express American Express (NYSE: AXP), sometimes known as "AmEx" or "Amex", is a diversified global financial services company, headquartered in New York City. The company is best known for its credit card, charge card and traveler's cheque businesses. and is one of four towers in the World Financial Center complex located in Battery Park City on the Hudson River Hudson River River, New York, U.S. Originating in the Adirondack Mountains and flowing for about 315 mi (507 km) to New York City, it was named for Henry Hudson, who explored it in 1609. Dutch settlement of the Hudson valley began in 1629. . Brookfield also owns 100% of Towers One and Two and 51% of Tower Four within the complex, which in total, comprises eight million square feet. Sold a 50% interest in the Company's Bankers Hall complex in Calgary to an institutional investor Institutional Investor A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. . This transaction generated net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). for Brookfield of US$72 million, the assignment of US$193 million of non-recourse debt Non-Recourse Debt A loan that is secured by some sort of collateral, usually property. The issuer can seize the collateral if the borrower defaults. Notes: These types of projects are characterized by high capital expenditures, long loan periods, and uncertain revenue to the purchaser and a gain of US$20 million. This transaction follows the sale of a 50% interest in Fifth Avenue Place in Calgary in 2001 and represents the culmination of the repositioning repositioning Laparoscopic surgery The changing of a Pt's position during a procedure to improve access or visualization of the operative field, which may be linked to complications, as it changes anatomic planes of operation. Cf Laparoscopic surgery. of the Calgary office portfolio. Reopened the Winter Garden on-time and on-budget, fulfilling a commitment to welcome back visitors one year after the 45,000 square foot glass-enclosed atrium was damaged in the collapse of the World Trade Center On September 11, 2001, the two main towers of the World Trade Center complex were each hit by aircraft as part of the September 11, 2001 attacks. The south tower (2 WTC) collapsed at 9:59 a.m., less than an hour after being hit, and the north tower (1 WTC) followed at 10:28 a.m. towers. During the $50 million reconstruction process, more than 500 laborers worked to replace 2,000 glass panes, sixteen 43-foot palm trees and 60,000 square feet of marble. A new eastern facade of sheer glass facing West Street was designed and the Winter Garden was rededicated on September 12 at a reception for the United Nations General Assembly held by President Bush. Progressed construction on CIBC World Markets CIBC World Markets is the investment banking division of the Canadian Imperial Bank of Commerce. It helps governments, large companies, and other large institutions obtain capital and credit and is a primary dealer in U.S. Treasury securities. Tower at 42nd Street and Madison Avenue Madison Avenue, celebrated street of Manhattan, borough of New York City. It runs from Madison Square (23d St.) to the Madison Bridge over the Harlem River (138th St.). In the 1940s and 50s, some of the major U.S. . This project continues on time and on budget for an anticipated delivery date of August 2003. Steel has been erected up to the 33rd floor of the 35-floor development and the installation of curtain wall curtain wall Nonbearing wall of glass, metal, or masonry attached to a building's exterior structural frame. After World War II, low energy costs gave impetus to the concept of the tall building as a glass prism, an idea originally put forth by Le Corbusier and Ludwig Mies is complete through the 10th floor. Completed C$200 million preferred share issue. Brookfield issued 8 million Class AAA AAA: see American Automobile Association. (Triple A) A common single-cell battery used in a myriad of electronic devices of all variety. Like its double A (AA) cousin, it provides 1.5 volts of DC power. When used in series, the voltage is multiplied. Preference Shares, Series F at a price of C$25.00 per share to yield 6% per annum Per annum Yearly. . The Series F Preference Shares commenced trading on the Toronto Stock Exchange Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. on September 25, 2002 under the symbol BPO.PR.F. The Board of Directors declared the first quarterly dividend of C$0.3986 per share payable on December 31, 2002 to shareholders of record on December 15, 2002. Renewed normal course issuer bid and continued to acquire common shares of the company, bringing the total number of shares repurchased to date in 2002 to 1,051,300 at an average price of $18.39 per share. OPERATING HIGHLIGHTS Brookfield achieved its financial and operating objectives year to date despite a more challenging leasing environment and increased sublet sub·let tr.v. sub·let, sub·let·ting, sub·lets 1. To rent (property one holds by lease) to another. 2. To subcontract (work). n. space in most markets. Brookfield's long-term lease profile and minimal lease maturities over the next few years, as well as below-market embedded Inserted into. See embedded system. rents, insulated in·su·late tr.v. in·su·lat·ed, in·su·lat·ing, in·su·lates 1. To cause to be in a detached or isolated position. See Synonyms at isolate. 2. the company from these market conditions, and positions the company for continued strong performance. During the third quarter of 2002, Brookfield: -- Leased approximately 600,000 square feet of space, despite a generally slower leasing environment, increasing total year to date leasing to 1.7 million square feet. Notable transactions include: in Calgary, a 10-year lease for 200,000 square feet with EnCana Corporation EnCana Corporation is one of the largest independently owned oil and gas companies in the world. In both 2003 and 2004 it was Canada's most profitable company, with approximately $3.5 billion (U.S.) in profits on $12.2 billion in revenue. at Bankers Hall; and 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 , a new 18-year lease for 27,000 square feet with NASD NASD See: National Association of Securities Dealers NASD See National Association of Securities Dealers (NASD). and 26,000 square feet with Cleary, Gottlieb, Steen and Hamilton at One Liberty Plaza. Also in New York, subsequent to September 30, 2002, Brookfield leased a quarter of a million square feet at One Liberty Plaza One Liberty Plaza is a skyscraper in lower Manhattan, New York, which resides at the location of the former Singer Building (in 1968, the second tallest building to be demolished). One Liberty Plaza is currently owned and operated by Brookfield Properties. through a renewal of a 10-year lease for 208,000 square feet with Zurich North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. and a new 10-year lease for 45,000 square feet with Arch Insurance Company. -- Remains 96% occupied across its office portfolio, excluding development properties, with an average lease term of 10 years and rollover A graphic element in an application or on a Web page that changes its color or shape when the pointer is moved (rolled) over it. See JavaScript rollover. See also n-key rollover. of leases less than 4% until 2005. -- Increased contribution from residential property operations to $26 million in the third quarter, an increase of 13% over 2001. These operations continued to benefit from the low interest rate environment, fueling consumer demand for new homes across North America. Residential property operations achieved 100% of expected sales for 2002 year-to-date, and sales for 2003 are now being booked. OUTLOOK "The separation of our U.S. home building business should create value for shareholders by allowing us to sharpen our focus on our core business, while facilitating Brookfield Homes' ability to respond to the opportunities of the home building industry, independent of a commercial property-focused company. At Brookfield Properties, we will continue to execute our disciplined strategy of owning, developing and managing premier office properties in select, supply-constrained, high-growth office markets, aimed at delivering solid earnings performance over the long term and throughout economic cycles," said Clark. Brookfield Properties Corporation, with a stock market value of $9 billion in assets, owns, develops and manages premier North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. 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 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 under the symbol BPO. For more information, visit the Brookfield Properties website at www.brookfieldproperties.com. 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, 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, 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.
CONSOLIDATED BALANCE SHEET
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unaudited Sep. 30 Dec. 31 Dec. 31
(US $Millions) 2002 2001 2000
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Assets
Commercial properties $5,553 $5,749 $6,326
Development properties 1,051 724 637
Residential housing inventory 723 618 559
Receivables and other 759 789 893
Cash and cash equivalents 197 196 209
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$8,283 $8,076 $8,624
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Liabilities
Commercial property debt $4,587 $4,606 $4,702
Advances and residential
construction financing 572 559 951
Accounts payable 355 269 368
Shareholders' interests
Interests of others in
properties 129 113 159
Preferred shares - corporate
and subsidiaries 579 585 607
Convertible debentures - - 50
Common shares and convertibles 2,061 1,944 1,787
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$8,283 $8,076 $8,624
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CONSOLIDATED STATEMENT OF INCOME
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unaudited Three months ended Nine months ended
(US$ Millions, except Sep. 30 Sep. 30
per share amounts) 2002 2001 2000 2002 2001 2000
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Total Revenue $470 $556 $483 $1,514 $1,603 $1,371
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Net Operating Income
Commercial property
operations
Operating income
from current
properties $144 $140 $128 $433 $416 $377
Operating income
from properties sold 2 14 23 15 52 62
Lease termination
income and gains 20 - - 60 55 19
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Total commercial
property operations 166 154 151 508 523 458
Development and
residential income 26 23 23 69 61 54
Interest and other 14 10 9 35 31 31
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206 187 183 612 615 543
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Expenses
Interest 71 80 85 216 252 240
Administrative and
development 10 11 10 33 34 33
Interests of others
in properties 8 7 11 23 22 36
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Funds From
Operations and Gains 117 89 77 340 307 234
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Depreciation and
amortization 20 19 17 58 56 47
Taxes and other
non-cash items 23 17 21 68 64 63
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Net Income $ 74 $ 53 $ 39 $214 $187 $124
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Funds From Operations
Per Share - Diluted
FFO per share -
prior to lease
termination income
and gains $0.59 $0.52 $0.46 $1.69 $1.50 $1.29
Lease termination
income and gains 0.10 - - 0.31 0.29 0.11
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$0.69 $0.52 $0.46 $2.00 $1.79 $1.40
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Net Income Per Share
- Diluted
Net income - prior
to lease termination
income and gains $0.34 $0.30 $0.22 $0.97 $0.84 $0.62
Lease termination
income and gains 0.08 - - 0.25 0.22 0.08
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$0.42 $0.30 $0.22 $1.22 $1.06 $0.70
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