Brookfield Reports 15% Growth In Funds From Continuing Operations For 2002.Business Editors NEW YORK--(BUSINESS WIRE)--Feb. 5, 2003 Brookfield Brookfield. 1 Village (1990 pop. 18,876), Cook co., NE Ill., a residential suburb of Chicago; inc. 1893. The noted Chicago Zoological Park (Brookfield Zoo) is there. 2 City (1990 pop. 35,184), Waukesha co., SE Wis. (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): 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 fourth quarter investor conference call can be accessed by teleconference on February February: see month. 5, 2003 at 1:00 p.m. EST P.M. also p.m. or p.m. abbr. post meridiem Usage Note: By definition, 12 a.m. at 416-695-9703 or 1-888-789-0089. The archived teleconference may be accessed by dialing 416-695-5797 or 1-866-467-2020 with access code 8588 through March 5, 2003. 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 today announced financial results for the fourth quarter and year ended December December: see month. 31, 2002. Excluding Brookfield Homes Corporation, which was distributed to shareholders on January January: see month. 6, 2003, the results of operations for the year ended December 31, 2002 are as follows:
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Results of Continuing Operations
For the 3 Months For the Year
Ended Ended
December 31 December 31
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(US$millions, except % %
per share information) Increase 2002 2001 Increase 2001 2002
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Funds from operations (FFO)
prior to lease termination
income and gains 21% $81 $67 13% $322 $286
FFO per share prior to lease
termination income and gains 24% $0.47 $0.38 15% $1.87 $1.63
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FFO and gains 21% $81 $67 12% $374 $334
FFO and gains per share 24% $0.47 $0.38 14% $2.18 $1.92
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Net income 28% $50 $39 17% $236 $202
Net income per share 38% $0.29 $0.21 20% $1.34 $1.12
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FINANCIAL HIGHLIGHTS On January 6, 2003, the company distributed all of the common shares of Brookfield Homes to shareholders of record on January 2, 2003. Shareholders received one common share of Brookfield Homes for each five shares of Brookfield Properties held on the date of record. The transaction was recorded as a distribution to shareholders at the carried value of the company's investment in Brookfield Homes, and resulted in a reduction in the stated capital stated capital See legal capital. of Brookfield Properties of $323 million. The company's results for the year 2002 and prior periods include the results of Brookfield Homes classified as a discontinued operation discontinued operation A segment of a business that has been abandoned or sold or for which plans for one or another of these actions have been approved. See also continuing operations. . For the year ended December 31, 2002, funds from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the , prior to lease termination The point where a line, channel or circuit ends. See SCSI termination and hybrid. income and gains, increased to $322 million or $1.87 per share, compared with $286 million or $1.63 per share in 2001. Funds from continuing operations, prior to lease termination income and gains, for the three months ended December 31, 2002, increased to $81 million or $0.47 per share, compared with $67 million or $0.38 per share in the prior year. Total funds from continuing operations and gains for the year ended December 31, 2002 increased to $374 million or $2.18 per share, compared to $334 million or $1.92 per share for 2001. The 2002 results included $60 million in gains on the sale of 50% interests 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 Calgary (kăl`gərē), city (1991 pop. 710,677), S Alta., Canada, at the confluence of the Bow and Elbow rivers. The largest city in Alberta and the fastest-growing major city in Canada, Calgary is a corporate, transportation, and financial and Exchange Tower in Toronto Toronto (tərŏn`tō), city (1998 est pop. 2,400,000), provincial capital, S Ont., Canada, on Lake Ontario. Toronto is the largest city in Canada and since the 1970s has been one of the fastest-changing cities in North America, experiencing , while 2001 results included $55 million in gains on the sale of partial interests in Fifth Avenue Place in Calgary and in Brookfield's Boston Boston, town, England Boston, town (1991 pop. 26,495), E central England, on the Witham River. Boston's fame as a port dates from the 13th cent., when it was a Hanseatic port trading wool and wine. Having recovered from a decline in the 18th and 19th cent. portfolio. Net income from continuing operations for the year ended December 31, 2002 was $1.34 per share, compared to $1.12 per share for 2001. Including the results of discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. , net income increased to $1.61 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share for the year ended December 31, 2002 compared to $1.36 per diluted share for the same period in 2001. The Board of Directors of Brookfield declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. a quarterly common share dividend of $0.10 per share, payable March 31, 2003 to shareholders of record at the close of business on March 1, 2003. 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 Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of will receive their dividends in Canadian dollars Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents at the exchange rate on the date of record, unless they elect otherwise. The regular quarterly dividend payable for the 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. , Series F preferred shares Preferred shares Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock. was also declared payable on March 31, 2003 to shareholders of record on March 15, 2003 equal to C$0.375 per share. "Brookfield achieved its cashflow targets for the year, including 15% growth in FFO FFO See: Funds from operations per share. Our shareholders also benefited from a 19.8% total return based upon share price appreciation and dividends received for 2002," said 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. "The continued strength of our results and confident outlook for 2003 reflects our focus on reducing risk throughout the portfolio in order to consistently deliver value to shareholders." MAJOR 2002 INITIATIVES -- Positioned Brookfield Properties as a pure play commercial property company through the spin-off of Brookfield Homes Corporation. On January 6, 2003, Brookfield completed the separation of its U.S. home building operations from the commercial operations through the creation and spin-out of Brookfield Homes Corporation. This initiative allows Brookfield to focus on its core commercial property business; it also enables the value of the U.S. home building business to be recognized in the marketplace on its own. Brookfield's share price has increased to surpass the price quoted on the day the distribution was announced, notwithstanding the distribution of assets with a book valuation of $323 million, or $2 per Brookfield Properties share. Additionally, the market price of Brookfield Homes on the NYSE exceeds the book value of the distribution. -- Generated in excess of $900 million in capital, including $285 million from commercial property operations, $91 million from Brookfield's residential operations, $220 million from the sale of partial interests and non-core assets, $93 million from financings, and $224 million through the issuance of preferred shares and additional credit lines. -- Purchased 51% or 1.2 million square feet of Three World Financial Center in New York for $158 million or $128 per square foot. The 52-story tower is home to the world headquarters of co-owner American Express and is one of four towers in the World Financial Center complex located in Lower Manhattan. Brookfield also owns 100% of Towers One and Two and 51% of Tower Four of the eight million square foot complex. -- Sold a 50% interest in the Company's Bankers Hall complex in Calgary to an institutional investor. This transaction generated net proceeds of $72 million, net of non-recourse debt of $193 million, and a gain of $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 of the Calgary office portfolio. -- Sold a 50% interest in Exchange Tower in Toronto to two Canadian pension funds based on a valuation of approximately $100 million for the undivided 50% interest. This transaction generated proceeds of approximately $55 million, net of non-recourse debt on the property, and a gain of $40 million. -- Increased ownership in New York and Boston assets to 98.5% for consideration of $56 million. -- Repurchased nearly 1.4 million common shares of the company at an average price of $18.49 per share, or $16.49 per share if the impact of the distribution of Brookfield Homes is considered. Subsequent to December 31, 2002, the company has acquired a further 150,600 shares at an average price of $18.18 per share. This brings the total shares repurchased since the inception of our normal course issuer bid in 1999 to over 5.9 million. -- Issued C$200 million of preferred shares that commenced trading on the Toronto Stock Exchange on September 25, 2002 under the symbol BPO.PR.F, reducing future preferred share dividends by $3.5 million. -- Entered into a three-year $100 million credit facility with two major financial institutions, further enhancing liquidity and financial flexibility. -- Increased ownership of Canada Trust Tower in Toronto to 50% by acquiring an additional 10% interest for $29 million. 2002 OPERATING HIGHLIGHTS -- Achieved 5% growth in commercial property operating income for the year to $600 million from $570 million in 2001, after removing the impact of dispositions. -- Generated $60 million of gains in excess of these operating cashflows for the year through the sale of partial interests in Exchange Tower in Toronto and Bankers Hall in Calgary. -- Pro-actively leased three million square feet during 2002, three times the amount contractually expiring during the year. The average lease term across the portfolio is ten years with no major lease rollovers until 2005. The portfolio was 95.5% leased at the end of the year. -- Leased over one million square feet in Toronto during 2002, most notably 428,000 square feet to CIBC and 106,000 square feet to McMillan Binch, and a further 207,000 square feet to Marsh Mercer in January 2003, eliminating significant 2005 lease expiries and extending the average lease term in Toronto. -- Led Lower Manhattan redevelopment activities with the reopening of the Winter Garden and the retenanting of the company's properties. The reoccupancy of Brookfield's Lower Manhattan properties proceeded with a number of new leases signed during the year including a 140,000 square foot sublease with Thacher Proffitt & Wood at Two World Financial Center, and more than 300,000 square feet at One Liberty Plaza in new lease agreements with Zurich North America, Arch Insurance, NASD and Cleary, Gottlieb, Steen and Hamilton. As the first major construction project to be completed near ground zero, the restoration and reopening to the public of the Winter Garden at the World Financial Center in September represented a significant contribution to the area's renewal. -- Progressed construction on 300 Madison Avenue development at 42nd Street in Midtown Manhattan. This project continues on time and on budget for an anticipated delivery date of fall 2003. Steel has been erected in the entire 35-story office tower and the installation of curtain wall is nearly finished. Brookfield completed the permanent refinancing in April 2002. OUTLOOK "Although 2002 was a challenging year for the North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. economy and for real estate markets, we are proud to be able to report another year of record financial results and significant accomplishments," said Ric Clark, President & CEO of Brookfield. "Our long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. lease profile, in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with a strong balance sheet and significant financial flexibility, provide a solid foundation for our continued growth, both internally through contractual rent increases and externally through acquisitions and selective development opportunities," concluded Clark. Brookfield Properties Corporation, with a stock market value of $8.6 billion in assets, owns, develops and manages premier North American office properties. The Brookfield portfolio comprises 50 commercial properties and development sites totaling 46 million square feet, including landmark A structure that has significant historical, architectural, or cultural meaning and that has been given legal protection from alteration and destruction. Although landmark preservation laws vary by city and state, they have the same basic purpose: to keep landmarks as close 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. 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 Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. 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 oc·cu·py tr.v. oc·cu·pied, oc·cu·py·ing, oc·cu·pies 1. To fill up (time or space): a lecture that occupied three hours. 2. To dwell or reside in. 3. 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 company 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. . The company undertakes 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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Pro-forma (a)
(US $Millions) Dec. 31 Dec. 31 Dec. 31 Dec. 31
2002 2002 2001 2000
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Assets
Commercial properties $5,661 $5,661 $5,802 $6,368
Development properties 944 944 575 537
Receivables and other 769 769 847 1,017
Cash and cash equivalents 76 76 195 201
Assets of Brookfield Homes Corporation - 879 872 762
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$7,450 $8,329 $8,291 $8,885
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Liabilities
Commercial property debt $4,038 $4,038 $4,376 $4,542
Commercial development property debt 550 550 230 160
Accounts payable and other liabilities 429 429 460 1,031
Liabilities of Brookfield Homes Corporation- 556 583 549
Shareholders' interests
Interests of others in properties 84 84 113 159
Preferred shares - corporate
and subsidiaries 579 579 585 607
Convertible debentures - - - 50
Common shares 1,770 2,093 1,944 1,787
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$7,450 $8,329 $8,291 $8,885
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(a) Reflects distribution of Brookfield Homes Corporation, completed
on January 6, 2003.
CONSOLIDATED STATEMENT OF INCOME
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Three months ended Dec. 31 Year Ended Dec. 31
(US$Millions, except 2002 2001 2000 2002 2001 2000
per share amounts)
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Total Revenue $385 $350 $360 $1,372 $1,428 $1,369
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Net Operating Income
Commercial property operations
Operating income from
current properties $152 $139 $129 $585 $555 $506
Operating income from
properties sold - 10 24 15 62 86
Lease termination income
and gains - - - 60 55 19
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Total commercial property
operations 152 149 153 660 672 611
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Development and residential
income 2 1 1 22 20 27
Interest and other 11 9 12 48 42 45
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165 159 166 730 734 683
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Expenses
Interest 68 76 84 284 328 324
Administrative and development 9 10 11 42 44 44
Interests of others in
properties 7 6 11 30 28 47
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Income before non-cash items 81 67 60 374 334 268
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Depreciation and amortization 22 20 19 80 76 66
Taxes and other non-cash items 9 8 9 58 56 62
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Net Income From Continuing
Operations 50 39 32 236 202 140
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Income From Discontinued
Operations 16 15 14 44 39 30
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Net Income $66 $54 $46 $280 $241 $170
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Funds From Operations Per Share -
Diluted
FFO per share -
prior to lease termination
income and gains $0.47 $0.38 $0.34 $1.87 $1.63 $1.45
Lease termination income
and gains - - - 0.31 0.29 0.11
Discontinued operations 0.16 0.15 0.14 0.45 0.40 0.32
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$0.63 $0.53 $0.48 $2.63 $2.32 $1.88
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Net Income Per Share - Diluted
Net income - prior to lease
termination income
and gains $0.29 $0.21 $0.16 $1.09 $0.90 $0.68
Lease termination income
and gains - - - 0.25 0.22 0.08
Discontinued operations 0.10 0.09 0.09 0.27 0.24 0.19
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$0.39 $0.30 $0.25 $1.61 $1.36 $0.95
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