All dollar references are in Canadian dollars
unless noted otherwise.
Brookfield Canada Office Properties (TSX:BOX.UN) (NYSE:BOXC), a
Canadian REIT (Real Estate Investment Trust), today announced that
net income for the year ended December 31, 2016 was $95.5
million or $1.02 per unit, compared with $351.4 million or $3.76
per unit in 2015. Net income for the three months ended December
31, 2016 was $64.2 million or $0.69 per unit, compared to $158.8
million or $1.70 per unit during the same prior year period.
Revaluation loss for the year ended December 31,
2016 was $60.0 million, compared to a revaluation gain of $207.5
million in 2015. Revaluation gain for the three months ended
December 31, 2016 was $25.3 million, compared to a revaluation gain
of $120.8 million during the same period in 2015. The value per
unit was $33.82 at the end of 2016 compared to $33.46 at the end of
the third quarter of 2016 and $35.72 at the end of 2015.
Trust funds from operations (“Trust FFO”) for
the year ended December 31, 2016 was $156.9 million or $1.68 per
unit, compared with $145.8 million or $1.56 per unit in 2015. Trust
FFO for the three months ended December 31, 2016 was $39.2 million
or $0.42 per unit, compared to $38.5 million or $0.41 per unit
during the same prior year period. Adjusted funds from operations
(“AFFO”) was $122.7 million or $1.31 per unit for the year ended
December 31, 2016, compared with $112.4 million or $1.21 per unit
in 2015. AFFO was $31.0 million or $0.33 per unit for the
three months ended December 31, 2016, compared with $30.6 million
or $0.33 per unit during the same prior year period.
Commercial property net operating income ("NOI")
for the year ended December 31, 2016 was $271.9 million, compared
with $251.3 million in 2015. NOI for the three months ended
December 31, 2016 was $67.6 million, compared with $64.8 million
during the same prior year period.
FOURTH QUARTER
HIGHLIGHTSBrookfield Canada Office Properties leased
420,000 square feet of space during the fourth quarter of 2016. The
significant leasing efforts during the quarter brought the Trust's
full-year leasing total to near 1.5 million square feet. The
Trust’s occupancy rate finished the quarter at 94.7%, an increase
of 70 basis points from the prior quarter. This rate compares
favourably with the Canadian national average of 88.1%.
Leasing highlights:
- A 13-year, 125,000-square-foot new lease with WSP Canada Inc.
at Fifth Avenue Place
- A five-year, 112,000-square-foot renewal with Aird & Berlis
LLP at Brookfield Place Toronto
- A 10-year, 30,000-square-foot new lease with Shire Pharma
Canada ULC at Bay Adelaide East
- A six-year, 27,000-square-foot renewal with Glencore Canada
Corporation at First Canadian Place
- A 10-year, 17,000-square-foot renewal with Russell Investments
Canada at First Canadian Place
- A 10-year, 15,000-square-foot new lease with The Consulate
General of Israel at Hudson's Bay Centre
- A five-year, 13,000-square-foot new lease with ECN Capital
Corporation at Brookfield Place Toronto
- A five-year, 12,000-square-foot renewal and expansion with
China Construction Bank at Brookfield Place Toronto
- A seven-year, 10,000-square-foot new lease with DLA Piper
(Canada) LLP at First Canadian Place
Construction continues on
schedule at Brookfield Place Calgary East. The floor
finishes are complete and the pavilion and lobby glass installation
are nearing completion. The project is currently 81% pre-leased to
Cenovus and The Bank of Nova Scotia. Completion remains on target
for late 2017.
“Brookfield Canada Office Properties had a
successful year in 2016 as we saw Trust FFO grow by over 7%,
increased our regular unitholder distribution by 5.7% and completed
the sale of Royal Centre in Vancouver at an attractive valuation,
which triggered a special distribution to our unitholders of $1.60
per unit,” said Jan Sucharda, president and chief executive
officer. “In addition, our significant leasing efforts allowed us
to maintain a healthy portfolio occupancy rate of 94.7%, well above
the national average, despite challenging market conditions in
Calgary where we continued to progress construction at Brookfield
Place Calgary East and secured a second tenant bringing the project
to 81% pre-leased."
ACQUISITION PROPOSAL BY BROOKFIELD
PROPERTY PARTNERSAs outlined in a news release issued by
Brookfield Canada Office Properties earlier today, Brookfield
Property Partners, L.P., announced a proposal to acquire all of the
Brookfield Canada Office Properties units it or its affiliates do
not already own for $30.10 cash per unit. The Board of Trustees of
Brookfield Canada Office Properties has established a special
committee to review and consider the proposal.
Monthly Distribution DeclarationThe Board of
Trustees of Brookfield Canada Office Properties announced a
distribution of $0.1092 per Trust unit payable on March 15,
2017 to holders of Trust units of record at the close of business
on February 28, 2017. The distributions are declared in
Canadian dollars. Registered unitholders resident in Canada will
receive payment in Canadian dollars and registered unitholders
resident in the United States will receive the U.S. dollar
equivalent unless they request otherwise. The U.S. dollar
equivalent of the distribution will be based on the Bank of Canada
closing exchange rate on the record date or, if the record date
falls on a weekend or holiday, on the Bank of Canada closing
exchange rate of the preceding business day. Beneficial unitholders
will receive payment in Canadian dollars unless they request to
receive the U.S. dollar equivalent.
About Brookfield Canada Office
PropertiesBrookfield Canada Office Properties is Canada’s
preeminent Real Estate Investment Trust (REIT). Our portfolio is
comprised of 26 premier office properties totaling 20 million
square feet in the downtown cores of Toronto, Calgary and Ottawa,
and a development site in Calgary. Our landmark assets include
Brookfield Place and First Canadian Place in Toronto, and Bankers
Hall in Calgary. Further information is available at
www.brookfieldcanadareit.com. Important information may be
disseminated exclusively via the website; investors should consult
the site to access this information.
Brookfield Canada Office Properties is the
flagship Canadian REIT of Brookfield Asset Management, a leading
global alternative asset manager with approximately $250 billion of
assets under management. For more information, go to
www.brookfield.com.
Please note that Brookfield Canada Office
Properties’ previous audited annual and unaudited quarterly reports
have been filed on SEDAR and can also be found in the Investors
section of its website at www.brookfieldcanadareit.com. Hard copies
of the annual and quarterly reports can be obtained free of charge
upon request.
For more information, please visit our website
at www.brookfieldcanadareit.com or contact:
Contact:Sherif
El-AzzaziManager, Investor Relations & CommunicationsTel: (416)
359-8593Email: sherif.elazzazi@brookfield.com
Conference Call and Quarterly Earnings
DetailsInvestors, analysts and other interested parties
can access Brookfield Canada Office Properties’ 2016 fourth quarter
and full-year results as well as Supplemental Information on
Brookfield Canada Office Properties’ website under the Investors
section at www.brookfieldcanadareit.com.
The conference call can be accessed via webcast
on January 24, 2017 at 9:00 a.m. Eastern Time at
www.brookfieldcanadareit.com or via teleconference toll free
at 1-844-536-4457 or toll at 1-574-990-3011, passcode: 41557071 at
approximately 8:50 a.m. Eastern Time. A recording of the
teleconference can be accessed toll free at 1-855-859-2056 or toll
at 1-404-537-3406, passcode: 41557071.
Non-IFRS MeasuresThis news
release and accompanying financial information make reference to
NOI, same property NOI, FFO,Trust FFO and AFFO on a per unit and/or
total basis.
NOI, same property NOI, FFO, Trust FFO and AFFO
do not have any standardized meaning prescribed by Internal
Financial Reporting Standards (“IFRS”) and therefore may not be
comparable to similar measures presented by other companies. The
Trust uses these non-IFRS measures to assess its operating results.
These measures should not be used as alternatives to other
operating measures determined in accordance with IFRS but rather to
provide supplemental insights into performance. NOI is an
important measure that both investors and management use to assess
operating performance of our commercial properties, FFO is a widely
used measure by securities analysts, investors and other interested
parties in analyzing the performance of real estate notwithstanding
the variability of its fair value, and AFFO is a measure used to
assess an entity’s ability to pay distributions.
The Trust defines NOI as adjusted commercial
property revenue net of direct property operating expenses,
including property administration costs that have been deducted,
but prior to deducting interest expense, general and administrative
expenses and revaluation gain (loss). Included in adjusted
commercial property revenue and revaluation gain (loss) is the
impact of rental payments received pursuant to a related party
lease, which in accordance with IFRS, would be included in fair
value gains (losses). Management believes the inclusion of the
rental lease payments, net of non-cash rental revenue, is important
to help investors understand the contracted economics of the Bay
Adelaide East acquisition on an "as-if-completed-and-stabilized
basis" and the related recurring operating cash flows generated
pursuant to that arrangement.
Same property NOI is a subset of NOI, which
excludes NOI that is earned from assets acquired, disposed of or
developed during the periods presented, or not of a recurring
nature. Same property NOI allows the Trust to segregate the
performance of leasing and operating initiatives on the portfolio
from the impact to performance from investing activities and
non-recurring income (charges), which for the historical periods
presented consist primarily of lease termination income.
Trust FFO is defined as net income prior to
transaction costs, revaluation gain (loss) which include the impact
of rental payments received from the related party lease as
described above, and certain other non-cash items, if any.
Trust FFO does not represent or approximate cash generated from
operating activities and is consistent with the definition of FFO
per the Real Property Association of Canada ("REALPAC") FFO white
paper, except that Trust FFO further includes the adjustment for
the related party lease payments. AFFO is defined as Trust FFO net
of normalized second-generation leasing commissions and tenant
improvements, normalized maintaining value capital expenditures and
straight-line rental income.
Forward-Looking StatementsThis
news release contains “forward-looking information” within the
meaning of Canadian provincial securities laws and applicable
regulations and “forward-looking statements” within the meaning of
“safe harbor” provisions of the United States Private Securities
Litigation Reform Act of 1995. Forward-looking statements include
statements that are predictive in nature, depend upon or refer to
future events or conditions, include statements regarding the
Trust’s operations, business, financial condition, expected
financial results, performance, prospects, opportunities,
priorities, targets, goals, ongoing objectives, strategies and
outlook, as well as the outlook for the Canadian economy 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.”
Although the Trust believes 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 forward-looking statements and information
because they involve known and unknown risks, uncertainties and
other factors, many of which are beyond the control of the Trust,
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 Canada;
the ability to enter into new leases or renew leases on favourable
terms; business competition; dependence on tenants’ financial
condition; the use of debt to finance the Trust’s business; the
behavior of financial markets, including fluctuations in interest
rates; equity and capital markets and the availability of equity
and debt financing and refinancing within these markets; risks
relating to the Trust’s 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.
Caution should be taken that the foregoing list
of important factors that may affect future results is not
exhaustive. When relying on the Trust’s 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, the Trust undertakes 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.
|
CONSOLIDATED BALANCE SHEET |
|
(Cdn $ Millions) |
Dec 31, 2016 |
|
Dec 31, 2015 |
|
Assets |
|
|
|
|
Investment
properties |
|
|
|
|
Commercial properties |
|
$ |
5,397.0 |
|
|
$ |
5,805.1 |
|
Commercial development |
|
684.3 |
|
|
462.7 |
|
|
|
6,081.3 |
|
|
6,267.8 |
|
|
|
|
|
|
Tenant and other
receivables |
|
15.8 |
|
|
23.8 |
|
Other assets |
|
7.9 |
|
|
7.3 |
|
Cash and cash
equivalents |
|
52.2 |
|
|
57.6 |
|
|
|
$ |
6,157.2 |
|
|
$ |
6,356.5 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
Investment property and
corporate debt |
|
$ |
2,828.0 |
|
|
$ |
2,838.5 |
|
Accounts payable and
other liabilities |
|
166.8 |
|
|
185.0 |
|
|
|
|
|
|
Equity |
|
|
|
|
Unitholders'
equity |
|
879.0 |
|
|
923.8 |
|
Non-controlling
interest(1) |
|
2,283.4 |
|
|
2,409.2 |
|
|
|
$ |
6,157.2 |
|
|
$ |
6,356.5 |
|
(1) Non-controlling interest represents Class B
LP units that are economically equivalent to Trust units and are
required to be presented separately under IFRS.
|
CONSOLIDATED STATEMENT OF INCOME |
|
(Cdn $ Millions, except per unit amounts) |
Three months ended Dec. 31 |
|
Twelve months ended Dec. 31 |
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
Commercial property
revenue |
|
$ |
136.7 |
|
|
$ |
134.7 |
|
|
$ |
522.5 |
|
|
$ |
516.9 |
|
Direct commercial
property expense |
|
71.7 |
|
|
69.9 |
|
|
265.7 |
|
|
265.6 |
|
Interest expense |
|
22.8 |
|
|
21.4 |
|
|
91.6 |
|
|
84.3 |
|
General and
administrative expense |
|
5.9 |
|
|
5.4 |
|
|
24.8 |
|
|
23.1 |
|
Income before fair value gains (losses) |
|
36.3 |
|
|
38.0 |
|
|
140.4 |
|
|
143.9 |
|
Fair value gains
(losses) |
|
27.9 |
|
|
120.8 |
|
|
(44.9 |
) |
|
207.5 |
|
Net income and comprehensive income |
|
$ |
64.2 |
|
|
$ |
158.8 |
|
|
$ |
95.5 |
|
|
$ |
351.4 |
|
|
|
|
|
|
|
|
|
|
Net income and comprehensive income
attributable to: |
|
|
|
|
Unitholders |
|
$ |
18.0 |
|
|
$ |
44.7 |
|
|
$ |
26.8 |
|
|
$ |
98.6 |
|
Non-controlling
interest |
|
46.2 |
|
|
114.1 |
|
|
68.7 |
|
|
252.8 |
|
|
|
$ |
64.2 |
|
|
$ |
158.8 |
|
|
$ |
95.5 |
|
|
$ |
351.4 |
|
Weighted average Trust
units outstanding |
|
26.3 |
|
|
26.2 |
|
|
26.3 |
|
|
26.2 |
|
Net income per Trust unit |
|
$ |
0.69 |
|
|
$ |
1.70 |
|
|
$ |
1.02 |
|
|
$ |
3.76 |
|
RECONCILIATION OF COMMERCIAL PROPERTY REVENUE TO NET
OPERATING INCOME |
|
(Cdn $ Millions, except per unit amounts) |
Three months ended Dec. 31 |
|
Twelve months ended Dec. 31 |
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
Commercial property
revenue |
|
$ |
136.7 |
|
|
$ |
134.7 |
|
|
$ |
522.5 |
|
|
$ |
516.9 |
|
Impact of related party
lease rental payments |
|
2.6 |
|
|
— |
|
|
15.1 |
|
|
— |
|
Adjusted commercial property revenue |
|
$ |
139.3 |
|
|
$ |
134.7 |
|
|
$ |
537.6 |
|
|
$ |
516.9 |
|
Deduct: |
|
|
|
|
|
|
|
|
Direct
commercial property expense |
|
71.7 |
|
|
69.9 |
|
|
265.7 |
|
|
265.6 |
|
Commercial property net operating income |
|
$ |
67.6 |
|
|
$ |
64.8 |
|
|
$ |
271.9 |
|
|
$ |
251.3 |
|
RECONCILIATION OF FAIR VALUE TO REVALUATION GAIN
(LOSS) |
|
(Cdn $ Millions, except per unit amounts) |
Three months ended Dec. 31 |
|
Twelve months ended Dec. 31 |
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
Fair value gains
(losses) per Statement of Income |
|
$ |
27.9 |
|
|
$ |
120.8 |
|
|
$ |
(44.9 |
) |
|
$ |
207.5 |
|
Impact of related party
lease rental payments |
|
(2.6 |
) |
|
— |
|
|
(15.1 |
) |
|
— |
|
Revaluation gain (loss) |
|
$ |
25.3 |
|
|
$ |
120.8 |
|
|
$ |
(60.0 |
) |
|
$ |
207.5 |
|
RECONCILIATION OF NET INCOME TO TRUST FUNDS FROM
OPERATIONS |
|
(Cdn $ Millions, except per unit amounts) |
Three months ended Dec. 31 |
|
Twelve months ended Dec. 31 |
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
Net income |
|
$ |
64.2 |
|
|
$ |
158.8 |
|
|
$ |
95.5 |
|
|
$ |
351.4 |
|
Add (deduct): |
|
|
|
|
|
|
|
|
Revaluation (gain)
loss |
|
(25.3 |
) |
|
(120.8 |
) |
|
60.0 |
|
|
(207.5 |
) |
Amortization of lease
incentives |
|
0.3 |
|
|
0.5 |
|
|
1.4 |
|
|
1.9 |
|
Trust funds from operations |
|
$ |
39.2 |
|
|
$ |
38.5 |
|
|
$ |
156.9 |
|
|
$ |
145.8 |
|
Trust funds from
operations - unitholders |
|
11.0 |
|
|
10.8 |
|
|
43.9 |
|
|
40.8 |
|
Trust funds from
operations - non-controlling interest |
|
28.2 |
|
|
27.7 |
|
|
113.0 |
|
|
$ |
105.0 |
|
|
|
$ |
39.2 |
|
|
$ |
38.5 |
|
|
$ |
156.9 |
|
|
$ |
145.8 |
|
Weighted average Trust
units outstanding |
|
26.3 |
|
|
26.2 |
|
|
26.3 |
|
|
26.2 |
|
Trust funds from operations per Trust unit |
|
$ |
0.42 |
|
|
$ |
0.41 |
|
|
$ |
1.68 |
|
|
$ |
1.56 |
|
RECONCILIATION OF TRUST FUNDS FROM OPERATIONS TO ADJUSTED
FUNDS FROM OPERATIONS |
|
(Cdn $ Millions, except per unit amounts) |
Three months ended Dec. 31 |
|
Twelve months ended Dec. 31 |
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
Trust funds from
operations |
|
$ |
39.2 |
|
|
$ |
38.5 |
|
|
$ |
156.9 |
|
|
$ |
145.8 |
|
Add (deduct): |
|
|
|
|
|
|
|
|
Straight-line rental income |
|
(0.9 |
) |
|
(0.3 |
) |
|
(5.0 |
) |
|
(3.0 |
) |
Normalized 2nd generation leasing commissions and tenant
improvements(1) |
|
(5.8 |
) |
|
(5.8 |
) |
|
(23.2 |
) |
|
(23.2 |
) |
Normalized maintaining value capital expenditures(1) |
|
(1.5 |
) |
|
(1.8 |
) |
|
(6.0 |
) |
|
(7.2 |
) |
Adjusted funds from operations(2) |
|
$ |
31.0 |
|
|
$ |
30.6 |
|
|
$ |
122.7 |
|
|
$ |
112.4 |
|
Adjusted funds from
operations - unitholders |
|
8.7 |
|
|
8.6 |
|
|
34.4 |
|
|
31.5 |
|
Adjusted
funds from operations - non-controlling interest |
22.3 |
|
|
22.0 |
|
|
88.3 |
|
|
80.9 |
|
|
|
$ |
31.0 |
|
|
$ |
30.6 |
|
|
$ |
122.7 |
|
|
$ |
112.4 |
|
Weighted average Trust
units outstanding |
|
26.3 |
|
|
26.2 |
|
|
26.3 |
|
|
26.2 |
|
Adjusted funds from operations per Trust unit |
|
$ |
0.33 |
|
|
$ |
0.33 |
|
|
$ |
1.31 |
|
|
$ |
1.21 |
|
(1) As the components used in calculating AFFO
vary quarter over quarter, a normalized level of activity is
estimated based on historical spend levels as well as anticipated
spend levels over the next few years. Maintaining value capital
expenditures relate to capital items that are required to maintain
the properties in their current state and exclude projects that are
considered to add productive capacity.
(2) AFFO calculated using actual leasing
commissions, tenant improvements and maintaining value capital
expenditures would result in AFFO of $25.6 million and $121.1
million for the quarter and year ended December 31, 2016.
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