Brookfield Property Partners L.p. - 5.750% · NASDAQ:BPYPN
Brookfield Property Partners L.p. - 5.750% — Brookfield Property Partners — Investor Day (September 2018)
75 slides from Brookfield Property Partners L.p. - 5.750%'s investor day presentation, Sep 26, 2018
Slide 1: Brookfield Property Partners Investor Day
Brookfield Property Partners I N V E S T O R D AY SEPTEMBER 26, 2018
Slide 2: Agenda
Agenda Overview & BPY’s 5-Year Evolution 3 Brian Kingston, Senior Managing Partner & CEO GGP & the U.S. Retail Opportunity 22 Brian Kingston, Senior Managing Partner & CEO Financial Update 45 Bryan Davis, Managing Partner & CFO Brookfield’s Multifamily Business 59 Ric Clark, Senior Managing Partner
Slide 3: BPY launched in 2013 as Brookfield's primary real estate vehicle
Brookfield Property Partners (“BPY”) was launched in 2013 as Brookfield’s primary vehicle to make investments across all strategies in real estate 3
Slide 4: 80% of invested capital in public real estate securities at launch
At the time of launch, approximately 80% of BPY’s invested capital was held in the form of other public real estate securities… 4
Slide 5: Major acquisitions in the past five years
Major acquisitions in the past five years… Total Assets TODAY ~$90B 2018 $40B Total Assets 2017 Q2 2013 $6B ~$31B 2016 $3B 2015 $12B 2014 $30B 5
Slide 6: Invested capital by sector
Invested capital by sector 2013 2018 17% 51% 5% 41% 20% 100% DIRECT DIRECT 42% 44% Office Retail LP Investments Office Retail LP Invesments • Multifamily • Multifamily • Logistics • Logistics • Hospitality • Triple Net Lease • Self-Storage • Student Housing • Manufactured Housing 6
Slide 7: One of the world's largest, highest quality portfolios
One of the world’s largest, highest quality portfolios Brookfield Place Fashion Show New York Las Vegas First Canadian Place Canary Wharf Potsdamer Platz Toronto London Berlin 7
Slide 8: ~$90B Property AUM
~$90B Property AUM CANADA UK & EUROPE $4.7B $11.7B UNITED STATES $63.1B BRAZIL ASIA & AUSTRALIA $0.9B $6.7B 8
Slide 9: Projects delivered over the past months
Projects delivered over the past 24 months… 4.2M SF PREMIER OFFICE SPACE 5 Manhattan West One Blue Slip New York Brooklyn 1,200 APARTMENT UNITS Principal Place The Eugene London Wall Place London New York London 9
Slide 10: Projects on schedule for delivery in 2019
Projects on schedule for delivery in 2019 5.6M SF PREMIER OFFICE SPACE Camarillo ICD Brookfield Place 1 Bank Street Los Angeles Dubai London ~3,500 APARTMENT UNITS 655 New York Ave 100 Bishopsgate 1 Manhattan West Washington DC London New York 10
Slide 11: Capital deployment & recycling
Capital deployment & recycling 1 2 Target Sector Identify Opportunities / Geography / Invest Capital 4 3 Strategic Exits to Create Maximum Value Maximize Returns 11
Slide 12: Case Study: IDI Gazeley projected to return 30% IRR
Case Study: IDI Gazeley projected to return 30% IRR in 5 years • Assembled a 42M SF global logistics business through the acquisition of 3 industrial companies in North America and Europe 50M SF 16% AREA LEASED RENT INCREASED 30M SF 88 – 95% COMPLETED CHANGE IN OPERATING DEVELOPMENT OCCUPANCY 2013-2
Slide 13: Case Study: Simply Self Storage returned 46% IRR in 2.5 years
Case Study: Simply Self Storage returned 46% IRR in 2.5 years • Acquired 90-asset, 6.8M SF portfolio and operating company in early 2016 and grew business to over 200 assets totaling ~16M SF 32% VALUE INCREASED PSF $1.3B $162M GROSS SALE PRICE* NET PROCEEDS TO BPY** 46% 2.6x GROSS IRR GROSS MOC *Par
Slide 14: Five-year asset sales recap
Five-year asset sales recap • In BPY’s first 5 years, we have completed over $47B of gross asset sales that were transacted at an average 4% premium over our carrying IFRS values ($’M @100%) 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - 2013 2014 2015 2016 2017 Gross Sales Price IFRS Value 14
Slide 15: Opportunistic real estate funds track record
Opportunistic real estate funds track record Total BPY Projected Projected Fund Inception Equity Stake Gross IRR Gross MOC RE Opportunity Fund I 2006 11.0% 1.9x RE Opportunity Fund II 2007 20.0% GGP Closes Acquisition 2.1x RE Turnaround Fund 2009 38.6% 2.3x Strategic Real Estate 2012 $4.5B 30% 25.0%
Slide 16: Polling question: BPY trades at a 30% discount to NAV
PO L L I N G Q U ESTI O N # 1 BPY trades at a 30% discount to NAV. What more can we do? A. Reduce leverage B. Buy back our units C. Simplify our business D. Improve disclosure / investor communication 16
Slide 17: Investment and Operating Segments
Investment and Operating Segments 17
Slide 18: High-quality core office assets
High-quality core office assets 46M PROPORTIONATE OFFICE SF Grace Building Amex House First Canadian Place New York Sydney Toronto $1.4B PROPORTIONATE NOI* Canary Wharf Brookfield Place London New York 93% OCCUPANCY Eichhornstraße 3 FL3500 Berlin São Paulo * Last 12 Months at June 30, 2018 18
Slide 19: Highly productive best-in-class malls and urban retail
Highly productive best-in-class malls and urban retail 122M PREMIER RETAIL SF GGP Acquisition Closes Fashion Show Las Vegas Oakbrook Illinois $1.7B PROPORTIONATE NOI* 95% NOI-WEIGHTED TOTAL OCCUPANCY Stonebriar Centre The Shops at LaCantera Frisco San Antonio * Last 12 Months at June 30, 2018 (propo
Slide 20: LP investments in mispriced assets with upside
LP investments in mispriced assets with upside to earn outsized returns The Diplomat Resort & Spa Conrad Hotel Florida Seoul Wynyard Place Center Parcs Sydney U.K. 1,400+ $5.8B $781M NO. OF PROPERTY INVESTED CAPITAL PROPORTIONATE INTERESTS IN BAM PRIVATE FUNDS NOI* * Last 12 Months at June 30, 2018
Slide 21: Polling question: best risk-adjusted returns sector
PO L L I N G Q U ESTI O N # 2 Which sector do you think offers the best risk-adjusted returns over the next 5 years? A. Office B. Retail C. Industrial D. Multifamily 21
Slide 22: GGP & the U.S. Retail Opportunity
GGP & the U.S. Retail Opportunity 22
Slide 23: GGP transaction summary
GGP transaction summary 1 2 3 Shareholder approval Offer price Issued 160M of July 26, 2018 $23.50/share BPR shares & 110M of BPY units Acquisition completed August 28, 2018 BPY’s public float increased by ~$6B 23
Slide 24: GGP acquisition plays to Brookfield's core investing principles
The acquisition of GGP plays to Brookfield’s core investing principles Acquire high-quality assets Invest on a value basis Enhance value through operations Contrarian Large-scale/Multifaceted 24
Slide 25: GGP owns 8% of the high-quality retail space in the U.S.
GGP owns 8% of the high-quality retail space in the U.S. Retail GLA 1.2B SF (4 SF Per Person) (SF Per Person) of High-Quality Retail GLA in the U.S. U.S. 24 8% OWNED BY GGP Canada 16 Australia 11 92% OTHERS U.K. 5 25
Slide 26: GGP acquisition plays to Brookfield's core investing principles
The acquisition of GGP plays to Brookfield’s core investing principles Acquire high-quality assets Invest on a value basis Enhance value through operations Contrarian Large-scale/Multifaceted 26
Slide 27: Doubling down on retail by capturing opportunistic market window
Doubling down on retail by capturing opportunistic market window… Regional Mall Index Performance* July 2016 Peak March 2018 GGP price agreed 2015 2015 2016 2016 2017 2017 2018 2018 Aug 2018 *Source: FTSE NAREIT 27
Slide 28: GGP acquisition plays to Brookfield's core investing principles
The acquisition of GGP plays to Brookfield’s core investing principles Acquire high-quality assets Invest on a value basis Enhance value through operations Contrarian Large-scale/Multifaceted 28
Slide 29: Uniquely positioned to capitalize on value-add opportunities
We are uniquely positioned to capitalize on value-add opportunities… Complete Redevelopment Initiatives Oakbrook Center Oakbrook, Illinois Identify and Execute Densification Opportunities Ala Moana Optimize Tenant Mix Honolulu, Hawaii Drive Operating Performance Village of Merrick Park Coral Gables,
Slide 30: From retail centers to mixed-use destinations
From retail centers to mixed-use, live-work-play destinations… Brookfield can control the redevelopment process across multiple asset classes and capitalize on the value-add beyond retail 30
Slide 31: Value creation strategy for malls with different attributes
We tailor value creation strategy for malls with different attributes… EXPAND DENSIFY Mall Productivity AVOID REDEVELOP Land Value 31
Slide 32: Value Creation Strategy: Expand
Value Creation Strategy EXPAND Mall Productivity Baybrook Mall (TX) Land Value 32
Slide 33: Case Study – Baybrook Mall Expansion
Case Study 1 – Baybrook Mall Expansion Acquired Land for Expanded Added Outdoor F&B Lifestyle Center Power Center and Entertainment Before After Post Development Yield on Cost 7.5% 33
Slide 34: Value Creation Strategy: Densify
Value Creation Strategy EXPAND DENSIFY Mall Productivity Baybrook Mall (TX) Ala Moana Center (HI) Land Value 34
Slide 35: Case Study – Ala Moana Center Densification
Case Study 2 – Ala Moana Center Densification Replaced Anchor Added Residential Density Placemaking Before After Phase 1 Yield on Cost 9.6% / Phase 2 Yield on Cost 6.9% 35
Slide 36: Value Creation Strategy: Redevelop
Value Creation Strategy EXPAND DENSIFY Mall Productivity Baybrook Mall (TX) Ala Moana Center (HI) REDEVELOP NewPark Mall (CA) Land Value 36
Slide 37: Case Study – NewPark Mall Redevelopment
Case Study 3 – NewPark Mall Redevelopment Replaced Redeveloped Developed Land to Anchor Vacant Box Highest & Best Use Before After Phase 1 Yield on Cost 8.5% / Phase 2 Yield on Cost 7.1% 37
Slide 38: Create value via redevelopment initiatives
Create value via redevelopment initiatives… Historical $1.1B 8.8% Redevelopment TOTAL YIELD COST ON COST Projects Under $1.6B 7.9% Redevelopment ESTIMATED YIELD COST ON COST Average Yield on Cost 7.9% - 8.8% 38
Slide 39: GGP acquisition plays to Brookfield's core investing principles
The acquisition of GGP plays to Brookfield’s core investing principles Acquire high-quality assets Invest on a value basis Enhance value through operations Contrarian Large-scale/Multifaceted 39
Slide 40: Polling question: e-commerce share of U.S. retail sales
PO L L I N G Q U ESTI O N # 3 Today, e-commerce makes up less than 10% of total retail sales in the U.S. What do you think the percentage will be in five years? A. Less than 10% B. 10%-20% C. 20%-30% D. More than 30% 40
Slide 41: E-commerce vs Brick-and-Mortar? Not a Zero-Sum Game
E-commerce vs Brick-and-Mortar? NOT a Zero-Sum Game… E-Commerce Brick-and-Mortar ONE Channel Online-to-offline examples Amazon Bonobos Rent the Runway 93% of all retail sales are owed all or in part to brick-and-mortar presence* * U.S. Census Bureau 41
Slide 42: GGP acquisition plays to Brookfield's core investing principles
The acquisition of GGP plays to Brookfield’s core investing principles Acquire high-quality assets Invest on a value basis Enhance value through operations Contrarian Large-scale/Multifaceted 42
Slide 43: GGP purchase supported by $10B equity and $5B acquisition financing
Funding Sources The purchase of GGP was supported by $10B of equity and $5B of acquisition financing Sources Acquisition Financing $2.5B Bridge Financing to Asset Sales $2.5B Partner Equity $4.0B BPY Equity $6.0B Total Capital $15.0B 43
Slide 44: We adhere to Brookfield's five core investing principles
We adhere to Brookfield’s five core investing principles… Acquire high-quality assets Invest on a value basis Enhance value through operations Contrarian Large-scale/Multifaceted 44
Slide 45: Financial Update
Financial Update Bryan Davis Chief Financial Officer, Brookfield Property Partners 45
Slide 46: Another year under our belts
Another year under our belts… $1.50+ $1.44 Earnings and distribution growth for five consecutive years since launch $1.36 9% CAGR $1.26 Annual CFFO growth of 9% $1.18 $1.18 6% $1.11 CAGR $1.12 $1.06 Annual distribution growth of 6% $1.00 Reduced payout ratio from 90% of CFFO to our target of 80% 201
Slide 47: Generating significant LP investment gains
Generating significant LP investment gains… $0.66 We have earned realized gains from our LP investments in private funds In the early years, these gains were from the sale of individual assets or smaller $0.37 portfolios As these funds mature, and investment- $0.14 level business plans are executed,
Slide 48: Future Earnings Growth
Future Earnings Growth $2.65+ Achieve annual CFFO growth for the $2.15+ next 5 years with target of 7%-9% $2.00+ $1.70+ Realize significant earnings from our LP investments including, on average, $500 million in annual realized gains $1.50+ Earnings provide ample coverage for $1.26 distributions Ear
Slide 49: Main drivers of earnings growth are unchanged
Main drivers of earnings growth are unchanged… Annual CFFO growth between 2017 and 2022 continues to be driven by: • Achieving same property growth of 2-3% • Completion of active developments on time and budget: In US$ millions Cumulative Development NOI $1.18 $600 $500 $400 $300 $200 $100 $0 2017 2
Slide 50: LP Investments – BSREP I
LP Investments – BSREP I Size of Fund BPY Share Called from LPs Net IRR Net MOC BSREP I $4.4B 30% $4.9B 21% 2.3x • What does this mean for BPY? In US$ millions $4,000 $4,000 $3,000 $3,000 Profit1 $1.9B $2,000 $2,000 $1,000 $1,000 $0 $0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Cumulativ
Slide 51: LP Investments – Layering on BSREP II
LP Investments – Layering on BSREP II Size of Fund BPY Share Called from LPs Net IRR Net MOC BSREP I $4.4B 30% $4.9B 21% 2.3x BSREP II 9.0B 25% 6.0B 17% 1.8x Profit1 In US$ millions $4.1B $4,000 $4,000 $3,000 $3,000 $2,000 $2,000 $1,000 $1,000 $0 $0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Slide 52: Significant liquidity will be generated from LP Investments
Significant liquidity will be generated from LP Investments Until the end of last year, we were investing a significant portion of our available liquidity into LP investments in funds • Now these investments will be generating liquidity: In US$ millions 2012-2017 2018-2022 Net capital (invested) ret
Slide 53: What about the next 15 years?
What about the next 15 years? Even as we invest capital into each new fund, this investing strategy will continue to produce significant cash flows: In US$ millions 2012-2017 2018-2022 2023-2027 2028-2032 BSREP I & II $ (2,700) $ 2,700. Profit 1,000. 3,100. Future Opportunity Funds (4,500) 1,000 (40
Slide 54: Payout Ratio
Payout Ratio Target payout ratio leaves sufficient retained cash to protect distribution levels, sustain properties and fund future growth: In US$ millions 2022 Forecasted CFFO $ 2,300 Annual realized gains from LP investments 600 Annual earnings $ 2,900 Distributions at target payout (1,800) Availa
Slide 55: Financing Strategy
Financing Strategy Our approach is to put an appropriate amount of leverage on each asset to provide the best risk-adjusted return on your equity Focus on non-recourse, asset-level debt Use of minimal amounts of “consolidated” leverage Raise debt in local currency with primarily fixed interest rates
Slide 56: Path to achieving leverage targets
Path to achieving leverage targets Long-term goal is to maintain a proportionate debt-to-capital ratio of 50% and debt-to- EBITDA of <11x • Conversion of $500 million of capital securities into equity • Acquisition of GGP improves credit metrics once acquisition debt is repaid In US$ millions Curren
Slide 57: Near-term path to leverage targets
Near-term path to leverage targets Focused on making progress to achieve target credit metrics • Completion of active development pipeline • Mandatory conversion of $1.8 billion of capital securities into BPY units • Repayment of credit facilities and remaining capital securities • Increase in equit
Slide 58: BPY = compelling investment opportunity
BPY = compelling investment opportunity 2022 25% CAGR $ 48 An investment today has the potential $ 22 to offer a very attractive return to 15% shareholders CAGR $ 35 Yield backed by cash flow from a $9 portfolio of high-quality assets $ 55 $6 $6 Entry point at discount to average $ 20 $ 20 $ 20 anal
Slide 59: Brookfield Multifamily
Brookfield Multifamily Ric Clark Chairman, Brookfield Property Partners 59
Slide 60: Cities across the globe are expanding rapidly
Cities across the globe are expanding rapidly1 Over the next ~30 years, the world’s population is expected to become dramatically more urban Worldwide Urban Population Urban Population 29% 54% 67% 725M 1950 3.9B 2014 6.0B 2050 U.S. Urban Population 258M 350M 125M 2014 2050 1950 1) Source: U.N. 60
Slide 61: U.S. homeownership rate
U.S. homeownership rate1 Homeownership rates in the U.S. have decreased over the last decade. The Q1’18 rate was equal to long-term level of 64%, close to the lowest level since 1965 70.0% 43.3% 44.0% Q1’05 > 35 years 69.0% 43.0% 68.0% 42.0% 69.1% 67.0% 41.0% Q1’05 66.0% 40.0% All age groups 65.0% 3
Slide 62: Price pressure to rent vs. own
Price pressure to rent vs. own1 On average, from 2000-2016, home purchase prices in the U.S. have increased by more than 100% in some markets Prices Decreased 25% Increase 50% Increase 100% Increase More Than 100% Increase No Data Available 1) Source: St. Louis Federal Reserve GEOFRED 62
Slide 63: U.S. apartment occupancy growth
U.S. apartment occupancy growth1,2 Apartment occupancies are above the long-term average, driven by strong demographics creating 10 million renters over the past 12 years 96.5% 96.0% 95.5% 95.0% 94.5% 94.0% 93.5% 93.0% 92.5% 92.0% 91.5% 91.0% 90.5% 90.0% 89.5% 89.0% 88.5% 88.0% 87.5% 87.0% 86.5% 86.
Slide 64: U.S. apartment supply and demand
U.S. apartment supply and demand • The U.S. housing shortage continues in coastal markets Supply1 Demand as of 1Q 2018 as of 1Q 2018 • Total U.S. Housing Starts • 94.5% apartment occupancy − 1.2M 12-month average (near 14-year high)2 − 93% of 25-year average of 1.3M • 64.0% homeownership rate − 886,
Slide 65: BPY's multifamily footprint
BPY’s multifamily footprint • We continue to be one of the largest owners of residential apartment properties in the U.S., with assets located in diverse, urban and suburban locations in over 20 states Units1 Properties1 Equity2 Gross Asset Value2 ~35,000 ~120 ~$1.9 billion ~$3.6 billion MANHATTAN M
Slide 66: BPY multifamily properties by state
BPY multifamily properties by state WA 5 properties VA 7 properties TX 6 properties OR 3 properties OH 15 properties NY 10 properties NV 2 properties NJ 5 properties NC 7 properties MI 5 properties MD 5 properties MA 2 properties IN 3 properties GA 4 properties FL 10 properties CT 2 properties CO 1
Slide 67: Multifamily platform growth
Multifamily platform growth Our multifamily portfolio has grown strongly since 2010 through acquisition and development activities in urban and suburban locations Acquired land for Opening of The U.S. Multifamily Value U.S. Multifamily Acquired Manhattan U.S. Multifamily Greenpoint Landing, Eugene a
Slide 68: Multifamily development profile
Multifamily development profile We are developing in core markets that are supply constrained and have high barriers to entry, with +14,000 units in our development pipeline UNDER COMPLETED CONSTRUCTION PLANNING STAGES The Eugene One Blue Slip Greenpoint Landing Mott Haven Halley Rise 755 Figueroa $
Slide 69: Opportunity zones
Opportunity zones More than 8,700 census tracts across the U.S. have been qualified as distressed communities, making private investments eligible for Opportunity Zone tax benefits Map source: Economic Innovation Group 69
Slide 70: Typical resident services & amenities
Typical resident services & amenities More and more, we are seeing buildings that are enhanced by technology and curated amenities, providing convenience, service and social connectivity Typical Building Enhanced Offerings at Services & Amenities Luxury/High-Rise Buildings • Gym • Concierge services
Slide 71: New innovations in resident services
New innovations in resident services Latch Hello Alfred Via Smart Access Technology Personal Concierge Ride Share Platform 71
Slide 72: Recently completed, active and planned developments
Recently completed, active and planned developments Multifamily Rental Location Units Completion ($M) Cost1 Yield The Eugene Manhattan 844 2017 414 5% One Blue Slip Greenpoint 359 2018 273 6% Village Gateway Camarillo 450 2018 127 7% Studio Plaza Silver Spring 399 2019 106 7% Water St. / George St.
Slide 73: Brookfield
Brookfield
Slide 74: Important Cautionary Notes
Important Cautionary Notes All amounts are in U.S. dollars unless otherwise Factors that could cause actual results to differ materially will be similar to the historic investments presented herein specified. Unless otherwise indicated, the statistical and from those contemplated or implied by forwa
Slide 75: Brookfield Property Partners Investor Day
Brookfield Property Partners I N V E S T O R D AY SEPTEMBER 26, 2018
Brookfield Property Partners — Investor Day (September 2018) on 6ix