Brookfield Property Partners L.p. - 5.750% · NASDAQ:BPYPN
Brookfield Property Partners L.p. - 5.750% — Brookfield Property Partners — Investor Day (September 2020)
43 slides from Brookfield Property Partners L.p. - 5.750%'s investor day presentation, Sep 24, 2020
Slide 1: Brookfield Property Partners Investor Day
Brookfield Property Partners INVESTOR DAY SEPTEMBER 24, 2020
Slide 2: Agenda
Agenda Overview and 12-Month Review 3 Brian Kingston, Chief Executive Officer Retail Real Estate – State of the Industry 14 Meredith Darnall, SVP, Business Intelligence & Strategy Financial Update 29 Bryan Davis, Chief Financial Officer Q&A
Slide 3: Overview and 12-Month Review
Overview and 12-Month Review BRIAN KINGSTON CHIEF EXECUTIVE OFFICER
Slide 4: Global Owner, Developer and Operator of High-Quality Real Estate
Global Owner, Developer and Operator of High-Quality Real Estate Investment Portfolio Characteristics CORE OFFICE $86B1 • 134 premier office properties Total Assets • 94 million square feet CORE RETAIL $25B1 • 122 best-in-class retail properties Unitholder Equity • Over 120 million square feet $0.33
Slide 5: Invested Capital by Sector
Invested Capital by Sector 2020 OFFICE LP INVESTMENTS 43% 15% 100% DIRECT RETAIL 42% 5
Slide 6: State of the Market
State of the Market Phases in 1 year... February 2020 September 2020 September 2019 June 2020 Business Economic Recovery as Usual Shutdown 6
Slide 7: Phase I – Business as Usual
Phase I – Business as Usual During Q4 2019 and Q1 2020, we completed Office Leasing • 5.3 million sq. feet at premiums to expiring rents Retail Leasing • 4.2 million sq. feet at premiums to expiring rents • Realized $674 million of net proceeds from $1.3 billion Capital Recycling in asset sales at 7
Slide 8: Phase II – Economic Shutdown
Phase II – Economic Shutdown Despite a shutdown of the global economy, our assets were resilient: • Rent collection in office, logistics, multifamily remained above 90% • Best-in-class operating procedures developed for shutdowns & reopenings • IFC Seoul Case Study: In Q2 2020... 90% 107,000sf Occup
Slide 9: Phase III – Reopening & Recovery
Phase III – Reopening & Recovery World-leading safety measures in place, including: Bi-polar ionization air filtration Temperature screening Widely available PPE, hand sanitization, etc. Enhanced surface cleaning Allowed 85% of our US retail tenants to reopen by July 4th weekend 9
Slide 10: Trading Update
Trading Update Unit performance over last 12 months is in line with peers 1 YR PRICE PERFORMANCE 100 90 80 70 60 50 40 30 9/30/2019 10/31/2019 11/30/2019 12/31/2019 1/31/2020 2/29/2020 3/31/2020 4/30/2020 5/31/2020 6/30/2020 7/31/2020 8/31/2020 BPY Shadow REIT 10
Slide 11: 2020 Outlook
2020 Outlook The worst is behind us Capital Markets are accommodating and capital is plentiful Operating environment for our tenants is key challenge Urbanization is not slowing down 11
Slide 12: The Future of Cities
The Future of Cities Population and number of urban clusters by size 5000 43 cities Megacities of 10 million or more 66 cities Large cities of 5 to 10 million Total Population (millions) 4000 33 cities 48 cities 597 cities Medium-sized cities of 1 to 5 million 3000 467 cities 710 cities Cities of 50
Slide 13: The Future of the Office
The Future of the Office Working from home will become a supplement to, rather than a substitute for, the office • Incubating a dynamic corporate culture • Long-term employee development and company growth • Physical workspace drives employee recruitment, connectivity and productivity • Increased wo
Slide 14: Retail Real Estate – State of the Industry
Retail Real Estate – State of the Industry MEREDITH DARNALL SVP, BUSINESS INTELLIGENCE AND STRATEGY
Slide 15: Retail is here to stay, but the game has changed
Retail is here to stay, but the game has changed
Slide 16: Physical retail sales have been strong and growing
Physical retail sales have been strong and growing +2% annually, continuing to represent the bulk of retail spending U.S. RETAIL SALES GROWTH BY CHANNEL $3.36T $3.04T +3.4% $0.71T +12% Non-Store $0.51T Three-Year CAGR Physical Retail as a % 83% of Total U.S. Retail Sales 79% In-Store $2.53T $2.65T +
Slide 17: Sales rebounded quickly following 2020 economic shutdown
Sales rebounded quickly following 2020 economic shutdown Physical stores still represent the vast majority of sales YTD 2020 U.S. RETAIL SALES VOLUME BY CHANNEL Total U.S. $448B $477B $316B $315B $325B $383B Retail Sales $315B 25% 25% Digital Sales 22% 22% 22% 27% % of Total 27% Pandemic Forced Stor
Slide 18: Foot Locker CEO quote on customers returning to stores
“While traffic is down, customers are excited to be back in our stores, and their intent to purchase is high, which has led to meaningful improvements in conversion.” – RICHARD JOHNSON, CEO OF FOOT LOCKER
Slide 19: Healthy retailers continue to open new stores
Healthy retailers continue to open new stores Our top-quality locations have been gaining a disproportionate share NATIONAL RETAILERS’ PHYSICAL STORE OPENINGS JANUARY 2019–JULY 2020 Aerie 91 Carter’s 56 Warby Parker 39 Tempur-Pedic 36 Amazon 4-Star 33 Untuckit 25 Hibbett Sports 12 Lululemon Athletic
Slide 20: Accelerating shift to leverage stores for one-channel capabilities
Accelerating shift to leverage stores for one-channel capabilities Store as a brand-awareness builder (or “billboard”) that drives sales across channels (halo effect) In-Store revenue Customer Point of Acquisition Sale Store as brand engagement Total Store as a returns center Brand Returns for custo
Slide 21: Store fulfillment increases operational profitability
Store fulfillment increases operational profitability Lessens last-mile distribution and inventory management costs OPTIMIZED FULFILLMENT JOURNEY MARGINS VS. THE SAME JOURNEYS, NON-OPTIMIZED 17.1x 13.5x 6.7x 6.1x 2.3x 1.6x Buy Online, Pick Up Buy Online, Curbside Pickup Buy In-Store, Ship Click & Co
Slide 22: When optimized, high-quality real estate wins
When optimized, high-quality real estate wins
Slide 23: BPY owns 19% of high-quality retail property in the U.S.
BPY owns 19% of high-quality retail property in the U.S. U.S. GRADED RETAIL REAL ESTATE BY QUALITY GLA PER GREEN STREET ADVISORS, 2020 36% High-Quality Retail Real Estate BPY 100% Owns 19% of All High-Quality Retail Real Estate GLA 64% Other Retail All Other Real Estate Owners Source: Green Street A
Slide 24: Prime locations near highly engaged consumers
Prime locations near highly engaged consumers BPY’S SHOPPING CENTERS PROXIMITY TO DENSITY OF ENGAGED SHOPPERS Less Dense More Dense 64% of the U.S. population lives within an hour of a BPY center Source: BPY Business Intelligence & Strategy, ESRI, Claritas Prizm 24
Slide 25: Our strategy and commitment to retailers and communities remains, with a twist
Our strategy and commitment to retailers and communities remains, with a twist
Slide 26: Evolving centers into hubs of daily life and commerce
Evolving centers into hubs of daily life and commerce Changing in concert with consumer and tenant needs Shopping YESTERDAY TODAY Discovery & The Center as a Hub Community Shopping Centers as Recreation of Daily Life Gathering Shopping Destination Owner/Developer as Owner/Developer as Landlord Lifes
Slide 27: We curate the best retailers to provide consumers the best experiences
We curate the best retailers to provide consumers the most compelling shopping, dining and entertainment experiences FOOD & BEVERAGE EDUTAINMENT/ ENTERTAINMENT PERSONAL CARE HEALTH & WELLNESS DIGITAL NATIVES BIG BOX HOME FURNISHINGS ELECTRONICS GROCERY 27
Slide 28: Mixed-use developments can include residential, office and hospitality uses
Mixed-use developments can include residential, office and hospitality uses MIZNER PARK, BOCA RATON, FL STONEBRIAR CENTER, FRISCO, TX OAKBROOK CENTER, OAK BROOK, IL SHOPS AT MERRICK PARK, CORAL GABLES, FL ALA MOANA, HONOLULU, HI NATICK MALL, NATICK, MA 28
Slide 29: Financial Update
Financial Update BRYAN DAVIS CHIEF FINANCIAL OFFICER
Slide 30: Irreplaceable core assets
Irreplaceable core assets Global business with 134 premier office properties with Core Office value concentrated in our top 15 complexes $13.5B Equity • $21B VALUE | $10B EQUITY • 94% OCCUPIED | 10-YR LEASE LIFE 122 best-in-class retail properties in the United States with Core Retail value concentr
Slide 31: Core operating metrics are extremely stable
Core operating metrics are extremely stable Supports cash flows and values through cycles OCCUPANCY AVERAGE IN-PLACE RENT1 100% $80 90% $60 80% $40 70% $20 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1. Reflects retail tenants <10K square feet
Slide 32: Unique investment opportunities
Unique investment opportunities Access to top-performing real estate funds that are LP Investments $4.8B Equity diversified by geography and sector • TRACKING NET PROJECTED RETURNS OF 15% IRR | 1.8X MOC Conservative corporate level capitalization on our Corporate invested capital • $28B OF PERPETUAL
Slide 33: Real estate is cyclical
Real estate is cyclical Current negative sentiment will shift to positive and we are well positioned TRADING PRICE – CAPITALIZATION RATE UNAFFECTED NAV1 – CAPITALIZATION RATE Retail Peer 10.1% BPY 7.9% Office Peer Retail Peer 6.8% BPY 6.5% 5.9% Office Peer 4.7% 1. Based on Q4 2019 NAV from covering
Slide 34: Progress on ESG initiatives across all investments
Progress on ESG initiatives across all investments Issued $1.2B in green bonds and preferred units since 2019 Supported communities impacted by the pandemic Achieved sustainability designation in 99% of our core office portfolio United Nations-supported Principles for Responsible Investing Taskforce
Slide 35: Our focus remains the same in core
Our focus remains the same in core 85% of our balance sheet is invested in these businesses Target stabilized occupancy across portfolio Recycle capital from mature properties where value is maximized Repay portion of debt in core retail with proceeds from asset sales Identify and execute redevelopm
Slide 36: Active development pipeline
Active development pipeline Significant progress advancing our development pipeline Two Manhattan West Cumulative stabilized net operating income $400 Bay Adelaide North Wood Wharf 755 Figueroa One Manhattan West Office 100 Bishopsgate $200 $0 2019 2020 2021 2022 2023 Estimated construction completi
Slide 37: Our focus remains the same with our LP capital
Our focus remains the same with our LP capital 15% of our balance sheet is invested in real estate funds Monitoring performance of our invested capital Matching future capital calls with capital returned from earlier generation fund investments 37
Slide 38: Significant liquidity is coming from our LP investments
Significant liquidity is coming from our LP investments We plan to re-invest the capital into new funds or our core businesses NEXT 5-YEARS CAPITAL LIQUIDITY NET PROFIT REMAINING ($ Millions) INVESTED GENERATED REALIZED CAPITAL BSREP I $ 550 $ 1,000 $ 450 $ - BSREP II 2,650 3,850 1,550 350 BSREP III
Slide 39: BPY is a yield vehicle
BPY is a yield vehicle The return on BPY investment includes a current yield supported by stable cash flow from a diversified portfolio $7,400 Cumulative Earnings Cumulative Distributions $5,180 2014 2015 2016 2017 2018 2019 39
Slide 40: A highly compelling investment opportunity
A highly compelling investment opportunity We see tremendous value in BPY units today above the dislocated trading price NAV = $27.011 $12.90 ~$19.50 analysts consensus NAV $4.80 ~$11 current unit price $13.40 ($4.10) Corporate Core Office LP Investments Core Retail 1. Includes the impact of the con
Slide 41: Q&A
Q&A Brookfield
Slide 42: Important Cautionary Notes
Important Cautionary Notes All amounts are in U.S. dollars unless otherwise specified. uncertainties of real estate development or redevelopment; This presentation includes estimates regarding market and Unless otherwise indicated, the statistical and financial data global equity and capital markets
Slide 43: Brookfield Property Partners Investor Day
Brookfield Property Partners INVESTOR DAY SEPTEMBER 24, 2020
Brookfield Property Partners — Investor Day (September 2020) on 6ix