SOURCE: Brookfield Property Partners L.P.

Brookfield Property Partners L.P.

February 06, 2014 07:17 ET

Brookfield Property Partners Reports Solid 2013 Fourth Quarter & Full-Year Results

HAMILTON, BERMUDA--(Marketwired - Feb 6, 2014) - Brookfield Property Partners L.P. (NYSE: BPY) (TSX: BPY.UN) today announced financial results for the quarter and year ended December 31, 2013.

Pro Forma Financial Results(1)

         
         
    Three months ended Dec. 31,   Year ended Dec. 31,
US$ millions (except per unit amounts)   2013   2012   2013   2012
Fully-diluted FFO (2) (3)   $ 150   $ 135   $ 561   $ 506
  - per unit   $ 0.29   $ 0.29   $ 1.17   $ 1.09
                         
Net income (2)   $ 190   $ 312   $ 995   $ 1,343
  - per unit   $ 0.37   $ 0.67   $ 2.10   $ 2.88
 
(1) Pro forma financial results reflect the International Financial Reporting Standards ("IFRS") financial statements of Brookfield Property Partners L.P. with adjustments to give effect to the spinoff of the Partnership from Brookfield Asset Management Inc. for the periods presented prior to April 15, 2013, when the spinoff was effectuated.
(2) Fully-diluted FFO, and net income represent interests attributable to LP units and REUs (defined as Redeemable/Exchangeable and special limited partner units of the operating partnership). The interests attributable to REUs are presented as non-controlling interests in the IFRS statement of income. See "Reconciliation of Non-IFRS Measures" below in this news release for the components.
(3) Non IFRS measure. See definition under "Basis of Presentation".
 
 

Brookfield Property Partners reported fully-diluted FFO of $561 million ($1.17 per unit) for the year ended December 31, 2013 versus $506 million ($1.09 per unit) in 2012.

For the quarter ended December 31, 2013, fully-diluted FFO increased to $150 million ($0.29 per unit) versus $135 million ($0.29 per unit) for the same period in 2012. These results reflect a strong performance from the Partnership's retail assets and significant investments in its retail and industrial platforms, which were offset by the expiration of a significant lease within its office platform.

For the year ended December 31, 2013, net income was $995 million ($2.10 per unit) versus $1,343 million ($2.88 per unit) in 2012. Net income was $190 million ($0.37 per unit) for the quarter ended December 31, 2013 versus $312 million ($0.67 per unit) in the same period in 2012. The Partnership booked fair value gains of $872 million and $95 million, respectively, for the year and the quarter ended December 31, 2013, which were less than the fair value gains in comparable periods in 2012, primarily accounting for the decrease in net income.

"In 2013 we made significant progress advancing our vision of becoming the leading globally-diversified owner and operator of high-quality real estate assets. We made a number of acquisitions that expanded the footprints of our industrial and multi-family platforms, and we invested $1.4 billion to increase our stake in General Growth Properties," said Ric Clark, Chief Executive Officer. "Looking forward to 2014, we are excited to formally launch our offer to acquire "any and all" of the shares of Brookfield Office Properties that we don't own, and we are optimistic that we will be able to acquire 100% of BPO, which will further accelerate our business plan."

Segment Performance

Brookfield Property Partners' office platform generated fully-diluted FFO of $339 million for the year ended December 31, 2013 versus $364 million in 2012. This is primarily due to a $26 million decrease in dividends received on our investment in Canary Wharf Group plc. in 2013. Excluding Canary Wharf dividends, fully diluted FFO was $325 million for the year ended December 31, 2013 versus $324 million in 2012. The results reflected a significant reduction in interest expense as a result of refinancing activities offset by a major lease expiry at Brookfield Place New York in Q4 2013. In the fourth quarter of 2013, fully diluted FFO was $81 million versus $85 million in the same period last year as a $14 million dividend from Canary Wharf in Q4 2013 largely offset the impact of the aforementioned lease expiration.

The Partnership's retail platform produced fully-diluted FFO of $325 million for the year ended December 31, 2013 versus $262 million in 2012. In the fourth quarter of 2013, fully-diluted FFO was $110 million versus $88 million in same quarter of 2012. The increase in results for the quarter and year were driven by the acquisition of additional interests in General Growth Properties Inc. (GGP) and Rouse Properties Inc. (RSE) in November 2013, higher occupancy levels, which improved to 95.9%, a 10% increase in suite-to-suite lease spreads, and interest expense savings from refinancings.

Brookfield Property Partners' multi-family, industrial and other platform posted fully-diluted FFO of $50 million for the year ended December 31, 2013 compared with $7 million in 2012. In the fourth quarter of 2013, fully-diluted FFO was nil compared with a loss of $6 million in the same period in 2012. The increase in results for the quarter and the year was largely due to acquisitions of industrial and multi-family assets during the year, in which the Partnership deployed approximately $325 million of equity.

             
    Three months ended Dec. 31,     Year ended Dec. 31,  
US$ millions   2013     2012     2013     2012  
    BPY     BPY
Pro forma
    BPY
Pro forma
    BPY
Pro forma
 
Fully-diluted FFO by segment                                
  Office     81       85       339       364  
  Retail     110       88       325       262  
  Multi-Family, Industrial, and Other     -       (6 )     50       7  
  Corporate     (41 )     (32 )     (153 )     (127 )
Fully-diluted FFO (1) (2)   $ 150     $ 135     $ 561     $ 506  
                                 
Net income by segment                                
  Office   $ 69     $ 160     $ 723     $ 701  
  Retail     198       179       445       720  
  Multi-Family, Industrial, and Other     (3 )     (14 )     50       (27 )
  Corporate     (74 )     (13 )     (223 )     (51 )
Net income (1)   $ 190     $ 312     $ 995     $ 1,343  
   
(1) Fully-diluted FFO and net income represent interests attributable to LP units and REUs (defined as Redeemable/Exchangeable and special limited partner units of the operating partnership). The interests attributable to REUs are presented as non-controlling interests in the IFRS statement of income. See "Reconciliation of Non-IFRS Measures" below in this news release for the components.  
(2) Non IFRS measure. See definition under "Basis of Presentation"  
   

Update on Brookfield Office Properties ("BPO") Acquisition

In September of 2013, Brookfield Property Partners announced its intention to make an offer to acquire "any and all" of the outstanding shares of BPO that it does not own in exchange for a combination of BPY units and cash (the "Offer"). In December, the Partnership agreed to increase the cash portion of the Offer. Under the terms of the Offer, BPO shareholders can elect to receive consideration for each BPO common share tendered of either 1.0 Limited Partnership Unit of Brookfield Property Partners or $20.34 in cash, subject in each case to proration based on the maximum number of BPY Limited Partnership Units and the maximum cash consideration equating to 67% and 33%, respectively, of the total number of BPO common shares that are tendered under the Offer. Brookfield Property Partners is pleased to report that the BPO Board of Directors intends to unanimously recommend the Offer and that the mid-point of the value of our units and the value of the cash consideration in the Offer are each higher than the mid-point of the value of the BPO common shares, as determined by BPO's independent valuator. Brookfield Property Partners has filed its offer documents with the U.S. Securities and Exchange Commission (the "SEC"), and it plans to formally launch the Offering shortly.

Significant Transactions during the Fourth Quarter

During the fourth quarter of 2013, Brookfield Property Partners, directly or through affiliates, disposed of 23 assets, raising $190 million of net proceeds and generating $8 million of nets gains above its IFRS carrying value for these assets. Brookfield Property Partners recycled this capital into 22 acquisitions, deploying $2.2 billion of net equity. Highlights from the quarter include:

Office

  • Acquired One North End Avenue, which is a 509,000 square foot office building in downtown Manhattan that will be integrated in Brookfield Place New York; acquired the remaining 50% interest in 125 Old Broad Street in London.
  • Closed on the acquisition of MPG Office Trust, Inc. through a fund, with institutional investors, which now owns seven Class A office properties totaling 8.3 million square feet in Downtown Los Angeles.

Retail

  • Closed on the acquisition of additional interests in GGP and RSE for $1.4 billion, increasing ownership on a fully-diluted basis to 32% and 39%, respectively.
  • Completed over 2.1 million square feet of regional mall acquisitions in the U.S.

Multi-family, Industrial and Other

  • Closed acquisition of Industrial Developments International with institutional partners for an aggregate investment of $1.1 billion
  • Closed on the acquisition of 17 apartment communities adding approximately 4,300 multi-family units located primarily in the southeastern United States.

Distribution Declaration

The Board of Directors has declared a quarterly distribution of $0.25 per unit payable on March 31, 2014 to unitholders of record at the close of business on February 28, 2014. Unitholders resident in the United States will receive payment in U.S. dollars and unitholders resident in Canada will receive their distributions in Canadian dollars at the exchange rate on the record date, unless they elect otherwise. The distribution represents an annualized distribution of $1.00 per unit.

Additional Information

Further details regarding the operations of Brookfield Property Partners are set forth in regulatory filings. A copy of the filings may be obtained through the website of the SEC at www.sec.gov and on Brookfield Property Partners' SEDAR profile at www.sedar.com.

Brookfield Property Partners' Supplemental Information Package and Letter to Unitholders can be accessed before the market open on February 6, 2014 at www.brookfieldpropertypartners.com. This additional information should be read in conjunction with this press release.

Conference Call

Analysts, investors and other interested parties are invited to participate in Brookfield Property Partners' live conference call reviewing 2013 fourth quarter and full-year results on Thursday, February 6, 2014 at 11:00 a.m. eastern time. Scheduled speakers are Ric Clark, chief executive officer, John Stinebaugh, chief financial officer and Brian Kingston, president & chief investment officer. Management's presentation will be followed by a question and answer period.

To participate in the conference call, please dial toll free 888.334.3034 or toll 719.457.2602, pass code 7707759, five minutes prior to the scheduled start of the call. Live audio of the call will also be available via webcast at www.brookfieldpropertypartners.com. A replay of this call can be accessed through March 6, 2014 by dialing toll free 888.203.1112 or toll 719.457.0820, pass code 7707759. A replay of the webcast, as well as a podcast download, will be available at www.brookfieldpropertypartners.com for one year.

Basis of Presentation

This press release and accompanying financial information make reference to net operating income ("NOI"), funds from operations ("FFO") (on a total and per unit basis) and equity per unit. NOI, FFO, fully-diluted funds from operations ("fully-diluted FFO") (on a total and per unit basis) and equity per unit do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other companies. NOI is defined as revenues from commercial and hospitality operations of consolidated properties less direct commercial property and hospitality expenses, with the exception of depreciation and amortization of real estate assets. FFO is defined as income, including equity accounted income, before realized gains (losses) from the sale real estate property, fair value gains (losses) (including equity accounted fair value gains (losses)), depreciation and amortization of real estate assets, income tax expense (benefit), and less non-controlling interests of others in consolidated subsidiaries, but before non-controlling interests in the REUs. Fully-diluted FFO is defined as FFO plus the FFO that would have been attributable to the partnership's shares of GGP, if all outstanding warrants of GGP were exercised on a cash-less basis. It also includes dilution adjustments to undiluted FFO as a result of the net settled warrants. The Partnership uses NOI, FFO and fully-diluted FFO to assess its operating results. NOI is important in assessing operating performance and FFO is a widely-used measure to analyze real estate. The Partnership provides the components of NOI and a full reconciliation from net income to FFO and fully-diluted FFO with the financial information accompanying this press release. The partnership reconciles FFO to net income as opposed to cash flow from operating activities as it believes net income is the most comparable measure. We believe that our performance is best assessed by considering these two components in aggregate, and over the long term, because that is the basis on which we make investment decisions and operate the business. In fact, if we were solely focused on short-term financial results, it is quite likely that we would operate the business very differently and, in our opinion, in a manner that would produce lower long-term returns.

Forward-Looking Statements

This news release contains "forward-looking information" within the meaning of Canadian provincial securities laws and applicable regulations. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, include statements regarding our operations, business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies and outlook, as well as the outlook for North American and international economies 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 we believe 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 our control, 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: the Offer will be subject to conditions, which may not be satisfied; if the Offer is not accepted by a sufficient number of BPO common shareholders, some of the benefits to Brookfield Property Partners may not be realized; the length of time necessary to consummate the Offer may be longer than anticipated; BPO shareholders who would like to exchange their common shares for limited partnership units of Brookfield Property Partners may receive cash in lieu of up to 33% of their shares; problems may arise in successfully integrating the business of Brookfield Property Partners and BPO; we may not realize the anticipated synergies and other benefits following the Offer; the Offer may involve unexpected costs; the business of Brookfield Property Partners and BPO may suffer as a result of uncertainty surrounding the offer; 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 the countries in which we do business; 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 our business; the behavior of financial markets, including fluctuations in interest and foreign exchanges rates; uncertainties of real estate development or redevelopment; global equity and capital markets and the availability of equity and debt financing and refinancing within these markets; risks relating to our 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.

We caution that the foregoing list of important factors that may affect future results is not exhaustive. When relying on our 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, we undertake 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.

Additional Important Information

This News Release relates, in part, to Brookfield Property Partners' previously announced proposal to acquire BPO through a tender offer for any or all of the common shares of BPO that it does not currently own (the "Offer"). Brookfield Property Partners has filed a Registration Statement on Form F-4 and a Transaction Statement on Schedule 13e-3, and intends to file a Tender Offer Statement on Schedule 14D-1F (collectively, with the accompanying letter of transmittal and related documents, the "Exchange Offer Documents"), with the Securities and Exchange Commission (the "SEC") in connection with the Offer. The Offer has not yet formally commenced and may not be completed until the registration statement filed with the SEC is effective. This communication is for informational purposes only and does not constitute an offer to exchange, or a solicitation of an offer to exchange, any securities, nor is it a substitute for the Exchange Offer Documents. The Offer will be made only through the Exchange Offer Documents.

Security holders and investors will be able to obtain free copies of the Exchange Offer Documents (when they become available), as well as other filings containing information about Brookfield Property Partners, BPO and the Offer, without charge, at the SEC's web site at www.sec.gov, at the Canadian securities regulatory authorities' web site at www.sedar.com and from Brookfield Property Partners. These documents will also be available for inspection and copying at the public reference room maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549, US. For further information about the public reference room, call the SEC at 1-800-732-0330. SECURITY HOLDERS AND INVESTORS ARE URGED TO READ ANY SUCH DOCUMENTS CAREFULLY IN THEIR ENTIRETY BEFORE MAKING ANY INVESTMENT DECISION WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.

Brookfield Property Partners is a commercial real estate owner, operator and investor operating globally. Our diversified portfolio includes interests in over 300 office and retail properties encompassing approximately 250 million square feet. In addition, we have interests in over 25,000 multi-family units, 68 million square feet of industrial space and a 19 million square foot office development pipeline. Our goal is to be the leading global investor in best in class commercial property assets. For more information, please visit www.brookfieldpropertypartners.com.

 
 
Consolidated Balance Sheet
 
(US$ Millions)   BPY   BPY-Pro forma   BPY
    Dec. 31, 2013   Dec. 31, 2012   Dec. 31, 2012
Assets                  
Non-current assets                  
Investment properties   $ 34,153   $ 30,956   $ 31,696
Equity accounted investments     9,281     7,470     8,038
Other non-current assets     5,981     6,381     5,606
Loans and notes receivable     20     246     246
      49,435     45,053     45,586
Current assets                  
Loans and notes receivable     608     212     212
Accounts receivable and other     1,035     989     989
Cash and cash equivalents     1,368     891     894
      3,011     2,092     2,095
Total assets   $ 52,446   $ 47,145   $ 47,681
Liabilities and equity                  
Non-current liabilities                  
Property debt   $ 16,520   $ 15,916     16,442
Capital securities     2,181     1,914     664
Other non-current liabilities     250     439     439
Deferred tax liability     1,532     1,075     973
      20,483     19,344     18,518
Current liabilities                  
Property debt     5,120     3,366     3,366
Capital securities     188     202     202
Accounts payable and other liabilities     1,665     1,559     1,592
      6,973     5,127     5,160
Total liabilities     27,456     24,471     23,678
Equity                  
Limited partners     2,528     2,028     -
General partner     4     4     -
Brookfield Asset Management Inc.     -     -     13,163
Non-controlling interests attributable to:                  
  Redeemable/exchangeable and special limited partner units of the operating partnership held by Brookfield Asset Management Inc.     11,092     9,777     -
  Interests of others in operating subsidiaries     11,366     10,865     10,840
Total equity     24,990     22,674     24,003
Total liabilities and equity   $ 52,446   $ 47,145   $ 47,681

See Appendix A "Reconciliation of the Partnership's financial results to pro forma financial results" for an explanation of the adjustments.

 
 
Consolidated Statements of Income
 
    BPY   BPY Pro-Forma
(US$ Millions) Three months ended December 31,   2013   2012   2012
Commercial property and hospitality revenue   $ 944   $ 975   $ 954
Investment and other revenue     77     39     56
Total revenue     1,021     1,014     1,010
Direct commercial property and hospitality expense     552     545     540
Interest expense     270     278     287
Administration and other expense     114     40     52
Total expenses     936     863     879
Fair value gains, net     95     206     206
Share of equity accounted income     292     253     242
Income before income taxes     472     610     579
Income tax expense     146     25     92
Net income   $ 326   $ 585   $ 487
Net income attributable to:                  
Limited partners   $ 35   $ -   $ 56
General partner     -     -     -
Brookfield Asset Management Inc.     -     410     -
Non-controlling interests:                  
  Redeemable/exchangeable and special limited partner units of the operating partnership held by Brookfield Asset Management Inc.     155     -     256
  Interests of others in operating subsidiaries     136     175     175
Net income   $ 326   $ 585   $ 487
                   
                   
         
         
    BPY   BPY-Pro forma
(US$ Millions) Year ended December 31,   2013   2012   2013   2012
Commercial property and hospitality revenue   $ 4,078   $ 3,601   $ 4,059   $ 3,523
Investment and other revenue     209     167     222     221
Total revenue     4,287     3,768     4,281     3,744
Direct commercial property and hospitality expense     2,285     1,876     2,280     1,858
Interest expense     1,088     1,020     1,100     1,052
Administration and other expense     355     205     370     255
Total expenses     3,728     3,101     3,750     3,165
Fair value gains, net     870     1,227     872     1,227
Share of equity accounted income     835     1,235     824     1,196
Income before income taxes     2,264     3,129     2,227     3,002
Income tax expense     501     489     376     494
Net income   $ 1,763   $ 2,640   $ 1,851   $ 2,508
Net income attributable to:                        
Limited partners   $ 118   $ -   $ 173   $ 233
General partner     -     -     -     -
Brookfield Asset Management Inc.     232     1,476     -     -
Non-controlling interests:                        
  Redeemable/exchangeable and special limited partner units of the operating partnership held by Brookfield Asset Management Inc.     557     -     822     1,110
  Interests of others in operating subsidiaries     856     1,164     856     1,165
Net income   $ 1,763   $ 2,640   $ 1,851   $ 2,508

See Appendix A "Reconciliation of the Partnership's financial results to pro forma financial results" for an explanation of the adjustments. 

   
   
Reconciliation of Non-IFRS Measures  
   
    BPY     BPY Pro-Forma  
(US$ Millions) Three months ended December 31,   2013     2012     2012  
Commercial property and hospitality revenue   $ 944     $ 975     $ 954  
Direct commercial property and hospitality expense     (552 )     (545 )     (540 )
Depreciation and amortization of real estate assets(1)     27       16       16  
NOI     419       446       430  
Investment and other revenue     77       39       56  
Share of equity accounted income excluding fair value gains and income tax expense     133       128       117  
Interest expense     (270 )     (278 )     (287 )
Administration and other expense     (114 )     (40 )     (52 )
Non-controlling interests of others in operating subsidiaries in funds from operations     (103 )     (130 )     (130 )
FFO (2,3)     142       165       134  
FFO from General Growth Properties Inc. Warrants     8       1       1  
Fully-diluted FFO (2,3)     150       166       135  
FFO from General Growth Properties Inc. Warrants     (8 )     (1 )     (1 )
Depreciation and amortization of real estate assets(1)     (27 )     (16 )     (16 )
Fair value gains, net     95       206       206  
Share of equity accounted fair value gains     159       125       125  
Income tax expense     (146 )     (25 )     (92 )
Share of equity accounted income tax expense     -       -       -  
Non-controlling interests of others in operating subsidiaries in non-FFO items     (33 )     (45 )     (45 )
Net income before non-controlling interests of others in operating subsidiaries     190       410       312  
Net income attributable to non-controlling interests of others in operating subsidiaries     136       175       175  
Net income (3)   $ 326     $ 585     $ 487  
(1)Depreciation and amortization of real estate assets is a component of direct hospitality expense that is added back to NOI and is deducted in the net income calculation.  
(2)FFO and Fully-diluted FFO represent interests attributable to LP units and REUs (defined as Redeemable/Exchangeable and special limited partner units of the operating partnership). The interests attributable to REUs are presented as non-controlling interests in the IFRS statement of income.  
(3)For the BPY columns FFO and net income are also attributable to Brookfield Asset Management Inc. for the period prior to the spin-off of BPY (April 15, 2013).  
   
   
             
             
    BPY     BPY-Pro forma  
(US$ Millions) Year ended December 31,   2013     2012     2013     2012  
Commercial property and hospitality revenue   $ 4,078     $ 3,601     $ 4,059     $ 3,523  
Direct commercial property and hospitality expense     (2,285 )     (1,876 )     (2,280 )     (1,858 )
Depreciation and amortization of real estate assets(1)     124       49       124       49  
NOI     1,917       1,774       1,903       1,714  
Investment and other revenue     209       167       222       221  
Share of equity accounted income excluding fair value gains and income tax expense     435       427       424       388  
Interest expense     (1,088 )     (1,020 )     (1,100 )     (1,052 )
Administration and other expense     (355 )     (205 )     (370 )     (255 )
Non-controlling interests of others in operating subsidiaries in funds from operations     (536 )     (512 )     (536 )     (512 )
FFO (2,3)     582       631       543       504  
FFO from General Growth Properties Inc. Warrants     18       2       18       2  
Fully-diluted FFO (2,3)     600       633       561       506  
FFO from General Growth Properties Inc. Warrants     (18 )     (2 )     (18 )     (2 )
Depreciation and amortization of real estate assets(1)     (124 )     (49 )     (124 )     (49 )
Fair value gains, net     870       1,227       872       1,227  
Share of equity accounted fair value gains     414       808       414       808  
Income tax expense     (501 )     (489 )     (376 )     (494 )
Share of equity accounted income tax expense     (14 )     -       (14 )     -  
Non-controlling interests of others in operating subsidiaries in non-FFO items     (320 )     (652 )     (320 )     (653 )
Net income before non-controlling interests of others in operating subsidiaries     907       1,476       995       1,343  
Net income attributable to non-controlling interests of others in operating subsidiaries     856       1,164       856       1,165  
Net income (3)   $ 1,763     $ 2,640     $ 1,851     $ 2,508  
(1)Depreciation and amortization of real estate assets is a component of direct hospitality expense that is added back to NOI and is deducted in the net income calculation.  
(2)FFO and Fully-diluted FFO represent interests attributable to LP units and REUs (defined as Redeemable/Exchangeable and special limited partner units of the operating partnership). The interests attributable to REUs are presented as non-controlling interests in the IFRS statement of income.  
(3)For the BPY columns FFO and net income are also attributable to Brookfield Asset Management Inc. for the period prior to the spin-off of BPY (April 15, 2013).  

See Appendix A "Reconciliation of the Partnership's financial results to pro forma financial results" for an explanation of the adjustments.

Appendix A: Reconciliation of the Partnership's financial results to pro forma financial results
                                             
                                             
As at December 31, 2012       Pro Forma Adjustments      
(US$ Millions)   Brookfield Property Partners L.P.    Australian Investments
(a)
    Capital Securities
(b)
    Preferred Shares
(c)
   
Equity
(d)
    Tax Impact of Reorganization
(e)
    Total Pro Forma Adjustments     Pro Forma Brookfield Property Partners L.P.
                                                             
Assets                                                            
Non-current assets                                                            
Investment properties   $ 31,696   $ (740 )   $ -     $ -     $ -     $ -     $ (740 )   $ 30,956
Equity accounted investments     8,038     (568 )     -       -       -       -       (568 )     7,470
Other non-current assets     5,606     775       -       -       -       -       775       6,381
Loans and notes receivable     246     -       -       -       -       -       -       246
      45,586     (533 )     -       -       -       -       (533 )     45,053
Current assets                                                            
Loans and notes receivable     212     -       -       -       -       -       -       212
Accounts receivable and other     989     -       -       -       -       -       -       989
Cash and cash equivalents     894     (3 )     -       -       -       -       (3 )     891
      2,095     (3 )     -       -       -       -       (3 )     2,092
Total assets   $ 47,681   $ (536 )   $ -     $ -     $ -     $ -     $ (536 )   $ 47,145
Liabilities and equity                                                            
Non-current liabilities                                                            
Property debt   $ 16,442   $ (526 )   $ -     $ -     $ -     $ -     $ (526 )   $ 15,916
Capital securities     664     -       1,250       -       -       -       1,250       1,914
Other non-current liabilities     439     -       -       -       -       -       -       439
Deferred tax liability     973     59       -       -       -       43       102       1,075
      18,518     (467 )     1,250       -       -       43       826       19,344
Current liabilities                                                            
Property debt     3,366     -       -       -       -       -       -       3,366
Capital securities     202     -       -       -       -       -       -       202
Accounts payable and other liabilities     1,592     (33 )     -       -       -       -       (33 )     1,559
      5,160     (33 )     -       -       -       -       (33 )     5,127
Equity                                                            
Limited partners     -     -       -       -       2,028       -       2,028       2,028
General partner     -     -       -       -       4       -       4       4
Brookfield Asset Management Inc.     13,163     (36 )     (1,250 )     (25 )     (11,809 )     (43 )     (13,163 )     -
Non-controlling interests attributable to:                                                            
  Redeemable/exchangeable and special limited partner units of the operating partnership held by Brookfield Asset Management Inc.     -     -       -       -       9,777       -       9,777       9,777
  Interests of others in operating subsidiaries     10,840     -       -       25       -       -       25       10,865
Total equity     24,003     (36 )     (1,250 )     -       -       (43 )     (1,329 )     22,674
Total liabilities and equity   $ 47,681   $ (536 )   $ -     $ -     $ -     $ -     $ (536 )   $ 47,145
                                                             
                                                             

See notes for an explanation of each adjustment.

                                               
                                               
For the year ended December 31, 2013         Pro Forma Adjustments        
(US$ Millions)   Brookfield Property Partners L.P.     Australian Investments
(a)
    Capital Securities
(b)
   
Equity
(d)
    Tax Impact of Reorganization
(e)
  Management Fee
(f)
    Total Pro Forma Adjustments     Pro Forma Brookfield Property Partners L.P.  
                                                               
Commercial property and hospitality revenue     4,078       (19 )     -       -       -     -       (19 )     4,059  
Investment and other revenue     209       13       -       -       -     -       13       222  
Total revenue     4,287       (6 )     -       -       -     -       (6 )     4,281  
Direct commercial property and hospitality expense     2,285       (5 )     -       -       -     -       (5 )     2,280  
Interest expense     1,088       (10 )     22       -       -     -       12       1,100  
Administration and other expense     355       -       -       -       -     15       15       370  
Total expenses     3,728       (15 )     22       -       -     15       22       3,750  
Fair value gains     870       2       -       -       -     -       2       872  
Share of net earnings from equity accounted investments     835       (11 )     -       -       -     -       (11 )     824  
Income before income taxes     2,264       -       (22 )     -       -     (15 )     (37 )     2,227  
Income tax (expense) benefit     (501 )     -       -       -       122     3       125       (376 )
Net income   $ 1,763     $ -     $ (22 )   $ -     $ 122   $ (12 )   $ 88     $ 1,851  
                                                               
Net income attributable to:                                                              
Limited partners   $ 118     $ -     $ -     $ 55     $ -   $ -     $ 55     $ 173  
General partner     -       -       -       -       -     -       -       -  
Brookfield Asset Management Inc.     232       -       (22 )     (320 )     122     (12 )     (232 )     -  
Non-controlling interests attributable to:                                                              
  Redeemable/exchangeable and special limited partner units of the operating partnership held by Brookfield Asset Management Inc.     557       -       -       265       -     -       265       822  
  Interests of others in operating subsidiaries     856       -       -       -       -     -       -       856  
    $ 1,763     $ -     $ (22 )   $ -     $ 122   $ (12 )   $ 88     $ 1,851  
                                                               
                                                               
                                                 
                                                 
For the three months ended December 31, 2012         Pro Forma Adjustments        
(US$ Millions)   Brookfield Property Partners L.P.     Australian Investments
(a)
    Capital Securities
(b)
   
Equity
(d)
    Tax Impact of Reorganization
(e)
    Management Fee
(f)
    Total Pro Forma Adjustments     Pro Forma Brookfield Property Partners L.P.  
                                                                 
Commercial property and hospitality revenue     975       (21 )     -       -       -       -       (21 )     954  
Investment and other revenue     39       17       -       -       -       -       17       56  
Total revenue     1,014       (4 )     -       -       -       -       (4 )     1,010  
Direct commercial property and hospitality expense     545       (5 )     -       -       -       -       (5 )     540  
Interest expense     278       (10 )     19       -       -       -       9       287  
Administration and other expense     40       -       -       -       -       12       12       52  
Total expenses     863       (15 )     19       -       -       12       16       879  
Fair value gains     206       -       -       -       -       -       -       206  
Share of net earnings from equity accounted investments     253       (11 )     -       -       -       -       (11 )     242  
Income before income taxes     610       -       (19 )     -       -       (12 )     (31 )     579  
Income tax (expense) benefit     (25 )     -       -       -       (70 )     3       (67 )     (92 )
Net income   $ 585     $ -     $ (19 )   $ -     $ (70 )   $ (9 )   $ (98 )   $ 487  
                                                                 
Net income attributable to:                                                                
Limited partners   $ -     $ -     $ -     $ 56     $ -     $ -     $ 56     $ 56  
General partner     -       -       -       -       -       -       -       -  
Brookfield Asset Management Inc.     410       -       (19 )     (312 )     (70 )     (9 )     (410 )     -  
Non-controlling interests attributable to:                                                                
  Redeemable/exchangeable and special limited partner units of the operating partnership held by Brookfield Asset Management Inc.     -       -       -       256       -       -       256       256  
  Interests of others in operating subsidiaries     175       -       -       -       -       -       -       175  
    $ 585     $ -     $ (19 )   $ -     $ (70 )   $ (9 )   $ (98 )   $ 487  
                                                                 
                                                                 

See notes for an explanation of each adjustment.

                                                       
                                                       
For the year ended December 31, 2012         Pro Forma Adjustments        
(US$ Millions)   Brookfield Property Partners L.P.     Australian Investments
(a)
    Capital Securities
(b)
    Preferred Shares
(c)
   
Equity
(d)
    Tax Impact of Reorganization
(e)
    Management Fee
(f)
    Total Pro Forma Adjustments     Pro Forma Brookfield Property Partners L.P.  
                                                                         
Commercial property and hospitality revenue     3,601       (78 )     -       -       -       -       -       (78 )     3,523  
Investment and other revenue     167       54       -       -       -       -       -       54       221  
Total revenue     3,768       (24 )     -       -       -       -       -       (24 )     3,744  
Direct commercial property and hospitality expense     1,876       (18 )     -       -       -       -       -       (18 )     1,858  
Interest expense     1,020       (45 )     77       -       -       -       -       32       1,052  
Administration and other expense     205       -       -       -       -       -       50       50       255  
Total expenses     3,101       (63 )     77       -       -       -       50       64       3,165  
Fair value gains     1,227       -       -       -       -       -       -       -       1,227  
Share of net earnings from equity accounted investments     1,235       (39 )     -       -       -       -       -       (39 )     1,196  
Income before income taxes     3,129       -       (77 )     -       -       -       (50 )     (127 )     3,002  
Income tax (expense) benefit     (489 )     -       -       -       -       (18 )     13       (5 )     (494 )
Net income   $ 2,640     $ -     $ (77 )   $ -     $ -     $ (18 )   $ (37 )   $ (132 )   $ 2,508  
                                                                         
Net income attributable to:                                                                        
Limited partners   $ -     $ -     $ -     $ -     $ 233     $ -     $ -     $ 233     $ 233  
General partner     -       -       -       -       -       -       -       -       -  
Brookfield Asset Management Inc.     1,476       -       (77 )     (1 )     (1,343 )     (18 )     (37 )     (1,476 )     -  
Non-controlling interests attributable to:                                                                        
  Redeemable/exchangeable and special limited partner units of the operating partnership held by Brookfield Asset Management Inc.     -       -       -       -       1,110       -       -       1,110       1,110  
  Interests of others in operating subsidiaries     1,164       -       -       1       -       -       -       1       1,165  
    $ 2,640     $ -     $ (77 )   $ -     $ -     $ (18 )   $ (37 )   $ (132 )   $ 2,508  
                                                                         
                                                                         

See notes for an explanation of each adjustment.

Notes regarding pro forma financial information:

The pro forma financial information in this release has been prepared to give effect to the acquisition by Brookfield Property Partners of Brookfield's commercial property operations (the "spinoff"), including its office, retail, multi-family, industrial and other assets, located in the United States, Canada, Australia, Brazil and Europe, that have historically been owned and operated, both directly and through its operating entities. The commercial property operations transferred to the partnership through the spinoff include all of the commercial property operations of Brookfield included in the financial statements.
In addition, the pro forma information was prepared reflecting adjustments for the following:

a) Acquisition of interests in Brookfield's Australian properties through participating loan interests.

b) Issuance of $1.25 billion of Capital Securities to Brookfield as partial consideration for the business acquired by the partnership.

c) Issuance of $25 million of Preferred Shares by certain holding entities of Brookfield Property Partners.

d) Issuance of partnership units by Brookfield Property Partners as partial consideration for the business acquired, and issuance of approximately 80 million units of the partnership in the spinoff based on the number of Class A limited voting shares and Class B limited voting shares of Brookfield.

e) Reorganization of the legal structure through which the business is held, including the issuance of certain inter-company debt between the property partnership and the holding entities, resulting in changes in the effective tax rate and the tax basis of certain investments.

f) Annual management fees of $50 million paid by the partnership to Brookfield pursuant to a Master Services Agreement.

The unaudited pro forma information has been prepared based upon currently available information and assumptions deemed appropriate by management. The unaudited pro forma financial information is provided for information purposes only and is not intended to represent, or be indicative of, the results that would have occurred had the transactions reflected in the pro forma adjustments been effected on the dates indicated.

Contact Information

  • Contact:
    Melissa Coley
    Vice President, Investor Relations & Communications
    Tel: 212-417-7215
    Email: Email Contact