TORONTO, November 4, 2008 – BPO Properties Ltd. (TSX: BPP) today announced financial results for the quarter ended September 30, 2008.
BPO Properties’ net income from continuing operations for the three months ended September 30, 2008 was $15.4 million ($0.43 per share) compared to $10.1 million ($0.19 per share) during the same period in 2007. BPO Properties’ net income for the three months ended September 30, 2008 was $15.4 million ($0.43 per share), consistent with $15.4 million ($0.38 per share) during the same period in 2007.
Funds from continuing operations was $38.6 million ($1.24 per share) for the three months ended September 30, 2008 compared to $35.6 million ($1.09 per share) during the same period in 2007.
MAJOR TRANSACTIONS
Advanced developments under construction which are 77% leased in aggregate.
- In Toronto, the 1.2-million-square-foot Bay Adelaide Centre West tower continues on budget and on schedule. The installation of the curtain wall is up to the 44th floor and a topping-off ceremony was held on September 23, 2008 to mark the raising of the final steel beam. Total pre-leasing at the building stands at 72%. Substantial completion is expected in July 2009.
- In Calgary, the 265,000-square-foot Bankers Court was topped-off on September 5, 2008. Penthouse and elevator work is underway with substantial completion remaining on schedule for February 2009. Curtain wall installation is nearing completion with base building finishes, mechanical and electrical work advancing. The building is being developed to a LEED-certified Core and Shell standard and is 100% pre-leased.
Completed a bridge facility of $300 million on Petro-Canada Centre, Calgary, subsequent to the third quarter for a one year term, raising net proceeds of $25 million at ownership. With the recent signing of a one million square foot lease, this asset will be permanently financed in 2009.
Refinanced 22 Front Street in Toronto for $20.0 million. This loan bears interest at 6.24% per annum and matures in October 2020. The loan generated net proceeds of $13.7 million after repayment of the previous loan of $6.3 million.
Repurchased 86,600 shares at an average price of $51.05 per share. Subsequent to quarter-end, 61,300 shares were repurchased at an average price of $42.05 per share.
OPERATIONS REVIEW
BPO Properties continued its proactive leasing strategy with the portfolio 98.6% leased at the end of the third quarter of 2008, compared to a Canadian national average of 94.1%. During the quarter, BPO Properties leased 1.4 million square feet of space.
Transactional highlights from the third quarter include:
1,127,000 square feet in Calgary
- 15-year renewal and expansion with Petro-Canada at Petro-Canada Centre for 1,015,000 square feet
- New 10-year lease with Petrobank Energy and Resources at Petro-Canada Centre for 78,000 square feet
277,000 square feet in Toronto
- New 10-year lease with Citco Inc. at Hudson’s Bay Centre for 99,000 square feet
- Five-year lease renewal with The Toronto Board of Trade at First Canadian Place for 36,000 square feet
- Seven-year lease renewal with CIT Financial at Queen’s Quay Terminal for 30,000 square feet
OUTLOOK
“With a well-leased portfolio and low near-term lease rollover exposure, we are strongly positioned for continued success in our core markets,” said Tom Farley, president and chief executive officer of BPO Properties.
* * * * *
Net Operating Income and FFO
This press release and accompanying financial information make reference to net operating income and funds from operations ("FFO") on a total and per share basis. Net operating income is defined as income from property operations after operating expenses have been deducted, but prior to deducting financing, administration, depreciation, amortization and income tax expenses. FFO is defined as net income prior to extraordinary items, one-time transaction costs, income taxes, certain other non-cash items and depreciation and amortization. The company uses net operating income and FFO to assess its operating results. Net operating income is important in assessing operating performance and FFO is a relevant measure to analyze real estate, as commercial properties generally appreciate rather than depreciate. The company provides the components of net operating income and a full reconciliation from net income to FFO with the financial statements accompanying this press release. The company reconciles FFO to net income as opposed to cash flow from operating activities as it believes net income is the most comparable measure. Net operating income and FFO are both non-GAAP measures which do not have any standard meaning prescribed by GAAP and therefore may not be comparable to similar measures presented by other companies.
Forward-Looking Statements
This press release, particularly the “Outlook” section, contains forward-looking statements and information within the meaning of applicable securities legislation. Although BPO Properties believes that the 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 which may cause the actual results, performance or achievements of the company to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements and information. Accordingly, the company cannot give any assurance that its expectations will in fact occur and cautions that actual results may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those set forth in the forward-looking statements and information include general economic conditions; local real estate conditions, including the development of properties in close proximity to the company’s properties; timely leasing of newly-developed properties and re-leasing of occupied square footage upon expiration; dependence on tenants' financial condition; the uncertainties of real estate development and acquisition activity; the ability to effectively integrate acquisitions; interest rates; availability of equity and debt financing; the impact of newly-adopted accounting principles on the company's accounting policies and on period-to-period comparisons of financial results; and other risks and factors described from time to time in the documents filed by the company with the securities regulators in Canada, including in the Annual Information Form under the heading “Business of BPO Properties – Company and Real Estate Industry Risks” and in the company’s annual report under the heading “Management’s Discussion and Analysis.” The company undertakes no obligation to publicly update or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, except as required by securities laws.
Dividend Declaration
The Board of Directors of BPO Properties declared a quarterly common share dividend of $0.15 per share, payable on December 31, 2008 to shareholders of record at the close of business on December 1, 2008.
The Board of Directors also declared dividends on series G, J and M preferred shares, payable February 14, 2009 to shareholders of record at the close of business on January 30, 2009, for the period November 14, 2008 to February 13, 2009. The dividend per preferred share is to be computed in accordance with the terms of the shares.
Conference Call
BPO Properties’ third quarter 2008 conference call can be accessed by teleconference on Tuesday, November 4, 2008 at 3:00 p.m. E.T. at 1-866-249-1361. The call will be archived through December 4, 2008 and can be accessed by dialing 1-800-558-5253, pass code #21395909. The conference call can also be accessed by webcast on the BPO Properties website at
www.bpoproperties.com.
Supplemental Information
Investors, analysts and other interested parties can access BPO Properties' Supplemental Information Package on BPO Properties' Web site under the Investor Relations/Financial Reports section. This additional financial information should be read in conjunction with this press release.
BPO Properties Profile
BPO Properties Ltd., 89% owned by Brookfield Properties Corp., is a Canadian company that invests in real estate, focusing on the ownership and value enhancement of premier office properties. The current property portfolio is comprised of interests in 27 commercial properties totaling 18.1 million square feet and five development sites totaling 5.7 million square feet. Landmark properties include First Canadian Place in Toronto and Bankers Hall in Calgary. BPO Properties’ common shares trade on the TSX under the symbol BPP. For more information, visit
www.bpoproperties.com.
Contact
Investor relations and media inquiries should be directed to Melissa Coley, Vice President, Investor Relations and Communications at (416) 359-8593. Inquiries regarding financial results should be directed to Bryan Davis, Senior Vice President and Chief Financial Officer, at (416) 359-8612.
* * * * *
CONSOLIDATED BALANCE SHEET
|
(Millions)
|
September 30, 2008
|
December 31, 2007
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Commercial properties
|
$
|
1,339.4
|
$
|
1,351.6
|
|
Commercial developments
|
|
643.0
|
|
452.5
|
|
Loans receivable
|
|
146.9
|
|
283.5
|
|
Tenant receivables and other assets
|
|
68.8
|
|
66.0
|
|
Cash and cash equivalents
|
|
61.2
|
|
37.7
|
|
Intangible assets
|
|
33.2
|
|
40.2
|
|
Assets related to discontinued operations
|
|
-
|
|
4.2
|
|
|
$
|
2,292.5
|
$
|
2,235.7
|
|
|
|
|
|
|
|
Liabilities and shareholders’ equity
|
|
|
|
|
|
Commercial and development property debt
|
$
|
1,178.7
|
$
|
965.5
|
|
Accounts payable and other liabilities
|
|
134.5
|
|
100.4
|
|
Intangible liabilities
|
|
74.6
|
|
85.0
|
|
Future income tax liabilities
|
|
48.8
|
|
41.3
|
|
Liabilities related to discontinued operations
|
|
-
|
|
3.0
|
|
Shareholders’ equity
|
|
855.9
|
|
1,040.5
|
|
|
$
|
2,292.5
|
$
|
2,235.7
|
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
|
|
Three months ended Sept. 30
|
Nine months ended Sept. 30
|
|
(Millions, except per share amounts)
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Properties
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
84.6
|
$
|
80.9
|
$
|
254.7
|
$
|
244.9
|
|
Expenses
|
|
35.4
|
|
34.9
|
|
109.0
|
|
105.1
|
|
Net operating income
|
|
49.2
|
|
46.0
|
|
145.7
|
|
139.8
|
|
Loans and investment income
|
|
4.0
|
|
2.3
|
|
12.4
|
|
7.2
|
|
|
|
53.2
|
|
48.3
|
|
158.1
|
|
147.0
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
9.5
|
|
8.2
|
|
28.1
|
|
23.9
|
|
General and administrative expenses
|
|
5.1
|
|
4.5
|
|
15.4
|
|
15.4
|
|
|
|
38.6
|
|
35.6
|
|
114.6
|
|
107.7
|
|
Transaction costs
|
|
-
|
|
4.0
|
|
-
|
|
4.0
|
|
Depreciation and amortization
|
|
13.3
|
|
13.6
|
|
38.9
|
|
42.9
|
|
Income taxes
|
|
9.9
|
|
7.9
|
|
25.2
|
|
22.5
|
|
Net income from continuing operations
|
|
15.4
|
|
10.1
|
|
50.5
|
|
38.3
|
|
Discontinued operations
|
|
?
|
|
5.3
|
|
?
|
|
57.5
|
|
Net income and comprehensive income
|
$
|
15.4
|
$
|
15.4
|
$
|
50.5
|
$
|
95.8
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
0.43
|
$
|
0.19
|
$
|
1.38
|
$
|
0.87
|
|
Discontinued operations
|
|
?
|
|
0.19
|
|
?
|
|
2.02
|
|
Total
|
$
|
0.43
|
$
|
0.38
|
$
|
1.38
|
$
|
2.89
|
RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS (“FFO”)
|
|
Three months ended Sept. 30
|
Nine months ended Sept. 30
|
|
(Millions)
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
Net income
|
$
|
15.4
|
$
|
15.4
|
$
|
50.5
|
$
|
95.8
|
|
Add:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization (i)
|
|
13.3
|
|
14.4
|
|
38.9
|
|
45.9
|
|
Income taxes (ii)
|
|
9.9
|
|
9.2
|
|
25.2
|
|
35.3
|
|
Transaction costs
|
|
?
|
|
4.0
|
|
?
|
|
4.0
|
|
FFO and gains
|
|
38.6
|
|
43.0
|
|
114.6
|
|
181.0
|
|
Property disposition gains
|
|
?
|
|
(5.6)
|
|
?
|
|
(65.1)
|
|
FFO prior to property disposition gains
|
$
|
38.6
|
$
|
37.4
|
$
|
114.6
|
$
|
115.9
|
(i) Includes depreciation and amortization from discontinued operations of nil and nil for the three and nine months ended Sept. 30, 2008, respectively (2007 - $0.8 million and $3.0 million, respectively)
(ii) Includes income taxes from discontinued operations of nil and nil for the three and nine months ended Sept. 30, 2008, respectively (2007 - $1.3 million and $12.8 million, respectively)
FFO PER COMMON SHARE
|
|
Three months ended Sept. 30
|
Nine months ended Sept. 30
|
|
(Millions, except per share amounts)
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
FFO prior to property disposition gains
|
$
|
38.6
|
$
|
37.4
|
$
|
114.6
|
$
|
115.9
|
|
Preferred share dividends
|
|
(3.3)
|
|
(4.7)
|
|
(11.3)
|
|
(13.5)
|
|
Funds available to common shareholders
|
|
35.3
|
|
32.7
|
|
103.3
|
|
102.4
|
|
Weighted average shares outstanding
|
|
28.4
|
|
28.5
|
|
28.5
|
|
28.5
|
|
FFO prior to property disposition gains per common share
|
$
|
1.24
|
$
|
1.15
|
$
|
3.62
|
$
|
3.59
|
DISCONTINUED OPERATIONS
|
(Millions)
|
September 30, 2008
|
December 31, 2007
|
|
Assets related to discontinued operations
|
|
|
|
|
|
|
|
|
|
Commercial properties
|
|
|
$
|
-
|
|
|
$
|
3.2
|
|
Intangible assets
|
|
|
|
-
|
|
|
|
0.1
|
|
Tenant receivables and other assets
|
|
|
|
-
|
|
|
|
0.9
|
|
|
|
|
$
|
-
|
|
|
$
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities related to discontinued operations
|
|
|
|
|
|
|
|
|
|
Accounts payable and other liabilities
|
|
|
$
|
-
|
|
|
$
|
3.0
|
|
|
|
|
$
|
-
|
|
|
$
|
3.0
|
INCOME FROM DISCONTINUED OPERATIONS
|
|
Three months ended Sept. 30
|
Nine months ended Sept. 30
|
|
(Millions, except per share amounts)
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
Property disposition gains
|
$
|
-
|
$
|
5.6
|
$
|
-
|
$
|
65.1
|
|
Revenue from discontinued operations
|
|
-
|
|
3.7
|
|
0.1
|
|
16.0
|
|
Operating expenses
|
|
-
|
|
(1.4)
|
|
(0.1)
|
|
(5.8)
|
|
Net operating income and gains from discontinued operations
|
|
-
|
|
7.9
|
|
-
|
|
75.3
|
|
Interest expense
|
|
-
|
|
(0.5)
|
|
-
|
|
(2.0)
|
|
Funds from discontinued operations and gains
|
|
-
|
|
7.4
|
|
-
|
|
73.3
|
|
Depreciation and amortization
|
|
-
|
|
(0.8)
|
|
-
|
|
(3.0)
|
|
Income taxes
|
|
-
|
|
(1.3)
|
|
-
|
|
(12.8)
|
|
Net income from discontinued operations
|
$
|
-
|
$
|
5.3
|
$
|
-
|
$
|
57.5
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share – discontinued operations
|
$
|
-
|
$
|
0.19
|
$
|
-
|
$
|
2.02
|