TORONTO, August 4, 2009 – BPO Properties Ltd. (TSX: BPP) today announced financial results for the quarter ended June 30, 2009 and declared a 100% increase in the ongoing quarterly dividend for common shares from $0.15 per common share to $0.30 per common share. The first increase will be payable on September 30, 2009 to shareholders of record at the close of business on September 1, 2009.
BPO Properties’ net income for the three months ended June 30, 2009 was $15.3 million ($0.50 per share), compared to $17.8 million ($0.49 per share) during the same period in 2008. Net operating income from commercial properties totaled $50.1 million, compared to $48.8 million during the same period in 2008.
Funds from continuing operations was $30.9 million ($1.05 per share) for the three months ended June 30, 2009, compared to $38.6 million ($1.22 per share) during the same period in 2008.
HIGHLIGHTS OF THE SECOND QUARTER
Achieved substantial completion of the 1.2-million-square-foot Bay Adelaide Centre West in Toronto. The majority of the pre-leased office space has been turned over for tenant fixturing and construction on the retail space commenced on August 1. The building is 73% pre-leased with the first tenant taking occupancy on August 10.
Completed final commissioning of the 265,000-square-foot Bankers Court project in Calgary. Leases commence in the third quarter of 2009, resulting in the project being reclassified from development to income-producing later this year. The building is expected to achieve LEED Gold certification. The building is 100% pre-leased.
Completed new financing at Petro-Canada Centre in Calgary for $220.0 million. The loan bears interest at 6.379% per annum and matures in June 2014. The loan generated net proceeds of $70.0 million after repayment of the previous bridge facility of $150.0 million.
Refinanced Enbridge Tower in Edmonton for $6.3 million. This loan bears interest at 6.5% per annum and matures in July 2019. The loan generated net proceeds of $4.1 million after repayment of the previous loan of $2.2 million.
Renamed Calgary building Suncor Energy Centre. The merged Petro-Canada and Suncor Energy Inc are consolidating operations in the renamed Brookfield building, with all employees at the combined entity expected to be moved in by the end of 2010. The building is 100% leased.
OPERATIONS REVIEW
BPO Properties continued its pro-active leasing strategy in the second quarter of 2009, with the portfolio 98.2% leased at the end of the quarter, compared to a Canadian national average of 93.0%. During the quarter, BPO Properties leased 371,000 square feet of space.
Transactional highlights from the second quarter include:
176,000 square feet in Calgary
- A five-year lease renewal with Bennett Jones at Bankers Hall for 161,000 square feet
159,000 square feet in Toronto
- A 12-year new lease with Globalive Wireless Management Corp. at Queen’s Quay Terminal for 59,000 square feet
- A five-year lease renewal with Public Works and Government Services Canada at 151 Yonge St. for 58,000 square feet
27,000 square feet in Vancouver
- A five-year lease renewal with Spectra Energy Corp. at Royal Centre for 27,000 square feet
OUTLOOK
“Our high occupancy rate continues to outpace the Canadian national average and our lease rollover profile is one of the most manageable in the industry which provides us with sustainable cash flow to support a common share dividend increase,” said Tom Farley, CEO of BPO Properties Ltd.
* * * * *
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, future 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 law.
Dividend Declaration
The Board of Directors of BPO Properties declared a quarterly common share dividend of $0.30 per share, payable on September 30, 2009 to shareholders of record at the close of business on September 1, 2009.
The Board of Directors also declared dividends on series G, J and M preferred shares, payable November 14, 2009 to shareholders of record at the close of business on October 30, 2009, for the period August 14, 2009 to November 13, 2009. The dividend per preferred share is to be computed in accordance with the terms of the shares.
Conference Call
BPO Properties’ second quarter 2009 conference call can be accessed by teleconference on Wednesday, August 5 at 9:00am E.T. at 866.551.1530, pass code: 5101122#. The call will be archived through September 4, 2009 and can be accessed by dialing 800.551.4520, pass code: 251818#. 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., 90% owned by Brookfield Properties Corporation, 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)
|
June 30, 2009
|
December 31, 2008
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Commercial properties
|
$
|
1,325.2
|
$
|
1,338.0
|
|
Commercial developments
|
|
767.3
|
|
689.1
|
|
Loans receivable
|
|
-
|
|
150.6
|
|
Tenant receivables and other assets
|
|
85.0
|
|
82.3
|
|
Cash and cash equivalents
|
|
141.5
|
|
61.5
|
|
Intangible assets
|
|
26.9
|
|
30.3
|
|
|
$
|
2,345.9
|
$
|
2,351.8
|
|
|
|
|
|
|
|
Liabilities and shareholders’ equity
|
|
|
|
|
|
Commercial and development property debt
|
$
|
1,375.6
|
$
|
1,255.3
|
|
Accounts payable and other liabilities
|
|
130.5
|
|
135.6
|
|
Intangible liabilities
|
|
66.7
|
|
71.9
|
|
Future income tax liabilities
|
|
33.5
|
|
28.6
|
|
Shareholders’ equity
|
|
739.6
|
|
860.4
|
|
|
$
|
2,345.9
|
$
|
2,351.8
|
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
|
|
Three months ended June 30
|
Six months ended June 30
|
|
|
(Millions, except per share amounts)
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Properties
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
85.3
|
$
|
86.4
|
$
|
172.1
|
$
|
170.1
|
|
|
Expenses
|
|
35.2
|
|
37.6
|
|
72.0
|
|
73.6
|
|
|
Net operating income
|
|
50.1
|
|
48.8
|
|
100.1
|
|
96.5
|
|
|
Loans and investment income
|
|
1.0
|
|
4.8
|
|
2.9
|
|
8.4
|
|
|
|
|
51.1
|
|
53.6
|
|
103.0
|
|
104.9
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
10.0
|
|
9.8
|
|
19.1
|
|
18.6
|
|
|
General and administrative expenses
|
|
5.0
|
|
5.2
|
|
10.3
|
|
10.3
|
|
|
|
|
36.1
|
|
38.6
|
|
73.6
|
|
76.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
12.8
|
|
13.0
|
|
26.1
|
|
25.5
|
|
|
Income taxes
|
|
8.0
|
|
7.8
|
|
16.2
|
|
15.3
|
|
|
Net income and comprehensive income
|
|
15.3
|
|
17.8
|
|
31.3
|
|
35.2
|
|
|
Net income per common share
|
$
|
0.50
|
$
|
0.49
|
$
|
0.99
|
$
|
0.95
|
|
RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS (“FFO”)
|
|
Three months ended June 30
|
Six months ended June 30
|
|
(Millions)
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Net income
|
$
|
15.3
|
$
|
17.8
|
$
|
31.3
|
$
|
35.2
|
|
Add:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
12.8
|
|
13.0
|
|
26.1
|
|
25.5
|
|
Future income taxes1
|
|
2.8
|
|
7.8
|
|
5.1
|
|
15.3
|
|
FFO
|
$
|
30.9
|
$
|
38.6
|
$
|
62.5
|
$
|
76.0
|
1 Funds from operations was redefined in the first quarter as net income prior to extraordinary items, one-time transaction costs, depreciation and amortization, future income taxes, and certain non-cash items.
FFO PER COMMON SHARE
|
|
Three months ended June 30
|
Six months ended June 30
|
|
(Millions, except per share amounts)
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
FFO
|
$
|
30.9
|
$
|
38.6
|
$
|
62.5
|
$
|
76.0
|
|
Preferred share dividends
|
|
(1.3)
|
|
(3.7)
|
|
(3.4)
|
|
(8.0)
|
|
Funds available to common shareholders
|
|
29.6
|
|
34.9
|
|
59.1
|
|
68.0
|
|
Weighted average shares outstanding
|
|
28.3
|
|
28.5
|
|
28.3
|
|
28.5
|
|
FFO per common share
|
|
1.05
|
|
1.22
|
|
2.09
|
|
2.39
|
INCOME FROM DISCONTINUED OPERATIONS
|
|
Three months ended June 30
|
Six months ended June 30
|
|
(Millions)
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Property disposition gains
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|
Revenue from discontinued operations
|
|
-
|
|
-
|
|
-
|
|
0.1
|
|
Operating expenses
|
|
-
|
|
-
|
|
-
|
|
(0.1)
|
|
Net operating income and gains from discontinued operations
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Interest expense
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Funds from discontinued operations and gains
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Depreciation and amortization
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Income taxes
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Net income from discontinued operations
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|