TORONTO, February 10, 2009 – BPO Properties Ltd. (TSX: BPP) today announced financial results for the year ended December 31, 2008.
BPO Properties’ net income from continuing operations for the year ended December 31, 2008 was $65.5 million ($1.80 per share), compared to $58.8 million ($1.42 per share) in 2007. Net income from continuing operations for the three months ended December 31, 2008 was $15.0 million ($0.42 per share) compared to $20.5 million ($0.55 per share) during the same period in 2007.
Funds from continuing operations was $154.0 million ($4.92 per share) for the year ended December 31, 2008, compared to $145.5 million ($4.61 per share) in 2007. Funds from continuing operations was $39.4 million ($1.29 per share) for the three months ended December 31, 2008, compared to $41.8 million ($1.30 per share) during the same period in 2007.
HIGHLIGHTS OF THE FOURTH QUARTER
Advanced developments under construction which are 77% leased in aggregate.
- In Toronto, Bay Adelaide Centre West Tower continues to be on budget and on time for completion in July 2009. The building is now enclosed and most of its 51 floors are ready for the commencement of tenant build-outs. Construction of the Adelaide tunnel to Scotia Plaza has commenced, with completion expected in September 2009, coinciding with the first retail openings at the concourse level. The building is 72% pre-leased.
- In Calgary, Bankers Court was fully enclosed during the quarter and all office floors were turned over to their respective tenants. The skybridge connecting the development to Bankers Hall was also erected during the quarter. The building is being developed to a LEED-certified standard and is 100% pre-leased.
OPERATIONS REVIEW
BPO Properties continued its proactive leasing strategy in 2008 with the portfolio 98.7% leased at the end of the fourth quarter, compared to a Canadian national average of 94.6%. During the quarter, BPO Properties leased 955,000 square feet of space.
Transactional highlights from the fourth quarter include:
768,000 square feet in Calgary
- Five-year renewal and expansion with Imperial Oil Limited at Fifth Avenue Place for 717,000 square feet
- One-year renewal with Compton Petroleum Corporation at Fifth Avenue Place for 23,000 square feet
- Ten-year renewal with Royal Bank of Canada at Bankers Hall for 17,000 square feet
- Five-year lease renewal with Berens Energy Ltd. at Altius Centre for 10,000 square feet
103,000 square feet in Toronto
- New seven-year lease with Air Canada at 2 Queen Street East for 15,000 square feet
- New five-year lease with Department of Justice at Exchange Tower for 15,000 square feet
50,000 square feet in Other Markets
- Five-year renewal and expansion with Public Works and Government Services Canada at Place de Ville I in Ottawa for 18,000 square feet
- Seven-year renewal with Club Fit at Canadian Western Bank Place in Edmonton for 22,000 square feet
Subsequent to the year-end, BPO Properties secured a ten-year, 194,000-square-foot lease renewal with Hudson’s Bay at Hudson’s Bay Centre in Toronto.
OUTLOOK
“Despite this period of financial market volatility and illiquidity, BPO Properties is in secure economic health as evidenced by our positive earnings, low vacancy and strong balance sheet,” said Tom Farley, president and chief executive officer of BPO Properties. “With high occupancy, low rollover exposure and manageable near-term debt maturities, we are optimistic about our performance prospects for 2009.”
* * * * *
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 March 31, 2009 to shareholders of record at the close of business on March 2, 2009.
The Board of Directors also declared dividends on series G, J and M preferred shares, payable May 14, 2009 to shareholders of record at the close of business on April 30, 2009, for the period February 14, 2009 to May 13, 2009. The dividend per preferred share is to be computed in accordance with the terms of the shares.
Conference Call
BPO Properties’ year-end 2008 conference call can be accessed by teleconference on Tuesday, February 10 at 3:00 p.m. E.T. at 866.249.1361. The call will be archived through March 11, 2009 and can be accessed by dialing 800.558.5253, pass code #21410970. 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 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)
|
December 31, 2008
|
December 31, 2007
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Commercial properties
|
$
|
1,338.7
|
$
|
1,351.6
|
|
Commercial developments
|
|
689.1
|
|
452.5
|
|
Loans receivable(i)
|
|
150.6
|
|
283.5
|
|
Tenant receivables and other assets
|
|
82.3
|
|
66.0
|
|
Cash and cash equivalents(i)
|
|
61.5
|
|
37.7
|
|
Intangible assets
|
|
30.3
|
|
40.2
|
|
Assets related to discontinued operations
|
|
-
|
|
4.2
|
|
|
$
|
2,352.5
|
$
|
2,235.7
|
|
|
|
|
|
|
|
Liabilities and shareholders’ equity
|
|
|
|
|
|
Commercial and development property debt
|
$
|
1,255.3
|
$
|
965.5
|
|
Accounts payable and other liabilities
|
|
105.6
|
|
100.4
|
|
Intangible liabilities
|
|
71.9
|
|
85.0
|
|
Future income tax liabilities
|
|
58.6
|
|
41.3
|
|
Liabilities related to discontinued operations
|
|
-
|
|
3.0
|
|
Shareholders’ equity
|
|
861.1
|
|
1,040.5
|
|
|
$
|
2,352.5
|
$
|
2,235.7
|
(i) Subsequent to year-end the deposit of $125 million with Brookfield Properties was repaid.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
|
|
Three months ended Dec. 31
|
Full year ended Dec. 31
|
|
(Millions, except per share amounts)
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Properties
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
90.4
|
$
|
83.3
|
$
|
345.1
|
$
|
328.2
|
|
Expenses
|
|
40.6
|
|
35.7
|
|
149.6
|
|
140.8
|
|
Net operating income
|
|
49.8
|
|
47.6
|
|
195.5
|
|
187.4
|
|
Loans and investment income
|
|
8.1
|
|
5.1
|
|
20.5
|
|
12.3
|
|
|
|
57.9
|
|
52.7
|
|
216.0
|
|
199.7
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
11.4
|
|
6.1
|
|
39.5
|
|
30.0
|
|
General and administrative expenses
|
|
7.1
|
|
4.8
|
|
22.5
|
|
20.2
|
|
|
|
39.4
|
|
41.8
|
|
154.0
|
|
149.5
|
|
Transaction costs
|
|
-
|
|
-
|
|
-
|
|
4.0
|
|
Depreciation and amortization
|
|
14.8
|
|
15.6
|
|
53.7
|
|
58.5
|
|
Income taxes
|
|
9.6
|
|
5.7
|
|
34.8
|
|
28.2
|
|
Net income from continuing operations
|
|
15.0
|
|
20.5
|
|
65.5
|
|
58.8
|
|
Discontinued operations
|
|
-
|
|
22.5
|
|
-
|
|
80.0
|
|
Net income and comprehensive income
|
$
|
15.0
|
$
|
43.0
|
$
|
65.5
|
$
|
138.8
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
0.42
|
$
|
0.55
|
$
|
1.80
|
$
|
1.42
|
|
Discontinued operations
|
|
-
|
|
0.79
|
|
-
|
|
2.81
|
|
Total
|
$
|
0.42
|
$
|
1.34
|
$
|
1.80
|
$
|
4.23
|
RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS (“FFO”)
|
|
Three months ended Dec. 31
|
Full year ended Dec. 31
|
|
(Millions)
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
Net income
|
$
|
15.0
|
$
|
43.0
|
$
|
65.5
|
$
|
138.8
|
|
Add:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization (i)
|
|
14.8
|
|
15.8
|
|
53.7
|
|
61.7
|
|
Income taxes (ii)
|
|
9.6
|
|
10.7
|
|
34.8
|
|
46.0
|
|
Transaction costs
|
|
?
|
|
?
|
|
?
|
|
4.0
|
|
FFO and gains
|
|
39.4
|
|
69.5
|
|
154.0
|
|
250.5
|
|
Property disposition gains
|
|
?
|
|
(26.1)
|
|
?
|
|
(91.2)
|
|
FFO
|
$
|
39.4
|
$
|
43.4
|
$
|
154.0
|
$
|
159.3
|
(i) Includes depreciation and amortization from discontinued operations of $nil and $nil for the three months and year ended Dec. 31, 2008, respectively (2007 - $0.2 million and $3.2 million, respectively)
(ii) Includes income taxes from discontinued operations of $nil and $nil for the three months and year ended Dec. 31, 2008, respectively (2007 - $5.0 million and $17.8 million, respectively)
FFO PER COMMON SHARE
|
|
Three months ended Dec. 31
|
Full year ended Dec. 31
|
|
(Millions, except per share amounts)
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
FFO
|
$
|
39.4
|
$
|
43.4
|
$
|
154.0
|
$
|
159.3
|
|
Preferred share dividends
|
|
(3.0)
|
|
(4.7)
|
|
(14.3)
|
|
(18.2)
|
|
Funds available to common shareholders
|
|
36.4
|
|
38.7
|
|
139.7
|
|
141.1
|
|
Weighted average shares outstanding
|
|
28.3
|
|
28.5
|
|
28.4
|
|
28.5
|
|
FFO per common share
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
1.29
|
$
|
1.30
|
$
|
4.92
|
$
|
4.61
|
|
Discontinued operations
|
|
-
|
|
0.05
|
|
-
|
|
0.34
|
|
Total
|
$
|
1.29
|
$
|
1.35
|
$
|
4.92
|
$
|
4.95
|
DISCONTINUED OPERATIONS
|
(Millions)
|
December 31, 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 Dec. 31
|
Full year ended Dec. 31
|
|
(Millions, except per share amounts)
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
Property disposition gains
|
$
|
-
|
$
|
26.1
|
$
|
-
|
$
|
91.2
|
|
Revenue from discontinued operations
|
|
-
|
|
2.2
|
|
0.1
|
|
18.2
|
|
Operating expenses
|
|
-
|
|
(0.4)
|
|
(0.1)
|
|
(6.2)
|
|
Net operating income and gains from discontinued operations
|
|
-
|
|
27.9
|
|
-
|
|
103.2
|
|
Interest expense
|
|
-
|
|
(0.2)
|
|
-
|
|
(2.2)
|
|
Funds from discontinued operations and gains
|
|
-
|
|
27.7
|
|
-
|
|
101.0
|
|
Depreciation and amortization
|
|
-
|
|
(0.2)
|
|
-
|
|
(3.2)
|
|
Income taxes
|
|
-
|
|
(5.0)
|
|
-
|
|
(17.8)
|
|
Net income from discontinued operations
|
$
|
-
|
$
|
22.5
|
$
|
-
|
$
|
80.0
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share – discontinued operations
|
$
|
-
|
$
|
0.79
|
$
|
-
|
$
|
2.81
|