TORONTO, February 10, 2010 – BPO Properties Ltd. (TSX: BPP) today announced that net income for the year ended December 31, 2009 was $61.5 million ($0.66 per share), compared to $65.3 million ($0.60 per share) in 2008. Net income for the three months ended December 31, 2009 was $16.8 million ($0.18 per share), compared to $14.7 million ($0.14 per share) during the same period in 2008.
Funds from operations was $117.7 million ($1.32 per share) for the year ended December 31, 2009, compared to $153.7 million ($1.64 per share) in 2008. Funds from operations for the three months ended December 31, 2009 was $28.8 million ($0.32 per share) compared to $39.1 million ($0.42 per share) during the same period in 2008.
Net operating income from commercial properties totaled $202.6 million for the year ended December 31, 2009, compared to $195.2 million in 2008. Net operating income from commercial properties was $52.9 million for the three months ended December 31, 2009, compared to $49.5 million during the same period in 2008.
HIGHLIGHTS OF THE FOURTH QUARTER
Leased 293,000 square feet of space. BPO Properties continued its pro-active leasing strategy in the fourth quarter of 2009, with the portfolio 98.6% leased at the end of the quarter, compared to a Canadian national average of 91.5%. Transactional highlights from the fourth quarter include:
226,000 square feet in Eastern Canada
- A 7-year, 74,000-square-foot renewal and expansion with CI Investments at 2 Queen St. East in Toronto
- A 3-year, 26,000-square-foot new lease with Department of Justice at Exchange Tower in Toronto
- A 12-year, 25,000-square-foot new lease with Network Reporting & Mediation at First Canadian Place in Toronto
- A 4-year, 16,000-square-foot renewal and expansion with Public Works and Government Services Canada at Place de Ville I in Ottawa
67,000 square feet in Western Canada
- An 8-year, 35,000-square-foot renewal with Royal Bank of Canada at Bankers Hall in Calgary
- A 5-year, 14,000-square-foot renewal with Alberta Infrastructure at Canadian Western Bank Place in Edmonton
Refinanced First Canadian Place in Toronto with $310 million, five-year first mortgage bonds. The financing was completed at a fixed rate of 5.367%. Proceeds from the financing were used to repay the existing first mortgage bonds and will pay for costs associated with the building’s repositioning program.
Completed 3-for-1 stock split on common and non-equity voting shares in the form of a stock dividend issued December 31, 2009 to shareholders of record at the close of business on December 8, 2009.
Announced plans for early adoption of International Financial Reporting Standards (IFRS) for financial periods beginning on or after January 1, 2010, one year ahead of the mandatory conversion date for Canadian public companies. The company intends to adopt IFRS commencing with its interim financial statements for the three months ended March 31, 2010.
POTENTIAL REIT CONVERSION
As previously indicated, BPO Properties is continuing to consider alternative structures that would offer a more tax efficient structure to its shareholders. BPO Properties has developed a structure for a possible REIT conversion that works under the new tax legislation and the company is continuing to evaluate how that structure would impact its current business model and existing stakeholders. BPO Properties’ Board of Directors has formed a committee of independent directors to review the structure with assistance from financial and legal advisors. The process is ongoing and at this point the company does not have anything definitive to report. BPO Properties anticipates making an announcement in the near future when the process is complete. There is no assurance at this time that a REIT conversion or other transaction will be proposed or implemented.
OUTLOOK
“Although we are still in the early stages of what we hope is an economic recovery, we remain well positioned to capitalize on the improvement of the property markets due to our high-quality tenant base, 98.6% occupancy rate and low near-term lease rollover exposure,” 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, including changes in accounting policies to be adopted under International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board; 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 $0.10 per share, payable on March 31, 2010 to shareholders of record at the close of business on March 1, 2010.
The Board of Directors also declared dividends on series G, J and M preferred shares, payable May 14, 2010 to shareholders of record at the close of business on April 30, 2010, for the period February 14, 2010 to May 13, 2010. The dividend per preferred share is to be computed in accordance with the terms of the shares.
Conference Call
BPO Properties’ fourth quarter and full-year 2009 conference call can be accessed by teleconference on Thursday, February 11 at 9:00am E.T. at 866-551-1530, pass code: 4200222#. The call will be archived for 90 days and can be accessed by dialing 866-551-4520, pass code: 259307#. 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 28 commercial properties totaling 18.3 million square feet and five development sites totaling 5.4 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.
s
* * * * *
CONSOLIDATED BALANCE SHEET
|
(Millions)
|
December 31, 2009
|
December 31, 2008
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Commercial properties
|
$
|
1,384.4
|
$
|
1,338.0
|
|
Commercial developments
|
|
744.0
|
|
689.1
|
|
Loans receivable
|
|
85.0
|
|
150.6
|
|
Tenant receivables and other assets
|
|
113.2
|
|
82.3
|
|
Cash and cash equivalents
|
|
55.7
|
|
61.5
|
|
Intangible assets
|
|
23.9
|
|
30.3
|
|
|
$
|
2,406.2
|
$
|
2,351.8
|
|
|
|
|
|
|
|
Liabilities and shareholders’ equity
|
|
|
|
|
|
Commercial and development property debt
|
$
|
1,447.7
|
$
|
1,255.3
|
|
Accounts payable and other liabilities
|
|
115.1
|
|
135.6
|
|
Intangible liabilities
|
|
62.8
|
|
71.9
|
|
Future income tax liabilities
|
|
30.7
|
|
28.6
|
|
Shareholders’ equity
|
|
749.9
|
|
860.4
|
|
|
$
|
2,406.2
|
$
|
2,351.8
|
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
|
|
Three months ended Dec. 31
|
Full year ended Dec. 31
|
|
(Millions, except per share amounts)
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Properties
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
93.4
|
$
|
90.4
|
$
|
350.9
|
$
|
345.1
|
|
Expenses
|
|
40.5
|
|
40.9
|
|
148.3
|
|
149.9
|
|
Net operating income
|
|
52.9
|
|
49.5
|
|
202.6
|
|
195.2
|
|
Loans and investment income
|
|
0.7
|
|
8.1
|
|
3.8
|
|
20.5
|
|
|
|
53.6
|
|
57.6
|
|
206.4
|
|
215.7
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
10.8
|
|
11.4
|
|
40.5
|
|
39.5
|
|
General and administrative expenses
|
|
8.4
|
|
7.1
|
|
24.5
|
|
22.5
|
|
|
|
34.4
|
|
39.1
|
|
141.4
|
|
153.7
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
13.3
|
|
14.8
|
|
52.4
|
|
53.6
|
|
Income taxes
|
|
4.3
|
|
9.6
|
|
27.5
|
|
34.8
|
|
Net income and comprehensive income
|
|
16.8
|
|
14.7
|
|
61.5
|
|
65.3
|
|
Net income per common share(1)
|
$
|
0.18
|
$
|
0.14
|
$
|
0.66
|
$
|
0.60
|
(1) Prior year share information has been restated to reflect the three-for-one common stock split.
RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS (“FFO”)
|
|
Three months ended Dec. 31
|
Full year ended Dec. 31
|
|
(Millions)
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Net income
|
$
|
16.8
|
$
|
14.7
|
$
|
61.5
|
$
|
65.3
|
|
Add:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
13.3
|
|
14.8
|
|
52.4
|
|
53.6
|
|
Future income taxes(1)
|
|
(1.3)
|
|
9.6
|
|
3.8
|
|
34.8
|
|
FFO
|
$
|
28.8
|
$
|
39.1
|
$
|
117.7
|
$
|
153.7
|
(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 Dec. 31
|
Full year ended Dec. 31
|
|
(Millions, except per share amounts)
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
FFO
|
$
|
28.8
|
$
|
39.1
|
$
|
117.7
|
$
|
153.7
|
|
Preferred share dividends
|
|
(1.2)
|
|
(3.0)
|
|
(5.7)
|
|
(14.3)
|
|
Funds available to common shareholders
|
|
27.6
|
|
36.1
|
|
112.0
|
|
139.4
|
|
Weighted average shares outstanding
|
|
85.0
|
|
85.3
|
|
85.0
|
|
85.3
|
|
FFO per common share (1)
|
$
|
0.32
|
$
|
0.42
|
$
|
1.32
|
$
|
1.64
|
(1) Prior year share information has been restated to reflect the three-for-one common stock split.