OCTOBER 4 LONDON INVESTOR TOUR. Brookfield Office Properties Inc.

Transcription

1 2012 OCTOBER 4 LONDON INVESTOR TOUR Brookfield Office Properties Inc.

2 Brookfield Office Properties Inc. Brookfield Office Properties Inc. 1 1 Brookfield Office Properties London Investor Tour October 4, 2012 Agenda Location Time London Overview Presentation Sofitel London St. James 12:00 pm Walking Tour of BPO Assets City of London 2:00 pm Drinks & Dinner Mews of Mayfair 6:30 pm

3 Brookfield Office Properties Inc. Brookfield Office Properties Inc. 2 2 Presentation Agenda Item BPO Overview London Office Market & BPO s Assets London Office Market: Investment and Economic Context Speaker Dennis Friedrich, CEO, Brookfield Office Properties Martin Jepson, SVP, Brookfield Office Properties Europe Richard Holberton, Director CBRE, EMEA Research & Consulting

4 Brookfield Office Properties Inc. 3 Brookfield Office Properties Inc. Brookfield Office Properties Overview Owner, developer and manager of premier office properties globally. Diversified portfolio comprises interests in 114 properties totaling 80 million square feet Prominent, well-located assets in the top markets of the United States, Canada and Australia, with a growing presence in London, UK Focus on high-quality assets to achieve high rents, high occupancy levels and long-term leases Generate stable operating income and a steady stream of cashflow Brookfield Place Toronto Darling Park, Sydney

5 Brookfield Office Properties Inc. Brookfield Office Properties Inc. 4 Business Strategy Operating Strategy own and operate premier office properties in dynamic markets around the world:» Focus on resource & energy, financial, government and technology sector markets Growth Strategy grow earnings through:» Leasing initiatives that increase occupancy, capture mark-tomarket opportunities, and reduce rollover exposures» Recycling of capital from mature or non-core assets into more accretive, core-plus opportunities» Advancement of development pipeline and other redevelopment initiatives Financing Strategy focus on asset-level financing which is non-recourse to the company:» Investment-grade debt» Refinance ahead of maturity in low-interest-rate environment» Non-recourse minimizes risk Darling Park Complex Sydney

6 Brookfield Office Properties Inc. Brookfield Office Properties Inc. 5 Global Reach United States 65 office assets totaling 50 million sq. ft. are concentrated in the most dynamic and resilient markets in the U.S.

7 Brookfield Office Properties Inc. Brookfield Office Properties Inc. 6 Global Reach Canada Brookfield s Canada assets are held through Brookfield Canada Office Properties ( BOX ), which is the country s premier publicly traded commercial property company with 27 office assets totaling 21 million sq. ft.

8 Brookfield Office Properties Inc. Brookfield Office Properties Inc. 7 Global Reach Australia Brookfield s Australia portfolio features 19 high-quality office assets encompassing 8.4 million sq. ft. in the country s three largest centers of commerce

9 Brookfield Office Properties Inc. Brookfield Office Properties Inc. 8 Global Reach United Kingdom In 2010, Brookfield made its initial investment in the UK and at present has acquired four operating assets and three development sites in the City of London totaling 3.2 million sq. ft.

10 London Office Market Overview

11 London Office Submarkets 10

12 Brookfield Office Properties Inc. 11 Trends Central London Leasing Market Vacancy in the City of London has been steadily decreasing since the economic downturn in 2008 and sits today at approximately 8.0%, below the historic average of 11.1% Limited new supply could see London office vacancy tighten further from 2013 onwards to potentially record low levels by 2015 While 2012 has seen an increased level of active demand in the market, occupiers remain unwilling to commit to significant amounts of space in the short term in what is still an uncertain economic environment 99 Bishopsgate London

13 Brookfield Office Properties Inc. 12 Trends Central London Leasing Market London office rents have remained at roughly 55/psf for 2011 and 2012 due to a lack of occupier confidence There are known lease events in the period from occupiers located in buildings that are no longer fit for purpose. A return to the long-term average take-up will place a strain on available supply and generate opportunities for growth Total potential new supply for still remains less than average demand and much of this supply is unlikely to materialize in current market conditions with a lack of speculative development financing 125 Old Broad St. London

14 Brookfield Office Properties Inc. London City Office Pipeline: Under Construction >50k sq ft 13 1,000, , Total: 0.34 mn sq ft 2012 Available: 0.25 mn sq ft Available Amount Let 2013 Total: 1.13 mn sq ft 2014 Total: 2.1 mn sq ft 2014 Available: 1.0 mn sq ft 800, , , , , , , ,000 - Source of Data: Brookfield, PMA

15 London City Proposed Office Developments >100k sq ft Brookfield Office Properties Inc. 14 1,200,000 1,000, : 0.15 mn sq ft 2015: 0.38 mn sq ft 2016: 2.45 mn sq ft 2017: 1.25 mn sq ft 2018: 1.86 mn sq ft 800, , , ,000 - Source of Data: Brookfield, PMA

16 City of London Competing Developments Brookfield Office Properties Inc Fenchurch - Walkie Talkie 657,000 sf over 34 floors Floor plates: 14,000 27,300 sf STATUS UNDER CONSTRUCTION; 130,000 SQ FT (20%) PRE-LET; PC Q Leadenhall - The Cheesegrater 595,000 sf over 45 floors Floor plates: 6,100 20,800 sf STATUS UNDER CONSTRUCTION; 190,000 SQ FT (33%) PRE-LET (AON); PC Q2 2014

17 BPO s London Investment Platform

18 Brookfield Office Properties Inc. Brookfield Office Properties Inc. 17 London Expansion and Investment Rationale London had been a target market for BPO for several years it fits well with the company s strategy of investing and operating in global centers of commerce with resilient economies and global tenant synergies Initial investment in London made in 2010 by acquiring a 50% JV share of the 100 Bishopsgate development In 2012, BPO seized opportunity to significantly increase the size and scale of its London operations through the Hammerson portfolio transaction at attractive cap rates and projected IRRs Quality and location of existing office assets are consistent with BPO s global portfolio and will be attractive to many of the company s global tenant relationships Existing and potential vacancies present an opportunity for BPO to leverage its leasing and operations expertise to reposition several assets and enhance returns Development assets provide BPO with the opportunity to cater to tenant space requirements in a market facing limited new supply in a 3-5 year time horizon

19 Brookfield Office Properties Inc. Brookfield Office Properties Inc. 18 Hammerson Acquisition Overview In June 2012, BPO agreed to acquire a portfolio of operating assets and two development sites located in the London financial district from Hammerson plc» The operating properties 125 Old Broad Street, 99 Bishopsgate, Leadenhall Court and 1 Puddle Dock comprise 884,000 square feet and are currently 85% leased» The development sites Principal Place and London Wall Place can accommodate approximately 1.4 million square feet of mixed-use density» Also included in the sale are buildings on Shoreditch High Street adjoining Principal Place The portfolio is being acquired for $871 million ( 544 million)» $106 million ( 66 million) is being funded through the assumption of debt with the balance funded through additional property-level debt expected to be put in place prior to close and from available cash resources» Closing occurred for 99 Bishopsgate, Principal Place (as funders), 1 Puddle Dock and the additional smaller assets on September 28, London Wall Place closed in July, 2012 and 125 Old Broad Street and Leadenhall Court will close in June, 2013» Recently closed on new property-level financing on 99 Bishopsgate for M, 5-year term at 4.27% fixed rate (1) Exchange rate of 1 = 1.60 USD

20 Brookfield Office Properties Inc. Brookfield Office Properties Inc. 19 Hammerson Acquisition: Impact on Operating and Financial Metrics (proportionate) BPO Q Operating Properties 112 Total Sq. Ft. 79,591 Leasable Sq. Ft. (000 s) total 69,471 Leasable Sq. Ft. (000 s) proportionate 50,247 Portfolio occupancy 93.4% Value ($ US millions) (1) $ 23,910 Value per leasable sq. ft. $ 476 Initial yield (2) operating properties 5.8% Development sq. ft. (000 s) proportionate 14,518 Value ($ millions) $ 791 Value per sq. ft. $ 54 (1) Exchange rate of 1 = 1.60 USD (2) Projected Stabilized yield in year 3 of 7% London % $ 714 $ % 1,357 $ 157 $ 116 Pro-Forma ,489 70,355 50,967 93% $ 24,624 $ % 15,875 $ 948 $ 60

21 BPO s London Portfolio

22 Brookfield Office Properties Inc. 21

23 Brookfield Office Properties Inc. Brookfield Office Properties Inc. 22 London Portfolio VACANCY / ROLLOVER EXPOSURE * 15.0% 135 (000 s sq. ft. and % of London Portfolio) Average Lease Life of 5.2 years 13% 119 0% 0 0% 0 3% 23 Vacant *Excludes development properties STATISTICS (sq. ft. in 000 s) Operating properties 4 Total sq. ft 884 Portfolio vacancy 15% Market vacancy 8% Development properties 3 Total sq. ft 2,270

24 Brookfield Office Properties Inc. Brookfield Office Properties Inc Old Broad Street 328,000 sq. ft. 26 floors 98% leased Year built: 2008 (redeveloped) 50% partnership interest with GE Capital and Kennedy Wilson Tenants: DTZ, King & Spalding, Gide Loyrette Nouel Location: ~2 minute walk to Bank station; ~5 minute walk to Liverpool St., Cannon St. and Monument tube and rail stations.

25 Brookfield Office Properties Inc. Brookfield Office Properties Inc Bishopsgate 339,000 sq. ft. 26 floors 62% leased Year built: 1996 (redeveloped) Tenants: Latham & Watkins, Charles River Associates Location: ~3 minute walk to Liverpool St. station; ~4 minute walk to Bank and Moorgate tube and rail stations

26 Brookfield Office Properties Inc. Brookfield Office Properties Inc. 25 Leadenhall Court 109,000 sq. ft. 6 floors 100% leased Year built: 1989 Tenants: Royal Sun Alliance (RSA) Location: ~5 minute walk to Bank and Fenchurch St. tube and rail stations. Equidistant between Liverpool St. and Monument tube stations. Within 200 meters of Lloyd s of London

27 Brookfield Office Properties Inc. Brookfield Office Properties Inc Puddle Dock Acquired an intermediate leasehold interest for 6.5M 10% effective interest in the property Entitles Brookfield to 400k per annum Asset is 100% let to Network Rail Future redevelopment site beside new Blackfriars Station

28 Brookfield Office Properties Inc. Brookfield Office Properties Inc. 27 Principal Place Development Property 870,000 sq. ft.» 16-storey, 625,000 sq. ft. commercial» 50-storey, 245,000 sq. ft. residential Office/Residential/Mixed-Use Location: City of London/Shoreditch border; ~2 minute walk to Liverpool St. station Sustainability: Targeting BREEAM Excellent Fully entitled site

29 Brookfield Office Properties Inc. Brookfield Office Properties Inc. 28 London Wall Place Development Property 500,000 sq. ft. Two office building scheme:» 12-storey, 300,000 sq. ft. office» 16-storey, 200,000 sq. ft. office 50:50 JV with partner Oxford Properties Location: Proximate to Bank of England and new Cheapside retail precinct. ~2 minute walk to Moorgate station, with new Crossrail entrance in 2018 Sustainability: Targeting BREEAM Excellent Fully entitled site

30 Brookfield Office Properties Inc. Brookfield Office Properties Inc Bishopsgate Development Property 900,000 sq. ft. 40 floors 50:50 JV with local partner Great Portland Estates Location: ~2 minute walk to Liverpool St. station; ~5 minute walk to Bank, Moorgate and Fenchurch St. stations Sustainability: Pre-certified LEED Gold and targeting BREEAM Excellent Fully entitled site

31 Richard Holberton, CBRE

32 London Office Market: Investment and Economic Context Richard Holberton, Director, EMEA Research & Consulting Brookfield Executive and Investor Conference 4th October 2012

33 Central London Office Markets 23m sq ft 76m sq ft 86m sq ft 17m sq ft 19m sq ft

34 Key Market Differences West End Diverse mix of tenants and property uses Distinct sub-markets, e.g. Mayfair, Soho, Victoria Restrictions on development heritage and conservation policies, limits on tall buildings City of London Dominated by financial services and related professional services Positive land use policy on new development Larger buildings and lot sizes Competition from Canary Wharf

35 2002 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q2 Investment Rebound in H Central London office capital transactions bn 7.0 Unknown Origin Overseas Purchasers Domestic Purchasers Annual Volume: 6.1bn 5.8bn 9.5bn 13.4bn 15.8bn 17.6bn 7.6bn 7.0bn 9.7bn 9.0bn 7.2bn Source: CBRE

36 Cross-Regional CRE Investment in Europe H Almost 50 billion was invested in European Commercial Real Estate in H % of which came from outside the European region European X-Border 10.0 bn 20% Domestic 30.0 bn 60% North America 4.2 bn 8.5% Latin America 0.8 bn 1.7% European CRE Total: 50 bn Middle East 2.5 bn 5.0% Asia 2.2 bn 4.5% Australia 0.2 bn 0.3% Source: CBRE, Property Data, KTI

37 Cross-Regional CRE Investment in Europe H Almost 10 billion came from outside of the European region in H Almost half of that capital was invested in London North America 4.2 bn 8.5% London 4.9 bn Paris 1.7 bn Stockholm 0.3 bn Frankfurt 0.3 bn Munich 0.3 bn Asia Middle East 2.5 bn 5.0% 2.2 bn 4.5% Australia 0.2 bn Latin America 0.8 bn 1.7% 0.3% Source: CBRE, Property Data, KTI

38 Q Q Q Central London Prime Office Yields Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q % West End City City 10-year average: 5.60% West End 10-year average: 4.77% 3 Source: CBRE

39 Jan-11 Feb-11 Mar-11 Apr-11 Ma-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Weaker Short-term Economic Sentiment How forecasts for real GDP growth in 2012 have changed GDP Growth (%pa) 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% -0.5% -1.0% -1.5% France Germany Italy UK Spain Netherlands -2.0% -2.5% Source: Consensus Economics

40 UK Sweden Germany France Eurozone Netherlands Italy Spain UK Forecast to Outperform Europe... Real GDP growth, GDP % p.a. 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Source: Oxford Economics, September 2012

41 Warsaw Moscow Munich London Zurich Amsterdam Brussels Paris Frankfurt Madrid Milan...And London to Outperform Too Real GDP growth, GDP % p.a. 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Source: Oxford Economics, September 2012

42 London Re-establishing a lead Global Financial Centres index scores Rating score 850 London New York Hong Kong Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Source: Global Financial Centres Index 11, March 2012, Z/Yen

43 Strong Medium-term Outlook for London Central London: finance and business services employment Employment 900,000 FORECAST 800, , , , ,000 Source: CBRE and Oxford Economics

44 City Office Market Update October 2012

45 London Overview Hedge Funds TMT Advertising & Publishing Government High end retail West End Sq Ft Prime Rent per sq ft West End 90 m City 107 m Docklands 19.2 m Total City 217 m Docklands Banking & Finance Accountants Media Legal Banking & Finance Insurance Legal Accountants 44

46 Office Market At a glance Summary Statistics Q1-Q City 12 Month Outlook Take-up 2011 Supply 2011 Overall Vacancy Rate 2011 Grade A Vacancy Rate 2011 Prime Rent 2011 Under construction 2011 Occupier Demand 2011 Investment Volumes m sq ft (3.4m sq ft) 8.5m sq ft (7.6m sq ft) 7.9% (7.1%) 5.7% (4.4%) per sq ft ( per sq ft) 3.8m sq ft (1.8m sq ft) 10.2m sq ft (10m sq ft) 6.2bln ( 6bln) 45

47 Office Market At a glance Summary Statistics Q1-Q City 12 Month Outlook Take-up 2011 Supply 2011 Overall Vacancy Rate 2011 Grade A Vacancy Rate 2011 Prime Rent 2011 Under construction 2011 Occupier Demand 2011 Investment Volumes m sq ft (3.4m sq ft) 8.5m sq ft (7.6m sq ft) 7.9% (7.1%) 5.7% (4.4%) per sq ft ( per sq ft) 3.8m sq ft (1.8m sq ft) 10.2m sq ft (10m sq ft) 6.2bln ( 6bln) 46

48 Take-up Expectations Historic average take-up c.5.1 million sq ft 7,000 6,000 5,000 4,000 3,000 2,000 1, Bank & Finance Prof Services TMT Service Other Forecast Average 47

49 The Walbrook 125 London Wall St Botolph Building 20 Fenchurch St 240 Blackfriars Rd 20 Fenchurch St 20 Moorgate 95 Gresham Street 1 New Change City Transactions psf psf Mid 50s psf PRA psf psf psf psf c psf psf

50 Office Jobs (Inner london East) Net Absorption (million sq ft) Future employment expectations are optimistic - but jobs growth may not mean net absorption Office Jobs numbers in Inner London East with Net absorption Financial services Business services Public administration City net absorption Source: Oxford Economics, Jones Lang LaSalle

51 Total size (m sq ft) Good quality large units are in short supply relative to demand City London Demand and Grade A Supply Balance , , , ,000 Size Band (sq ft) Total Grade A Supply Active Demand Potential demand Speculative Construction 50

52 Case Studies The Shard, SE1 Client Size Project Sellar Property Group/Qatari Consortium 589,000 sq ft (offices) The Shard is the tallest building in Western Europe, comprising of offices, restaurants, Shangri- La Hotel and high end residential apartments. 20 Fenchurch St, EC3 Client Size Land Securities / Canary Wharf 625,000 sq ft Project Due for completion Q ,000 sq ft Let to Markel psf A further 80,000 sq ft let to Kiln per sq ft 17.5 year lease The Leadenhall Building, EC3 Client Size British Land/Oxford Properties 613,000 sq ft Project Due for completion Q ,000 sq ft pre-let to Aon (4-13 th floors), with an option over the 14 th -18 th floors. Average rent of psf.

53 Who Is Driving the Market? 52

54 million sq ft % of overall take-up TMT s share of take-up is growing % 20% 15% % 5% 0% TMT take-up (lhs) % of overall take-up (rhs)

55 Millions sq ft Occupier Demand: City Q02 3Q04 3Q06 3Q08 3Q10 3Q12 Potential Active Source: Jones Lang LaSalle, July

56 Millions Sq ft Future lease events , , , , ,000 55

57 Vacancy Rate Forecasts 16.0% 14.0% 12.0% 13.5% 10.0% 10.4% 8.0% 6.0% 7.3% 5.7% 5.40% 6.50% 4.0% 2.0% 0.0% 4.5% 3.4% 2.5% 1.2% City City 10 Year Average Grade A City 10 Year Average (grade A) 56

58 Prime Office Rental Growth Forecast European Office Rental Growth (% pa, weighted average) Source: Jones Lang LaSalle, August 2012 F Office Rental Growth (% pa ) Oslo London-City London-WE Stockholm Dublin Moscow Edinburgh Lyon Munich Paris-CBD Helsinki Warsaw Madrid Hamburg Manchester Copenhagen Frankfurt Rotterdam Budapest Luxembourg Prague Utrecht Bucharest Dusseldorf The Hague Stuttgart Barcelona Berlin Amsterdam Lisbon Rome Brussels Milan Paris-LDF European Average 1.8%

59 Rental forecasts Year Prime Rent Change (%) Rent Free Net Effective Net Effective (%) Grade A Rent Grade A % Change % % % % % % % % % % % % % % % % % % Source: Jones Lang LaSalle, September

60 Capital Markets 59

61 The increasing dominance of overseas capital London office investment volumes Q3 100% 5% 2% 12% 20% 80% 38% 44% 60% 55% 46% 40% 20% 57% 54% 33% 34% 0% UK Overseas Asian 60

62 Direct Real Estate Investment in Top 10 Leading Cities US$ mn 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Greater London Tokyo New York Paris Hong Kong Singapore Washington D.C. Seoul Los Angeles Shanghai 61

63 Quarterly volumes ( billion) 3Q12 2Q12 1Q12 4Q11 3Q11 2Q11 1Q11 4Q10 3Q10 2Q10 1Q10 4Q09 3Q09 2Q09 1Q09 12 month rolling (billion) City Investment Volumes Overseas UK 12 month rolling (RHA)

64 Central London Investment Purchasers by Nationality % UK German 42% Middle East Far East 8% US Other 16% 6% 3% 63

65 Debt market reality: new debt is difficult OUT IN Regulation: Basel, Solvency, Slotting Margins up Swap breakage costs Impact on secondary Distressed product is storing up obsolescence

66 Prime Yield % Prime Yield Expectations Are Flat City West End Current Prime Yield 5.00% % ( 140m+ 5.25%+) 4.00% ( 80m+ 4.75%) 10 Year Average 5.58% 4.66% 20 Year Average 5.71% 4.94% City 20 Year City West End 20 Year West End Source: Jones Lang LaSalle 65

67 Investment market: performance from rental growth Year Prime Yield (%) Prime Capital Value Growth (%) Source: Jones Lang LaSalle, June 2012

68 Investment transactions One Exchange Sq, EC2 One Cabot Sq, E14 1 Bunhill Row, EC1* Draper Gardens, EC2 March million ( 909 psf) Purchaser: PNB NIY: 5.25% February million ( 595 psf) Purchaser: QIA NIY: 5.38% January m ( 698 psf) Purchaser: St Martin s NIY:5.5% June m ( 939psf) Purchaser: RREFF NIY:5.1% One Silk Street, EC2 December m ( 758 psf) Purchaser: PNB NIY: 5.38% 23 Savile Row, W1 August 2012 Reported Price: 220million ( 2,120 psf) NIY: 4.00% Purchaser: Plaza Global Real Estate Partners 60 Gresham St, EC2 July m ( 862 psf) Purchaser: Standard Life NIY: 6.56% Plantation Place, EC3 May m ( 870 psf) Purchaser: Private NIY:5.70% * Jones Lang LaSalle advised 67

69 Investment transactions 3 Bunhill Row, EC1* 107 Cheapside, EC2 January m ( 805 psf) Purchaser: Private Saudi NIY: 5.40% April m ( 723 psf) Purchaser: Invesco NIY: 5.53% Park House, EC2* March m ( 797 psf) Purchaser: RREEF NIY: 5.48% Thames Court, EC4 May m ( 812 psf) Purchaser: RREEF NIY: 5.70% Stratton House,W1 April m ( 1,670 psf) Purchaser: Private NIY: 4.2% CAA House*, WC1 March 2012 c. 110m ( 477 psf) Purchaser: Almacantar NIY:c.5.75% Queensberry House,W1 March 2012 c. 165m ( 1,650 psf) Purchaser: Private NIY:4.9% 60 Threadneedle St, EC2 December m ( 793 psf) Purchaser: RREEF NIY: 4.75% * Jones Lang LaSalle advised

70 Thank you COPYRIGHT JONES LANG LASALLE IP, INC. 2012

71 Questions & Answers

72 Brookfield Office Properties Inc. 2012