Brookfield Property’s retail tenants paid 34% of rent in Q2

Company reported another big quarterly net loss, but CEO optimistic “worst of the economic shutdown is behind us”

TRD NATIONAL /
Aug.August 06, 2020 03:32 PM
Brookfield Property Partners’ Brian Kingston

Brookfield Property Partners’ Brian Kingston

Brookfield Property Partners collected just 34 percent of rent across its retail portfolio in the second quarter, helping drive another sharp decline in earnings this year. Its office holdings also took a hit.

The real estate arm of Brookfield Asset Management reported a net loss of $1.5 billion from April through June, compared with $23 million of net income over the same period in 2019.

At Thursday’s earnings call, company executives blamed its poor April through June results on coronavirus-caused mall closures. Most of its malls didn’t reopen until June, and the company has seen improved rent collections since July.

Brookfield Property Partners CEO Brian Kingston said the company was “cautiously optimistic that the worst of the economic shutdown is behind us.” He added that “our business is well positioned to handle any lingering impacts.” Brookfield is one of the largest mall operators in the U.S.

At its first quarter earnings call in May, company executives said they were negotiating with 2,400 of its retail tenants who had been unable to come up with the rent, and whose spaces were still closed at the time. That first quarter was also harsh for the Canadian giant, which reported a net loss of $373 million in Q1 compared with $713 million in net income year-over-year.

At its Q2 earnings, the company said cash flow from operations for its retail portfolio dropped to $140 million, compared to $170 million over the same period in 2019.

But the company’s core office portfolio also took a hit. It reported cash flow from operations of $126 million in the second quarter compared to $187 million in the same period in 2019. Occupancy fell slightly to 92.3 percent across the portfolio, with a remaining weighted average lease term of 8.6 years.

As other large office landlords have done, Kingston said he doesn’t believe the pandemic will have a lasting effect on the market.

“In the long run, we don’t think that remote working represents a threat to office,” he said.

The company also saw a decline in its liquid assets, which dropped to $5.9 billion, from $6.2 billion year-over-year.

“Operating with $6 billion in liquidity is more than adequate,” said CFO Bryan Davis. “We tend not to operate with lots of cash because it is not a good returning investment.”

Brookfield’s retail portfolio has come under close scrutiny by investors and analysts, who see it as a bellwether. Brookfield in May said it planned to inject $5 billion into major retail companies hit hard by the pandemic.

The company recently canceled plans to redevelop a mall in Burlington, Vermont, where it planned to build 10 apartment buildings and a 10-story office. It became involved in the project in 2017, but last month sold its interest to local partner Devonwood Investors.


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