Brookfield Property Partners reports $2B in losses in 2020

Malls and offices owner said funds from operations plummeted in Q4; parent company seeking to take firm private

Brookfield Property Partners' Brian Kingston and Brookfield Place (Brookfield;Getty/Illustration by Kevin Rebong for The Real Deal)
Brookfield Property Partners' Brian Kingston and Brookfield Place (Brookfield;Getty/Illustration by Kevin Rebong for The Real Deal)

Closing the book on a devastating year, Brookfield Property Partners recorded about $2 billion in losses in 2020, with its office and retail holdings getting slammed by the pandemic.

The real estate arm of Brookfield Asset Management reported a net loss of $38 million in the fourth quarter, veering sharply from its net income of $1.55 billion over the same period in 2019.

At its fourth quarter earnings call on Tuesday, Brookfield Property Partners reported a big drop in funds from operations — or cash flow generated from its businesses. That figure fell to $167 million in Q4, from $379 million over the same period in 2019.

Brookfield said the loss was largely due to “unrealized reductions of values of certain assets within the portfolio.” Most of that occurred within Brookfield’s retail segment, which includes its massive mall holdings across the country.

The news comes just weeks after Brookfield Asset Management said it would seek to take Brookfield Property Partners private in a deal worth nearly $6 billion. The investment manager already owns about 65 percent of Brookfield Property Partners stock, and is planning to buy out the remaining shares.

Brookfield Property Partners said a special committee made up of its independent directors have met and hired advisers to consider the proposal. The company said that it would be able to report more information on the plan later in the first quarter.

The company also announced that Ric Clark stepped down as chairman at the end of January. In November, Clark — previously the company’s CEO — had partnered with former Tishman Speyer executive Philip Waterman to start a new real estate investment firm.

4 quarters of losses
The Q4 losses compared to the previous quarter, in which it lost $135 million. Brookfield reported a second quarter net loss of $1.5 billion and a first quarter loss of $373 million.

CFO Bryan Davis said at Tuesday’s call that Brookfield has reduced the value of its retail portfolio by about $600 million in the fourth quarter.

Brookfield has previously been criticized over its valuation methods. As a Canada-based company, Brookfield does not use GAAP accounting standards like its American counterparts. Instead, it relies on IFRS, which gives management more discretion on valuations. During the Covid crisis, the company maintained valuations on some of its properties at pre-pandemic levels, raising concerns from some in the industry.

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On the call, the company noted that retail rent collections rose to 80 percent in the fourth quarter, from 70 to 75 percent in the third quarter and 34 percent in the second quarter.

Brookfield, which gained about 125 malls from its acquisition of GGP in 2018, is in default on its loans on several of them. On the call, executives said the company is in negotiations with special servicers on about 20 of those properties in its core portfolio, where the value of the mall is equal to the debt on the property.

Davis said Brookfield could possibly modify its loans, hand over the malls to its lenders through a deed in lieu, or buy back the malls at a discount.

“There are opportunities and we are seeking to see what we can do to modify the existing loans,” he said.

Brookfield’s mall portfolio is mostly the result of its acquisition of GGP. Those properties have contributed to hefty losses during the pandemic and the company could hand back the keys to lenders on at least 10 of them, according to a recent Real Deal analysis.

Office vacancies across the U.S. remain high, but Brookfield touted its portfolio abroad. Executives said employees are already returning to work in Dubai and Asia.

Brookfield CEO Brian Kingston said during the call that the company has been in talks with public officials about reopening offices.

Kingston said the company has spent time with local governments and agencies “wanting to be thoughtful about how you [reopen] safely, but trying to emphasize with all of them the importance of getting people back to work.” That stands in contrast to an overall hesitancy among employees and many businesses in the U.S. about returning workers to the office. A recent survey found that in 10 major metropolitan cities, the average number of office workers who returned to their desks fell to 21.7 percent on Jan. 20. Last week, American Express told workers to operate from home until Labor Day.

Brookfield Property Partners stock rose 21 cents to $17.29 at closing on Tuesday.