Brookfield Property Partners reports $135M net loss in Q3

Despite latest big quarterly loss, CEO said "workers will return to the office as they did prior to the pandemic”

One Manhattan West and Brookfield CEO Brian Kingston (Brookfield)
One Manhattan West and Brookfield CEO Brian Kingston (Brookfield)

Brookfield Property Partners, one of New York’s largest office landlords, reported a $135 million net loss for the third quarter. That marked a sharp fall from the $870 million profit it reported during the same period last year.

But the July through September earnings were also an improvement from Q2, when the company — whose holdings include offices and malls across the country — reported a net loss of $1.5 billion.

Executives on Brookfield’s earnings call on Friday expressed optimism about the city’s office market, even as the sector continues to show signs of distress. Brookfield, the real estate arm of Brookfield Asset Management, controls 27 million square feet of office space in New York City.

Brookfield reported that its Q3 funds from operations fell to $161 million, compared to $324 million last year. After the third quarter ended, the company recorded two large deals: It sold a London office building, One London Wall Place, for $620 million, and it sold the Simply Self Storage brand to Blackstone Group for $1.23 billion. Brookfield claims that it would generate $235 million in proceeds from the two deals.

During Friday’s call, Brookfield execs said they are seeing an increase in prospective office tenants, including from companies looking for large corporate headquarters. They also said some firms with flexible work-from-home policies are looking to take advantage of market conditions and lease new office space.

“We have strong conviction that workers will return to the office as they did prior to the pandemic,” Brookfield CEO Brian Kingston said on the call.

New York’s office market is facing enormous challenges as employees continue to work remotely. In October, Manhattan office availability hit its highest rate since 2004, according to Colliers International’s latest market report. As of late October, only 10 percent of Manhattan workers had returned to their offices, according to a survey from the Partnership for New York City.

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Despite those issues, Brookfield was able to refinance some of its top office assets. Those include the 2.1 million-square-foot office portion of One Manhattan West. In August, Brookfield secured a $1.8 billion refinancing on the 70-story tower. Its partner on the property is Qatar Investment Authority. In its retail division, which largely consists of malls, Brookfield reported an uptick in rent collections from its tenants. For the quarter, rent collections averaged 70 to 75 percent, up from 34 percent in the second quarter.

But the firm is also seeking to hand back the keys to at least one of its malls in Florence, Kentucky, which is the collateral on a $90 million CMBS loan.

During the call, Kingston suggested that the number of properties where the equity is worth less than the debt is “relatively small.”

Brookfield and Simon Property Group recently agreed to buy J.C. Penney, which filed for Chapter 11 bankruptcy earlier this year. J.C. Penney has 99 stores at Brookfield Property Partners’ retail outlets.

But during the call, Kingston said Brookfield Property Partners “won’t have any actual investment in the transaction itself.” That would come from Brookfield Asset Management, which has over $550 billion in assets under management.

In recent months, Brookfield Asset Management has been buying up a significant amount of Brookfield Property Partners’ stock. Kingston said Brookfield Asset Management now owns about 65 percent of Brookfield Property Partners’ stock.

Shares of Brookfield Property Partners were down 4 percent on Friday, to $14.05.