Brookfield Property Partners L.P.
Q1 2017 Earnings Call Transcript

Published: 5 May 2017

[Operator:]

Good morning, ladies and gentlemen, and welcome to the Brookfield Property Partners' First Quarter 2017 Results Conference Call and Webcast. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host Mr. Matt Cherry, Senior Vice President, Investor Relations and Communications. Mr. Cherry please go ahead.

[Matt Cherry:]

Thank you, and good morning, everyone. Before we begin our presentation, let me caution you that our discussion will include forward-looking statements. These statements that relate to future results and events are based on our current expectations. Our actual results and future periods may differ materially from those currently expected because of a number of risks, uncertainties, and assumptions. The risks, uncertainties, and assumptions that we believe are material are outlined in our press release issued this morning. With that, I'll turn the call over to Chief Executive Officer, Brian Kingston.

[Brian Kingston:]

Thank you, Matt, and good morning, everyone. Thank you for joining the call today. With me on the call are Ric Clark, the Chairman of BPY; and Bryan Davis, our CFO. In my prepared remarks, I'll discuss our activities and accomplishments from the quarter as well as providing some observations and real estate fundamentals and the investment environment that we're seeing in our various markets around the globe. Bryan will then go through the details of our quarterly financial results and then following those comments we'd be happy to take questions from any analysts or investors on the call today. So as you would have seen in our disclosure this morning we reported another strong quarter. Our Company FFO was $237 million or $0.34 per unit, which is a 10% increase over the prior period and our seventh consecutive quarter of year-over-year FFO earnings growth. Our results this quarter benefited from strong performance in our core office business, as well as growth from our opportunistic investment segment. Capital Recycling remains one of our key priorities and we've made significant progress in this initiative during the first several months of the quarter. After raising approximately $3 billion of net equity from asset sales in 2016, we set a goal to raise an additional $1 billion to $2 billion over the course of 2017. Premier, well-leased properties in core markets continue to attract interest from global investors seeking stable, bond-like yields, and, consistent with the dispositions we completed last year, we expect to complete these sales at very attractive prices. The capital raise from these sales will be used in part to fund the ongoing construction of our 10 million square feet of development projects around the globe. The returns associated with these developments will be meaningfully higher than the assets that we're selling and are being developed to modern specifications to ensure the continued to meet our tenants demands well into the future. As has been reported we are close to finalizing the sale of our 51% interest in 245 Park Avenue in Manhattan in a transaction that values the building at more than $2.2 billion and will generate net proceeds to BPY of over $650 million. While this is a trophy asset in the much-sought-after Grand Central corridor that commands some of the highest rents in New York, we felt this capital could be better deployed elsewhere at higher returns. In addition, our private real estate funds have begun harvesting capital through realizations of maturing investments. During the quarter, these funds returned approximately $240 million of capital to BPY, which will be used to fund our capital commitments to future opportunistic strategies. Following the end of the quarter we entered to an agreement with Brookfield Canada Office Properties to acquire the 17% equity interest in BOX we did not already own for approximately CAD516 million or CAD32.50 per unit. Similarly we entered into a agreement to acquire the remaining 20% of the Brookfield Prime Property Fund in Australia for AUD85 million. As we continue to amalgamate our listed subsidiaries into BPY as flagship public vehicle. Both of these transactions will also allow us to streamline operations and processes reduce administrative costs. Shareholder meetings to approve both of these proposals are scheduled for June. We also remain very active in putting capital to work on behalf of our opportunistic strategies. Investing approximately $190 million at BPY share through Brookfield managed opportunity fun to acquire a portfolio of 13 student housing assets in the UK and preferred equity investment in hospitality REIT. Jones 141 select-service hotels throughout the United States. On the corporate side during the first quarter we repurchased over 4.4 million BPY units at an average price of $22.90 per unit, a 25% discount to our IFRS value per unit. This significant increase in our buyback activity relative to prior years affirms our commitment to this strategy. And as long as our units continue to trade at a significant discount to their intrinsic value, we will continue to allocate resources to buyback. I will now turn the call over to Bryan Davis for the detailed finance report.

[Bryan Davis:]

Thank you, Brian. During the first quarter, we are in Company FFO of $237 million compared with $217 million for the same period in 2016. On a per unit basis, Company FFO for the current quarter was $0.34 per unit compared with $0.31 per unit in the prior year at an increase of 10% which was an increase of 10% with strong operating performance across most of our business units more than offset the impact of the conversion of foreign income into fewer U.S. dollars. BPY recorded a net loss attributable to unitholders for the quarter of $166 million or $0.23 per unit compared with net income of $251 million or $0.35 per unit in the prior year. The decrease in the quarter was driven by net fair value losses which was primarily due to adjustments to valuation models in our core office and retail businesses to reflect future cash flows and generally – straight environment in the U.S. BPY realized gains of $206 million in the quarter as we successfully closed on the previously announced sale of 50% interest in Principal Place, office tower in London, or Amazon is the tenant as well as the sale of various assets within our opportunistic office, multifamily, triple net lease, and industrial portfolios. In the last 12 months, we've realized gains of approximately $1.1 billion as we continue to execute our strategy of selling all our interests in assets where we feel we have maximized value. These realized gains combined with our FFO this quarter provides strong support for our quarterly distribution of $0.295 per unit that was paid at the end of March. In reviewing our Q1 Company FFO in a little more detail, the main drivers that contributed to the $20 million year-over-year growth were a legal settlement related to – earned in our London portfolio related to historic lease dispute of $20 million. We had same-store growth of 4% and 1% in our core office and core retail businesses respectively in natural currency which increased net operating income by $12 million. And although our retail business had some headwinds in the quarter due to tenant bankruptcies they continue to expect to achieve same-store growth between 3% and 4% for the year. We had $15 million in FFO from additional capital invested in our opportunistic businesses where we benefited from our recent investment in IFC, Seoul. We increased our ownership interest in Rouse. We grew our Simply Storage and our student housing portfolios and we closed on a significant investment in the manufactured housing sector in the U.S. These pluses were partially offset by the impact of dispositions from our core office and retail platforms which reduced FFO by $20 million. The impact of a major renovation project and Easter holiday following in the first quarter last year which reduced earnings at Atlantis on a comparable basis, and the continued strength of the US dollar which reduced FFO earned from foreign currencies by $7 million. We did not have any merchant build gains in our results in Q1 and similar to last year due to differences in accounting rules we did not include in our earnings income recognized by GGP from the Ala Moana condominium development project which was $3 million at our share. To date this income totaled $23 million at our share or $0.03 per BPY unit which we expect to recognize in our IFRS results over the balance of 2017. In arriving at company FFO which we detail on Page 9 of our supplemental, amongst our standard adjustments for GGP warrants, and the add-back of depreciation of non-real estate assets, we adjusted for $14 million in transaction cost related to our recent acquisitions and $5 million for capitalized interest on active development projects that we now account for under the equity method due to recent sale of interest to third parties. IFRS rules allow for a return on your share of equity invested in a development only if you consolidate that development and not on that same amount of equity if the development is accounted for under the equity method. As a result, we have adjusted our FFO to reflect a return consistent with our consolidated development projects and most importantly to be consistent with the return we recognized on these projects in prior periods. In comparing our results to the fourth quarter of 2016, the Company FFO decreased by $31 million from $268 million earned in that period. This decrease was primarily attributable to a reduction in FFO of $22 million in our core retail business due to seasonality and a net reduction in earnings from Canary Wharf, where the $44 million development fee earned in the fourth quarter of last year exceeded the $20 million legal settlement that we've benefited from this quarter. These minuses were partially offset by same-store increase in our opportunistic investment, which improved FFO by $15 million, largely driven by strong results from our hospitality business in North America and $3 million in interest expense savings due to lower average corporate debt balance. On our proportionate balance sheet, total assets increased to $66 billion as we completed the acquisition of a manufactured housing portfolio, continued to fund our active development pipeline and benefited from the conversion of foreign currencies into more U.S. dollars using spot rates at the end of the quarter. These investments were funded in part through incremental asset level of debt with the balance from on hand liquidity including available credit facilities in cash raise from asset sales. We continue to focus on reducing corporate level debt and pushing out maturities. During the quarter, we repaid CAD200 million of senior unsecured bonds that were issued by our subsidiary BPO and we used available liquidity. In addition we issued CAD275 million of perpetual preferred shares at a rate of 5.1% using the proceeds to redeem an equal amount of our on demand capital securities. In addition just subsequent to quarter end, we were able to capitalize on a strong market and issued a further $275 million of perpetual preferred shares, this time at a rate of 4.85%. The proceeds from this issuance will be used to redeem the last of the on demand capital securities issued by our subsidiary BPO issuing preferred equity into the Canadian market continues to be inaccessible on efficient means of raising capital to fund our growth. Lastly our Board of Directors yesterday declared a quarterly distribution of $29.50 per unit to be paid at the end of June. So with that, I'll turn the call back over to you Brian.

[Brian Kingston:]

Thanks Bryan. Our core office business had an active first quarter with several of our key operating markets reporting strong leasing, notably New York City where we did almost 500,000 square feet, Denver and Sydney where we had renewals in excess of 300,000 feet and Toronto, Houston and Boston. In total, we leased 2.1 million square feet of core office space in Q1 at rents that we’re on average 25% higher than the leases that expiring during the period. In addition to our existing operating portfolio, the office developments that we've been constructing during the current building cycle are now beginning to deliver, premier product to many of our key markets. The volume of pre-leasing activity has been very encouraging in our two most active development markets, London and New York City. At a New York development, Manhattan West, we signed Whole Foods to be the local destination food hall and grocer for the area as well as lunch leasing at the Eugene, our 844-unit apartment building to very strong demand. Our leasing pipeline remains robust at Five Manhattan West and as well as the under construction One Manhattan West. Activity and interest in this project is as strong as we've ever seen it. In London, Amazon exercise its option to occupy the balance of the office space at principal place and will soon begin moving its employees into that building. At a 100 Bishopsgate, which is our largest London development, we signed law firm Freshfields to a lease of more than 200,000 square feet with optionality to take an additional 100,000 square feet. Over the next two years in total, we will deliver nearly 2 million square feet of new office development in the City of London, 75% of which is already pre-leased. Moving to our U.S. mall business, despite the prevailing negative sentiment surrounding bricks and mortar retail, our high quality portfolio continues to perform very well. Same-store lease percentage was 95% at quarter end and initial NOI weighted rental rates for signed leases that commenced in the trailing 12 months on a sweet to sweet basis increased 15.5% when compared to the rental rate for expiring leases. While certain retailers are experiencing challenges in adapting their business model to changing consumer tastes and the impact of e-commerce. Demand for high quality space in well-located market dominant retail centers such as ours continues to be robust. And this is reflected in Ohio occupancy and leasing activity, which totaled nearly 9 million square feet in the past 12 months. As an example of this demand in the first quarter of 2017 approximately 1.2 million square feet of space in our portfolio was impacted by retail tenant bankruptcies, 80% of that space has already been released to retailers whose businesses continue to grow. We also have a robust pipeline of development and redevelopment opportunities within the portfolio which will yield very attractive rates of return and continue to drive above market earnings growth within our portfolio. In short, our retail business is doing extremely well in spite of what you may be seeing in the press. We also noted comments from some analysts and media coming out of GGP’s conference call earlier this week. That referenced the company being for sale and believe that some of management's comments have been taken out of context. The board of GGP and BPY is a very significant shareholder our supportive of management's efforts to find ways to close the gap between their trading price and the underlying value of their assets and work with them to evaluate various alternatives and chart a path forward beyond that there's nothing else to report at this time. So in conclusion we had a strong financial and operational quarter. We continue to execute the business plan four to five balance sheet to make new strategic investment in order to generate higher returns for our unitholders. So with those are planned remarks. I'm now happy to open the line up to questions from analysts and investors. Operator?

[Operator:]

[Operator Instructions] Your first question comes from the line of Sheila McGrath with Evercore. Your line is open.

[Sheila McGrath:]

Yes, good morning. Brian you described the interest level in leasing in New York as robust in your letter. And I was just wondering if you could talk about the trends there, do you see more interest from in place tenants willing to move west to new office space, and just give us an update on Manhattan West the activity and tenant interest level there?

[Brian Kingston:]

Sure. I’m going to let Ric talk about that generally in terms of what happening in New York.

[Ric Clark:]

Hi, Sheila. Yes. So we have experience of a market sort of a pretty meaningful pickup in overall activity, and Manhattan West in fact – we had four tenants competing for all available space at Five Manhattan West, we've got leases out for every inch of availability there which is over 600,000 square feet. And similarly we're seeing a lot of competition for the remaining space that we have available in our North Tower which is under development. So we expect the next several months to be able to announce additional leasing there. These tenants – most of them are coming from outside our portfolio, and in total in New York we probably have a million square feet of leases in very serious negotiation stage for vacant space. So we're expecting a pretty good year on the leasing front in New York.

[Sheila McGrath:]

And then just keeping with the New York’s team on the investment sales side, if you could describe the interest level at 245 Park and if you are seeing continued interest from foreign investors or domestic investing in office in Manhattan?

[Brian Kingston:]

Yes. There's still a lot of foreign interest. There's been a lot of discussion about Asian tenants not being in the market because of concerns about getting currency out of China that has not been our experience. We had a good level of activity when we ran the sales process for 245 Park Avenue and it was coming from I guess all sort of walk, public companies were very interested, some private investors were interested in a lot of foreign capital as well. As Bryan mentioned, we expect that transaction to close soon at pretty robust pricing. So we haven't seen an abatement in interest and assets. Maybe it's not quite as broadly as a couple years ago, but still very strong interest.

[Sheila McGrath:]

Okay. Last one and then I'll get back in the line. Just in London it looks like you had a lot of good leasing at some of your development. And I'm just wondering just because everybody is worried about Brexit and tenants leaving. If you could comment on any known tenant departures or are you seeing any trends there with tenants wanting to exit upon expiration?

[Brian Kingston:]

No would be the quick answer, part of that is because we generally have very long-term leases in place. At Canary Wharf I don't think there's any expiries of any note for the next six years. So we certainly don't have any tenants coming to talk about handing back leases or in advance of the lease expiry. Occasionally we read the same things as you would in the press about – some large tenants in London talking about what their plans maybe for the future, but we haven't really seen evidence that anybody is actually making those space decisions yet. So I’d see the overall impact to date really from Brexit has been a slowdown in decision making as tenants sort of wait to see how all this plays out as opposed to them having a particular view on where they're going. And obviously as you know our view in the long-term is London is going to remain a very important center of commerce and finance in particular, it’s got great infrastructure, great location and tax loss et cetera. So we think in the fullness of time, it's going to be fine and we're not really seeing any evidence of what you were referring to yet. Although, there is a lot of discussion around the topic for sure.

[Sheila McGrath:]

Okay. Thank you.

[Operator:]

[Operator Instructions] Your next question comes from the line of Mario Saric with Scotia Capital. Your line is open.

[Mario Saric:]

Thank you and good morning. Just wanted to circle back to the office discussion, through looking at the U.S. core office occupancy kind of fell bit quarter-over-quarter 80.7% after pickup last quarter. Ric I was just wondering maybe if you can provide a bit commentary in terms of whether kind of the target mid-90% occupancy for kind of early mid-2018 is still impact. It sounds like you’ll contribute to that, but I’m just wondering if there’s been any change in terms of where you think our core occupancy may end up?

[Ric Clark:]

So occupancy did dip by about 80 basis point through really sort of a couple of things that occurred during the quarter that contributed that. One was we worked on early renewals with a couple of energy sector tenants one in Denver, one in Houston. And as part of that those renewals we took back a little bit of the space, so that added to our vacancy not materially, but a little bit. We lost a law firm in downtown LA for a little over 100,000 square feet, again not material. But the biggest contributor to that vacancy dip was the associated fresh lease expiring at Five Manhattan West. We were able to do a new lease with them at 200 Liberty Street in Lower Manhattan. And as I mentioned before, leases out on every inch of available space at Five Manhattan West. So the activity remains robust. I think our projection for the year still remains that will increase overall occupancy by about 200 basis points and we don't see anything that jeopardizes that target at this point. It still looks pretty good.

[Mario Saric:]

Okay. And that 200 basis point increase that’s relative to Q4 2016?

[Ric Clark:]

It’s probably relative, yes.

[Mario Saric:]

Okay. Is that for the entire portfolio or just for the core U.S. portfolio?

[Ric Clark:]

That would be overall portfolio.

[Mario Saric:]

Okay. And then maybe just coming back to the UK and Brian in your commentary there, so given kind of your thoughts on the operating environment in London, can you talk about potential quarter development leases that you maybe able to find over the next year or so. And then based on where current valuations are in the various asset classes that you own, do you expect to be a net buyer or seller in the UK over the next 12 months?

[Brian Kingston:]

Yes. Especially as I mentioned, we did sign the lease with Freshfields at 100 Bishopsgate which assuming they exercise all of their options and take the full amount of the space that they can under their lease, but more about 70% lease there. So that remaining 30% we have 18 months or so until construction completion. We've got a good pipeline of leasing. I expect the balance of that space is going to go to smaller tenants then we've been leasing two to date, so single or a couple of floors at a time and generally they're making their space planning decisions in the sort of 12 to 18 months at a time as opposed to some of the larger ones that where we've been able secure leases three or four years before the development completed. So I'd say our leasing plan despite all of the noise around Brexit et cetera is exactly on track what we would have thought, which is to be at about 70% at this stage and feel pretty confident by the time we get to completion or shortly thereafter, we should have the balance of that's basically stop and that's really all of the leasing that we have to do and in London. As I mentioned, Amazon has taken up 100% of the office space at principal place and all of our other ones are. So from a developer perspective, we're in great shape on leasing. I'd say to your question about, are we net buyer or a seller and in London? We would love to grow the business there. We like the market. I think it's going to be partly dependent on prices and we along like – along with a number of others. We're hopeful that maybe some of the disruption that's coming with Brexit would create some opportunities to find some either deep value or even distressed opportunities. We haven't really seen them surface. There's a lot of capital still in London. Pricing is very strong and so I'd say we prefer to buy, but it's really going to be dependent on whether we can find things that hit our return.

[Mario Saric:]

Okay. That’s good color. Maybe last question from more of a higher level question, your capital recycling, you done a really good job in terms of buying higher cap rate asset – lower cap rate assets and realize gains that you’re disclosing $1.1 billion over the past 12 months – testament to that. The flipside of that is if we back code kind of the lease termination fees and whatnot, the FFO for unit growth was fairly flat year-over-year. So I guess a two part question, the first part being is there generally a time lag from a capital recycling perspective that could impact the FFO per unit in terms of realizing that incremental positive spread? And then secondly when we think about the FFO per unit, growth composition going forward, should we think about the bigger part of that growth being some of these realized gain in settlements and whatnot that are kind of traditional customary core FFO deal?

[Brian Kingston:]

Yes. Mario, its Brian. I'll just say on sort of year-over-year basis, sometimes there is a lag between when we raise capital and then ultimately can deploy it into other strategies that are higher return and so that will definitely impact our results a specific to Q1 2017 versus the same period in 2016. We did have growth that is kind of matched by the fact that our year-over-year was $20 million, which is exactly equals that at lease settlement. But that growth was offset to some degree by $7 million of incremental FX headwinds related to the strength of the U.S. dollar and similarly as the comment, I mentioned about there falling in the first quarter of 2016 that had a fairly sizable impact on our results when you compare it on a period-over-period basis. So you back those things out, there's $12 million to $13 million of incremental earnings that we had in Q1 of 2017 that I think a little bit lost in the numbers.

[Mario Saric:]

Okay. Okay, that’s helpful. Thank you.

[Operator:]

Your next question comes from the line of Mark Rothschild with Canaccord. Your line is open.

[Mark Rothschild:]

Thanks and good morning everyone. You commented on GGP that maybe things were misunderstood coming out of their conference call though, it appears that they were saying that they would like to look at different strategies to the surface value with their shares trading below NAV. BPYs units are obviously trading well below NAV as well and overall you have increased the unit buyback. I was curious if this is something you would potentially increase further something we should expect to continue or if there are other options that you may consider at some point to improve the valuation relative to the NAV?

[Brian Kingston:]

Yes, so I’d say all of those things are true. So as we've sort of said in the past, as one of the uses of proceeds from these asset sales of course is to buyback our units. Over the last couple of years, we've been investing a significant portion of those proceeds into our building out our development pipeline and investing in our opportunistic strategy, which we thought were the right – as well as reducing some corporate debt. So we thought were the right place is a lot of that is now largely done. The equity to go into our development is largely funded as these projects are now getting into the later stages of development. As I mentioned on the opportunistic side, we're starting to have natural realizations out of that strategy that will fund them going forward and we've made a lot of progress on cleaning up all of the corporate debt. So what that does it allows us to use to dedicate more of the proceeds toward buying back our own units and I think that's what you're starting to see the beginning of. So as always will make the decisions at the time based on the various options that are available to us to invest in. But we certainly have more flexibility today to use those proceeds to buyback stock and it certainly at the prices where we're trading. We think that's a great use of cash. As far as considering other things that I think we've mentioned in the past some of the things that we been thinking about whether it's re-conversion or other things, I think we spend a fair bit of time considering whether this things we can do to either simplify the story, do a better job marketing to investors that we think will have an interest in the story that maybe aren't investing in it and I think Bryan and I will continue on doing that, but I wouldn't expect any major strategy shift, we think to really continue what we've been talking about the last three years.

[Mark Rothschild:]

Okay and you have indicated that there would be some more asset sales. Should we expect any other large office sales like the one you're doing on Park Avenue in 2017?

[Bryan Davis:]

Yes, potentially I would say we said we're targeting $1 billion to $2 billion of net equity, 245 Park is $650 million of that number. In the balance will be a combination maybe one or two other large things as well as some smaller portfolios or assets here and there and then just potentially to be one more.

[Mark Rothschild:]

And then just lastly if you pretty much funded much of the development and evaluation is what we expect more of the proceeds to go to unit buyback versus acquisitions or will you still be focused on external growth?

[Bryan Davis:]

It will be both. I think when we're making these external acquisitions as we are through the opportunistic strategy. We think these are 20% plus IRR transactions which are obviously very attractive. So I think it so long as we continue to find those and we've got a pretty good pipeline of those types of acquisitions we will put some of our capital toward that, but as I mentioned we now have a bit more flexibility to put more toward the buyback if we stay down here.

[Mark Rothschild:]

Okay. Got it. Thanks a lot.

[Operator:]

Your next question comes from the line of Sheila McGrath with Evercore. Your line is open.

[Sheila McGrath:]

Yes, Bryan may be you could just give us a sense of how much capital you need or equity need on the remaining development and I think at the beginning of the year you said you would sell or try to source $1 billion to $2 billion of equity and is that - does that still stand. I'm just trying to get a sense of sources and uses for the year?

[Bryan Davis:]

Yes, the $1 billion to $2 billion of equity proceeds is still the plan for the year in terms of asset sales and the amount of equity that will come out of those. We think for funding of development, it's probably in the order of $250 million to $300 million needed for that and then the balance would go to some combination of new investments, investing and whether that's new investments or acquisitions or otherwise funding development or redevelopment and so not necessarily ground up development, but investing in things like place here as well as the buyback.

[Sheila McGrath:]

Okay. And then could you give us a little more detail on San Francisco acquisition of one – I think it was One Post just terms of pricing and how that came about to that opportunity?

[Brian Kingston:]

Yes. So look it was a – this was an occupier owned building, there was a process around the sale, so they hired brokers, we participated in it. And essentially the transaction is to buy the building from them, lease it back to them portion of it on a long-term basis and a portion on a shorter term one, so they're trying to shrink their own footprint within it. And I'd say one of the key things on this transaction why they got comfortable with us was it's a tenant that we do – within other places. And they felt comfortable that we be a long-term owners, the building require some capital around the lobby and refurbishing the floors et cetera. We think obviously because it was a marketed process, we have to sell at fair price. But we do think this is one where the seller had the unique interest in who is going to own the building afterwards as opposed to whether the check would clear and we think that sort of help distinguish us among the pool. This was bought as part of our core plus strategy which we recently launched last year. That funded strategy is targeting 10% to 12% levered returns and us that we sort of fit into that profile.

[Sheila McGrath:]

Okay. And then just strategically in terms of property sectors obviously office and retail are main core, and in the past you’ve mentioned growing multifamily away from the fund business. Are you focused on growing that business on balance sheet and any other sectors that you think you would be looking at on balance sheet away from the funds?

[Brian Kingston:]

Yes. I'd say that the distinction maybe is in the funds on multifamily to date; a lot of our investments have been suburban garden style. Apartments and the strategy oftentimes was buy it, fix it, sell it and these were assets that were maybe under invested in and needed some repositioning. The strategy you're referring to in terms of growing and growing on the balance sheet in particular and outside of the funds is much more focused on building a multifamily business similar to our office building business being in major gateway cities in urban locations generally high-rise, much higher value assets where you've got a lot more density. Look we continue to do that. We've got a number of developments underway right now in Manhattan and we've got sites available to us in Los Angeles and a few other major markets around the United States. We're also looking outside of the U.S. at this we're building assets like this on Canary Wharf. I think this will be a meaningful part of the business going forward. Given where pricing is right now, our focus has been on developed to hold because we think the returns are better there, we can develop to a lower price and more often these assets are trading through replacement cost. So that's really been the focus, but I think it’s an opportunity came along to buy for good value of a larger portfolio, we'd look to do that. And then as far as your second question other sectors that we’re looking to build on the balance sheet. We continue to like logistics as a sector longer-term, I think pricing there are similar to multifamily, right now it’s a little bit challenging to invest in scale, so we've done a few smaller things there. But I think over time that's another area you could see become a larger portion of our core balance sheet.

[Sheila McGrath:]

Okay. And then last question on The Eugene. How is the reception so far, if you could just give us a little bit of update there?

[Brian Kingston:]

Sheila, so just a couple of quick data points on The Eugene, we open for leasing March 1, and March was a bit of a slow month largely weather related I think we released 20 units in March. We release 60 in April, and we’ve released 102 to-date. So we’re well above our pro forma pace of 35 to 40 units a month. And overall things are going really well. We're getting the economics that we thought so.

[Sheila McGrath:]

Great, thank you.

[Brian Kingston:]

Okay, thank you.

[Operator:]

Your next question comes from the line of Mario Saric with Scotiabank. Your line is open.

[Mario Saric:]

Hi, thank you. Just one quick follow-up, just on the back of that $1 billion to $2 billion target net equity sales for the year 245 Park, Brian as you mentioned is part of that that has been reported that you're looking at a partial sale of Brookfield place, New York, which if you do the math would take a big part of the remainder? I was just wondering if you may provide a good color in terms of what your plans are there and the potential level of interest in downtown New York versus which gives a 245 Park.

[Brian Kingston:]

Yes, that is potentially one that we could look at it. I'd say in terms of interest in lower Manhattan and Ric, could probably comment on this better than I can. But I'd say interest is never been higher in this sub market, and rents are strong down here, people are sort of seeing the transformation that happens. So we do think investor interest in an asset like this particularly one that’s been fully repositioned and is now least would be high. I think we've got a couple of options available to us as we think about that $1 billion to $2 billion. Obviously we've got a lot more than that in a potential pipeline. And so that's possibly one of the assets. I think part of that will just be assessing the pricing we can get on that and some of the upside that you maybe foregoing by selling it here versus things we can do elsewhere so.

[Ric Clark:]

Yes, I don't have a whole lot to add. I just would say that Brookfield Place New York has turned out to be one of the best assets in the world. So there is a lot of interest, people would be interested in and holding in for a long period of time as what we – but as Brian said, at the right price will bring partners into the asset, if not will work on other things to fill the rest of that $2 billion number.

[Mario Saric:]

Okay, that's great. Thank you.

[Ric Clark:]

Okay. End of Q&A

[Operator:]

There are no further questions at this time. Mr. Brian Kingston, I will turn the call back over to you.

[Brian Kingston:]

Okay, thank you everyone for dialing in and we look forward to updating you again next quarter. Thank you.

[Operator:]

This concludes today's conference call. You may now disconnect.