Brookfield Property Partners L.P.
Q3 2016 Earnings Call Transcript

Published: 6 Nov 2016

[Operator:]

Good day, ladies and gentlemen. Welcome to the Brookfield Property Partners’ 2016 Third Quarter Financial Results Conference call. As a reminder, today’s call is being recorded. It is now my pleasure to turn the call over to Mr. Matt Cherry, Vice President of Investor Relations and Communications. Please go ahead sir.

[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 our call today. With me on the call are Ric Clark, Chairman of BPY; and Bryan Davis, our CFO. In my prepared remarks, I’ll provide an update on our various strategic priorities, as well as some observations on real estate fundamentals and the investment environment around the globe, including some of the transactions we are hoping to close out either prior to the end of the year or early next year. Bryan will then go through the details of our quarterly financial results. And then, following those comments, we would be happy to take questions from anyone on the line today. As you will have seen in our disclosure this morning, we reported our fifth consecutive quarter of year-over-year earnings growth in the third quarter of 2016. Specifically, our Company FFO increased by 6.4% over the third quarter of last year, highlighted by a 36% increase in earnings from our opportunistic investment segment, driven by new investments we’ve made in this strategy over the past 12 months. Same-property NOI growth in our core office and core retail portfolios was 4% to 5%, although total FFO from these portfolios was flat or slightly down due to disposition activity and the impact of foreign currency. Market fundamentals remained strong in the majority of our key markets with low vacancy and increasing rents in our portfolio of premier properties. Capital markets have remained open and accessible as global investors continue to increase their allocation to real assets that produce stabilized cash flows and consistent yield. As we’ve been talking about over the past several quarters, one of the key parts of our value creation strategy continues to be recycling capital from mature, stabilized assets, in many cases, at premiums to IFRS value. In the third quarter, we sold One Shelley Street in Sydney at a 5% cap rate, which was a 6% premium to our IFRS carrying value. Responding to healthy demand in that market, we sold two additional smaller assets in Australia as well during the quarter. And in total, these three dispositions surfaced nearly $300 million of net equity capital. Following the end of the quarter, we entered into a contract to sell Moor Place, a fully let 227,000 square foot office building in the city of London. Obviously, there has been a lot of focus recently on the impact Brexit will have on property values in London. We have held and continue to hold the view that London remains an attractive market in which to invest, and this anecdotal transaction supports that theory. We executed the sale at a cap rate below 5% and at a price consistent with our Q1 IFRS carrying value, which was established prior to the referendum. In our less than two-year hold period on this particular investment, we booked a £60 million gain. The asset sale program in our core retail business is continuing as well at similarly strong execution. Reported as a subsequent event last quarter was the 49% sale of Fashion Show in Las Vegas at a sub-4% cap rate. In the third quarter, we also sold two additional malls and continued to use those proceeds to fund an active development pipeline that is producing nearly 10% unlevered cash returns. Beyond core assets within our opportunistic strategies, we’ve begun harvesting gains on some of the investments we’ve made over the past several years, including the sale of 31 multifamily assets this year for a total of $981 million of gross proceeds. This resulted in a 27% IRR and a doubling in the value of our investment over just four years. We are on track to meet our objective of surfacing $2 billion of net equity from asset sales in 2016 and have a pipeline of further dispositions we expect to continue to make in 2017, including core office properties in New York, Washington D.C. and London. With that, I’ll now turn the call over to Bryan Davis for the financial report.

[Bryan Davis:]

Thank you, Brian. During the third quarter, we earned company FFO of $232 million compared with $218 million for the same period in 2015. On a per unit basis, company FFO for the current quarter was $0.33 per unit, compared with $0.31 per unit in the prior year, an increase of 6% as operating performance was strong across all business units, which more than offset weaker foreign currencies compared with the U.S. dollar. Net income attributable to unitholders for the quarter was $1.25 billion, or $1.77 per unit, compared with $193 million, or $0.27 per unit, in the prior-year. The increase this quarter largely relates to a routine restructuring the Partnership undertook to consolidate assets with similar characteristics into a more efficient and existing REIT subsidiary. This resulted in approximately $900 million of non-cash deferred tax income. In addition to that, we had valuation gains of $88 million. Although not reflected in current period FFO and only partially reflected in current period net income, we did realize gains of $541 million this quarter, or $0.76 per unit, on assets that were sold as a result of strong execution on the sale of 100% interest in One Shelley Street in Sydney, a 49% interest in Fashion Show in Las Vegas, the sale of the Interhotel portfolio in Germany and the sale of trademark licenses associated with the Hard Rock at well in excess of the capital we had invested in these assets. These realized gains, combined with our FFO this quarter provides strong support for our quarterly distribution of $0.28 per unit that was paid at the end of September. In reviewing our Q3 Company FFO in a little more detail, the main drivers that contributed to the $14 million year-over-year growth were incremental income from our opportunistic segment, which earned $90 million of FFO this quarter compared with $66 million in the prior year. Much of this increase came from the $1.3 billion of capital we have invested in our new Strategic Real Estate Fund. This fund contributed $39 million to FFO compared with $30 million in the prior-year. Specifically, we benefited from same-property growth at Center Parcs in the U.K., where occupancy and pricing was up. We also benefited from new investments in the self-storage business, a student housing portfolio and two office portfolios, which contributed an incremental $9 million of FFO. We also benefited from capital invested in our multifamily funds, which had a strong quarter with an incremental $10 million of income earned as a result of the successful sale of a merchant build property in Vista, California. So although lumpy, these earnings are reoccurring, and based on our current investments, we expect another $90 million in incremental merchant build gains between now and 2021. And lastly, in our real estate finance funds where we’ve made further investments in our fourth fund and have benefited from strong performance in our other funds, we have increased overall income by $5 million. We also had a $9 million reduction in corporate interest expense as we have been diligently repaying corporate-level debt with proceeds from asset sales. These increases were offset by a $15 million reduction in FFO from both our core office and core retail platforms. In both of these businesses, we experienced strong operating results offset by the impact to earnings of asset sales and foreign exchange. In our core office business, we had same-store growth of 5% natural currency. This quarter, we benefited from Saks beginning occupancy. Our annual run rate at Brookfield Place New York is now at $120 million. These pluses were partially offset by anticipated tenant move-outs, where in Calgary Imperial Oil moved out of Fifth Avenue Place; in Sydney, KPMG moved out of 10 Shelley Street; in New York, AMEX moved out at 200 Vesey Street; and in Houston, Hilcorp moved out at 1201 Louisiana. We are making progress on advancing lease discussions in Calgary, Houston and New York. And in Sydney, we’ve already leased 90% of the space that was vacated, which we expect to begin contributing to earnings in the second half of 2017. Our core retail business had 3.8% same-property growth compared with the prior-year due to increased rents. Similar to last quarter due to a difference between IFRS and U.S. GAAP, we did not include in our earnings this quarter income recognized by GGP from their share of the Ala Moana condominium development project, which was $3 million at our share. Year-to-date this income totaled $16 million, and if there were no GAAP difference, it would increase our Company FFO by $0.03 per unit. We expect this income to be included in our 2017 results. These increases were offset by asset sales, which reduced Company FFO by $25 million and a reduction in FFO of $10 million from our exposure to foreign currencies that weakened relative to the U.S. dollar, mainly the British pound. 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 $15 million in transaction costs related to our recent Rouse and student housing portfolio acquisitions, and $11 million of gains mainly associated with early debt extinguishment. Included in net income, we recorded fair value gains during the quarter of $88 million. The gains in our investment properties were mostly in our opportunistic businesses. I would say split evenly across our self-storage, triple-net lease and industrial businesses. As it relates to core office. In London, although we reduced cash flow assumptions on our city portfolio to reflect a slowing leasing environment, we kept valuation metrics constant with the prior quarter based primarily on transactional evidence in the market, including our own properties. In addition, we increased the value of our Principal Place development site to reflect the price in which we have transacted to sell a 50% interest in that property. At Canary Wharf, our portfolio remains well insulated due to the quality, stability and longevity of its cash flows. In comparing our results to the second quarter of 2016, Company FFO decreased by $18 million from $250 million earned in that period. This decrease was primarily due to the incremental income of $11 million earned in our multifamily fund investments last quarter, weaker foreign currencies which reduced company FFO by $6 million, the disposition of One Shelley Street and an interest in the Fashion Show Mall and Interhotels portfolio, which reduced FFO by $10 million. And these were offset by same-store growth in our core retail businesses and incremental income from acquisitions in our opportunistic business of about $3 million. On our proportionate balance sheet, our total assets remained unchanged at $66 billion. Our focus through the third quarter of this year was to continue to make progress and increasing the flexibility of our balance sheet. We achieved this through a continuation of our asset sales program, as Brian highlighted. The proceeds raised from these asset sales, along with the cash generated within our business, were used to fund our commitment to our opportunistic strategy where we invested $200 million during the quarter, and to our commitment to reduce leverage, where we repaid $270 million of our corporate and subscription facilities. We ended the quarter with an IFRS value per unit of $31, almost $1 higher than where we ended at the end of the prior year, as a result of our positive net income, which more than offset the impact of weaker foreign currencies and distributions paid. Lastly our Board of Directors yesterday declared a quarterly distribution of $0.28 per unit to be paid at the end of December. With that, I’ll now turn the call back over to you, Brian.

[Brian Kingston:]

Thank you, Bryan. Just turning to operations, occupancy remained essentially flat across our core office and retail businesses, but fundamentals in the majority of our key markets were positive. In Manhattan, we opened up Saks Fifth Avenue to anchor our destination retail collection at Brookfield Place New York, which essentially completes our multi-year repositioning of this project. And with the opening of the World Trade Center Transportation Hub a few months ago, the multi-billion dollar transportation infrastructure program that has transformed downtown is now complete. We’re already starting to see the effects of that with recent reports indicating record high rents in the downtown submarket. In Midtown, we’re very close to announcing a second tenant at the One Manhattan West development project which would bring it to 37% pre-lease three years prior to completion. While activity in Houston and Los Angeles remained slow during the quarter, we leased 575,000 square feet in Houston and 350,000 square feet in Los Angeles. We also had a strong leasing quarter in Toronto, Calgary and Ottawa, leasing a total of 546,000 square feet and have a substantial pipeline of active lease discussions behind that as well. Toronto has been particularly strong in 2016 with a market vacancy of just 4.1% at the end of the third quarter, which is a new three-year low. And while the story is quite the opposite in Calgary, with high vacancy due to low oil prices and overall volatility in global commodity markets, the highest quality assets in that market are stable and present opportunities for tenants to upgrade or consolidate their existing premises. As recently reported by our Canadian REIT subsidiary, Brookfield Office Properties Canada, we signed a 140,000 square foot lease with the Bank of Nova Scotia at our Brookfield Place Calgary development, bringing that project to 81% pre-committed with 12 months to go before completion. We mentioned the strength of the investment market in Sydney earlier, and the office portfolio operational activity in the quarter was likewise strong. We leased approximately 500,000 square feet at 21% higher rents than the expiring leases they replaced. In total, globally, we leased 2.4 million square feet of office space in the quarter at rents that were on average 17% above expiring rents. Moving on to retail. Leasing activity comprised over 11 million square feet at average rent spreads of 21% over prior leases that expired in the comparable space. Tenant sales were up 1.4% to $19.5 billion on a trailing 12-month basis, and occupancy finished the quarter at 95.5%. One of the themes at our investment meeting last September - or in September was that although the impact of online shopping receives quite a bit of publicity, hard data has shown that Class-A malls in the U.S. are not only surviving but becoming more profitable when backed by landlords that are willing to reinvest capital in their assets and adapt to changing customer patterns and growth. A common misperception is that millennials prefer to do their shopping exclusively online. However data supports quite the opposite that that generation having the highest propensity to visit malls with more frequency than any other generation. Retailers are increasingly finding that omni-channel customers, ones who balance both online and in-store purchases, are their most valuable consumers, and accordingly, are sourcing the appropriate balance between online sales and utilizing bricks-and-mortar locations. Over the course of the past 12 months, we’ve made a number of investments in several new property sectors, including self-storage, manufactured housing and student housing. In total, we’ve invested about $312 million of BPY shares in these three sectors and expect to earn 18% to 20% returns on those investments. Each of these businesses produce relatively high cash yields, deliver above-average growth in earnings and are generally less capital intensive than many other assets classes. They have also shown to be, for the most part, resistant to recessionary cycles. Our plan is to continue to build scale in each of these portfolios by making further tuck-in acquisitions from non-institutional owners. For example, in just the nine months that we have owned it, our self-storage business has grown from an initial portfolio of 90 assets and 55,000 units, to 161 assets and nearly 100,000 units. In addition to new sectors, we also continue to grow in new geographies where we’re finding compelling investment opportunities. We are currently under contract to acquire a high-quality 4.2 million square foot office portfolio in Mumbai, India. While just our second investment in India, we’ve been able to buy in quality and scale in both instances and now control the largest foreign-owned office portfolio in the country. The Mumbai portfolio presented a unique opportunity for us to acquire an entire 39-acre live, work, play district at a significant discount to replacement cost. And finally, we are under contract to make an initial investment in Seoul, South Korea, agreeing to acquire the premier 5.4 million square foot mixed-use International Financial Centre. The complex consists of three office towers, a 400,000 square foot shopping mall and 434 room luxury Conrad Hotel. Our experience in managing large scale, multiuse commercial campuses and our multinational tenant relationships will be beneficial in enhancing the value of this newly constructed best-in-class commercial property. We were also pleased to host many of those of you on the call today at our Annual Investor Meeting in New York in the last week of September, and at that meeting, provided a comprehensive review of our operating units and our overall growth strategy. We also discussed a number of the current and longer term valuation - discussed the current and longer term valuation of our business. As discussed, private equity capital has been increasing its investment allocation to high quality real estate assets, and in many cases, they are willing to pay premiums for this type of stable investment with long-term contractual cash flows in place. Like the majority of our peers, these valuations have generally not traded - not translated into public markets. Accordingly at certain points in time, reinvesting in our own units is the most prudent use of our capital. During the third quarter, we repurchased 470,000 units, and in total, since our buyback program began 15 months ago, we have repurchased 2.8 million units at an average price of just under $22 per unit. With our current IFRS value of $31 per unit, which has been supported by asset sales mentioned earlier, we believe this has been a great use of our capital. And finally, as hopefully many of you have seen, Brookfield launched a new and improved corporate website, which streamlines a lot of our branding and strategy efforts. We hope that the information you find on there relevant to BPY makes it easier to navigate and certainly welcome any feedback that you may have. So with those as our initial remarks, we’re happy to open up the line to any questions from analysts or investors on the phone. Operator?

[Operator:]

Thank you. [Operator Instructions]. And we’ll pause for just a moment to allow everyone an opportunity to signal for questions. [Operator Instructions]. And we’ll go first to Mario Saric with Scotiabank.

[Mario Saric:]

Hi, good morning. Just on the capital recycling side and the disposition activity in particular, I think, Brian, you mentioned potential sales core office in London, New York, as well as Washington. Can you give us a sense in terms of the quantum, both on a gross asset value and net equity basis that those dispositions may represent?

[Brian Kingston:]

Yes. So we’re obviously early on in terms of identifying specifically which assets - and a lot of this will be dependent on where property markets go over the course of the next year, but I would expect that in 2017, it will probably be a similar size, both in terms of gross asset value and net proceeds as what we did this year. So that’s about $2 billion of net equity and given we’re roughly 50% levered, probably double that for the gross asset value.

[Mario Saric:]

Got it. Okay. And then from an operational standpoint, you’re clearly selling assets at very low cap rates and you’re redeploying into higher cap rate assets, which you argue have good risk profile. When I look at the year-over-year FFO per unit growth and if we strip out the merchant development gain, we can - I appreciate the commentary in terms of those being recurring in nature and pretty significant going forward. If we do strip them out, the year-over-year growth was modestly positive say 1% to 1.5%. And so I’m curious in terms of - through the capital recycling initiatives, the opportunistic assets you’re acquiring going at cap rates, do you tend to see those cap rates maybe come down a little bit in the initial phase and then start ramping up again from a cash flow perspective. I’m just curious in terms of how you drive that year-over-year FFO per unit growth through the capital recycling?

[Brian Kingston:]

Yes. So I guess, I’d say there is a couple of things that are driving that. First and foremost, when we think about the investments, taking capital out of these mature ones and putting it into two other higher returning ones, we do think of it as in terms of total return not necessarily FFO. So you’re right. In some cases, we are acquiring assets like International Financial Centre in Seoul, where there is some element of leasing to be done. And so the initial FFO yield that you may see from those investments just on an immediate basis, doesn’t always translate through but will over the course of the next 12 to 18 months as we lease it up. In other cases, we’re redeploying that capital into new development, which again similarly may take a period of time before it actually translates into FFO but we think is good long-term returns. But there is a substantial portion of it that we are investing into some of those businesses I mentioned earlier like self-storage, manufactured housing, et cetera, that are generating very high FFO yields. And so when you see the FFO growth in that opportunistic sector, a lot of it is coming from that. The other thing I’d say is when you’re looking at our FFO in totality, we did have a couple of headwinds as well that we were working against, including the impact of foreign exchange this quarter, as well as Bryan mentioned some tenants moving out of some of the office properties that was offsetting some of the growth that we’re seeing through new leases coming on at Brookfield Place, et cetera. So I think it’s overly simplistic to just look purely at FFO year-over-year. But I think, importantly we do see a good, stable cash flow on a same-store basis coming out of the office and retail portfolios, which is what we’d expect and substantial growth in that opportunistic bucket. So you’re seeing both of those things.

[Mario Saric:]

Got it. Okay. And then maybe just on the core office, like if we were to exclude the incremental contribution from Brookfield Place New York during the quarter, and I don’t know what that number would be. But if we were to exclude that number, how would the 5% same-property NOI number change?

[Bryan Davis:]

So the 5% same-property. So maybe answered a different way, we had got about $7 million in incremental NOI coming out of Brookfield Place New York this quarter which brings us close to the $120 million annual. I think we’ll get a little bit of an incremental pickup in the fourth quarter related to those leases. But if you look at our same-store growth in office Q3 versus Q2, it’s flat to potentially negative, largely due to expirees that I mentioned particularly in Sydney, in Houston and in Calgary. I’m not sure if that helped?

[Mario Saric:]

That’s perfect. Then maybe last question for me, just coming back to the U.K. The valuation that you received seems pretty impressive. From a fundamental perspective there has been some headlines recently with respect to Barclays, which is a top tenant of yours in the U.K., very long-term lease in terms of their expectations for office employment in the city going forward. Can you just maybe give us an update in terms of the discussions that you’re having to your tenant base in terms of what their thoughts are on the implications of Brexit, now that maybe a bit of time has passed and [indiscernible]?

[Ric Clark:]

Mario, hi, it’s Ric. So maybe I’ll take a stab at this. Early on pre-Brexit, our discussions with financial service tenants led us to believe that post-Brexit that there might be a few jobs that shift to the continent. But current discussions are basically saying to us that they haven’t sorted that out and they don’t really know where that will end up. What we are seeing within our portfolio in the city is activity is pretty strong. In fact, we are far along with a pretty meaningful-sized lease discussion for 100 Bishopsgate, not finished but activity has been pretty brisk for that property. Canary Wharf with 50% of the tenants’ financial services, maybe activity is a little bit slower than the city. But all-in-all we’re not really currently seeing any meaningful impact post-Brexit. So I think that’s the best update I can give you for now. Things are still looking good.

[Mario Saric:]

Understood. Okay. Thank you for the color.

[Operator:]

[Operator Instructions]. And we’ll go next to Mark Rothschild, Canaccord.

[Mark Rothschild:]

Thanks. Good morning. Maybe just following up on that Brexit discussion. I did hear that you said that you were selling a property in London at the IFRS value pre-Brexit or around there. How confident are you in the current IFRS values, in particular for the assets in Canary wharf that these values are reflective of where these properties would trade today?

[Brian Kingston:]

Well, I think as we said in our materials, it’s anecdotal. It’s one building. It’s 225,000 square feet but it was a fully marketed process. We had good interest from a number of potential investors in this property. So there was depth to the bid. It wasn’t just one outlier. But look, I think similar to Ric’s comments on leasing, it remains to be seen and I think until you see a bit more transactional evidence, we have been low to make any adjustments one direction or the other until you get a bit more. So I’d say transaction volume on - certainly on the leasing side is slower in London but also on the capital side. But the transactions - not just this one but the other transactions that we’ve been observing in the market seem to be at or even a little bit lower cap rates than what you would have seen prior, but activity is certainly slower. So I think it’s similar leasing. It’s sort of a - let's - we need a bit more time before we’ll have a real strong view one way or the other.

[Mark Rothschild:]

Okay. And immediately after the Brexit vote, you seem to be saying that you didn’t expect any leasing at all. You seemed very, very cautious on leasing. Now it sounds like at 100 Bishopsgate there might be something done. What type of tenant is that? What type of confidence do you have in that, and has there actually - were you maybe too cautious in your commentary then, or am I reading too much into what you just said now?

[Ric Clark:]

Well, activity is definitely strong. And I’d say the tenants that we are in discussions with range from - and this is in the city at 100 Bishopsgate - range from service firms to financial service firms. So maybe we were too cautious, it’s a little early to say, as Brian said. But we are pretty optimistic that we’ll land some more of these tenants. That building is about 40% pre-leased, and if we land some of these that are looking pretty good, we could move it up to 65%, possibly even before the end of the year but we’ll see.

[Mark Rothschild:]

Okay. And then just one other question on the unit buybacks. You did buyback some units this past quarter. However considering the size of your acquisitions and dispositions, it’s still relatively modest. The gap between the unit price and the IFRS NAV is exceptionally wide. Is there any reason why you wouldn’t be much more active in the coming months?

[Brian Kingston:]

No. I’d say one of the things obviously that limits the number of units we can buy is just trading liquidity in the shares. So I think we continue to be active buying back our units, but if you’re comparing it to the scale of some of the larger acquisitions, it’s just the market volume is not there to make that kind of acquisition in any event unless you did something much larger than just an ordinary course bid.

[Mark Rothschild:]

Have you considered doing anything larger than a normal course issuer bid [ph]?

[Brian Kingston:]

We consider all things regularly.

[Mark Rothschild:]

Okay. Thank you very much.

[Brian Kingston:]

Thanks.

[Operator:]

And we’ll take a follow-up question from Mario Saric with Scotiabank.

[Mario Saric:]

Hi. Actually two really quick questions. Bryan, just with respect to global capital flows and institutional appetites for various types of real estate been very much focused on opportunistic mandate for the past couple years. Can you talk about the type of demand that you’re seeing from sovereign wealth funds in large institutions across the various buckets? So core, core plus versus opportunistic today, and how that has changed in the past, call it six to nine months?

[Brian Kingston:]

I’d say that as a general comment, we see a lot of demand from those types of investors for real estate. Your question is more on the risk return spectrum and is there a shift in where their focus is at? I’d say that core real estate in the U.S. continues to be a pretty desirable place for a lot of these offshore international sovereign wealth funds, et cetera, to put capital to work. But increasingly we are seeing a desire from them maybe to get a little higher returns or potentially a little more protection against raises - increases in interest rates by shifting a bit more to what we describe as core-plus, which might be great core real estate with some leasing or some potential lease rollover in the nearer term. So if anything, we’re maybe seeing a bit of a slight shift out on the risk spectrum for those investors, really just trying to get a bit more cushion. But I would say on the opportunistic side, which is generally targeting these higher returns, there is still a great deal of interest there as well. We obviously closed our fund in April. We were targeting $7 billion of commitments. We ended up with $9 billion, and probably could have raised more than that had we not closed the fund. So there continues to be good appetite for - really across the spectrum for real estate. I’d say core maybe has softened a little bit over the last 12 months, if there was any change.

[Mario Saric:]

Okay. And then from your own capital deployment perspective on the acquisition side, your unit prices come off but the entire market has come off pretty significantly. Does this kind of corporate M&A today look more attractive than it did three months?

[Brian Kingston:]

Well, look, certainly with the REIT sector trading down since, say, July or August, any and all of those potential acquisition targets are more attractive than they used to be. I don’t know whether that necessarily translates into more activity, but there are many companies out there right now that are trading at discounts to their net asset value, and so you may see more M&A activity as a result of that.

[Mario Saric:]

Okay. I’m sorry, just last question maybe for Bryan Davis, just on your comment with respect to the Ala Moana gain of about $0.03 this quarter and the expectation that you will include them in your FFO in 2017, can you give us a bit of sense in terms of what that [indiscernible]?

[Bryan Davis:]

It will be that number, the $0.03, and it really just relates to timing and when you can recognize revenue under IFRS versus GGP’s ability to recognize revenue in this current period under U.S. GAAP.

[Mario Saric:]

Okay. So then in total for the annual, we’re looking at $0.12, roughly or…

[Bryan Davis:]

$0.03.

[Mario Saric:]

$0.03, okay.

[Bryan Davis:]

Yes, $0.03. Now to the extent that they continue to sell next year, that may increase, but we may be in a position where their Q1 get recognized in Q4 or maybe the early part of 2018, but we’ll keep you posted on that.

[Mario Saric:]

Understood. Okay. Thank you.

[Operator:]

And it appears that there are no other questions in the queue at this time. I’d like to turn the conference back to Brian Kingston for any additional or closing remarks.

[Brian Kingston:]

Thank you, operator. And thank you, everyone, for joining the call today and we look forward to speaking with you again next quarter.

[Operator:]

This does conclude today’s conference. We thank you for your participation. You may now disconnect.