Brookfield Property Partners L.P.
Q3 2014 Earnings Call Transcript

Published: 8 Nov 2014

[Operator:]

Welcome, ladies and gentlemen, to the Brookfield Property Partners’ Third Quarter Results Conference Call. As a reminder, this call is being recorded. It is now my pleasure to turn the call over to Matthew Cherry, Vice President, Investor Relations and Communications. Please go ahead, sir.

[Matthew Cherry:]

Thank you. Good morning. 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 in 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 news release issued this morning. With that, I will turn the call over to Chief Executive Officer, Ric Clark.

[Ric Clark:]

Thank you, Matt. Good morning to everyone on the call. With me are John Stinebaugh, our CFO; and Brian Kingston, Brookfield Property Partners’ President and Chief Investment Officer. We had a successful quarter financially and operationally and on many fronts with new investments and dispositions. We’ll get to some highlights on these activities in a minute, but before we do, I’ll start with a couple of remarks about the operating environment and trends that we’re seeing across the many geographies in which we operate. As you know, the bulk of our property investments are in North America, Australia and the United Kingdom, London specifically; 97% of our invested capital is in these markets with 68% in the U.S. The balance was invested in Brazil, China. Recently, we’ve added India and we have a modest investment in Mexico, which we are in the process of selling out of. Our markets generally are in varying stages of recovery, some like North America are moving forward with confidence and others like Europe are moving with uncertainty. The data points that we’re mining from our North American office, mall, warehouse, apartment and hotel businesses confirmed that the North American economy is strengthening. We’re seeing improving fundamentals basically in all sectors. The office sector has been the most recent to rebound and the recovery is gradually moving from the most dynamic markets like New York City to other large cities and to some extent secondary markets as well. Tech, media and energy have been fueling with momentum. Within North America, there are strong capital inflows and upward movements on valuations as you should have noticed from the IFRS valuation gains that we reported during the quarter. Like fundamentals, capital is also migrating out of the most popular major markets into other large cities and locations. Opportunistic investing is a little harder in North America but our platforms are finding plenty of deals and we’ll discuss a couple of these shortly. As risk adjusted returns on new development are substantially better than acquiring core quality assets, we’re beginning to see projects advance in some markets. Given the below average levels of construction for the past 15 years or so, there’s nothing to worry about at this point except possibly in Toronto where there’s a bit of a race going on between developers. In Europe, economic conditions are less robust, low growth, highest unemployment and high leverage not yet dealt with continued to be the theme. The UK, and particularly London, has been an isolated bright spot with improving fundamentals very similar to New York. Also similar to North America, there are strong capital inflows into Europe. This has caused valuations that we have struggled to reconcile in many instances, but having said that, we remain active in Europe and are anticipating increased deal flow in the near term. With strong market conditions, our London office portfolio and development pipeline has performed very well. Australia has been impacted by a slowdown in the demand for resources, which have curbed new capital investments in this sector. Coal and iron ore pricing anecdotally are at five-year lows. There are also concerns of a housing bubble as housing prices have rapidly increased even though the economy is running at a slower pace. Notwithstanding this, like North America and Europe, Australia has seen strong capital flows into the property sector. Increasing Superannuation Fund treasuries approaching almost $1 trillion and an interest from Asian investors has pushed asset pricing. In Australia, office space demand has been down particularly in resource centers like Perth and Brisbane and there has been a decent amount of new supply advancing in some markets, notably Sydney. Emerging markets with less consistent government policies and financial systems are more volatile creating windows of opportunity in markets that are long-term attracted to us because of demographic shifts that are taking place. Currently in many developing markets, capital is pivoted away leaving liquidity voids, so we’re spending a lot of time right now in China, India and Brazil. So high level, that’s sort of what we’re seeing around the globe. Let’s turn the call over to John to get our financial report.

[John Stinebaugh:]

Thanks, Ric. Beginning this quarter, my remarks will focus on company FFO, which is equal to FFO inclusive of the contribution from our GGP warrants assuming that their net settled. Additionally, company FFO adds back non-real estate depreciation and amortization, transaction costs as well as gains or losses related to non-investment property. Company FFO is a metric that we use to manage our business and it’s also more consistent with the disclosure of our parent, Brookfield Asset Management. For the quarter, we reported company FFO of 199 million or $0.28 per unit versus 132 million or $0.28 per unit in 2013. The significant increase was primarily due to the completion of our merger with Brookfield Office Properties in June of this year and a $1.4 billion investment in GGP in November of last year. On a per unit basis, company FFO was flat, despite the expiration of a 3.5 million square foot lease at Brookfield Place New York in October of last year. Net income for unitholders increased to 978 million versus 235 million in the prior year, due to over 900 million of fair value gains on our investments as compared to 170 million in valuation gains a year ago. Turning to our segments. Our office platform generated company FFO of 149 million in the third quarter compared with 91 million in 2013. Our additional 51% interest in BPO contributed approximately 80 million of the increase offset by the impact of the Merrill Lynch lease expiring at Brookfield Place New York. We’ve been talking about this lease expiry for many quarters but as you may have seen, we now have essentially released this space. At September 30 of last year, 225 Liberty and 250 Vesey had a combined occupancy of 37.5%. As of today, these towers are combined 92.7% leased. Our successful leasing effort coincided with a resurgence of interest in Lower Manhattan that has enabled us to sign leases in excess of our initial expectations. As mentioned before, we will more than recover the 150 million in NOI that we were earning on this space. Furthermore, concluding leases signed subsequent to quarter end, we now have a backlog of signed leases that are not yet generating income that will contribute more than 190 million of NOI by 2015. Nearly all of the fair value gains that we recognized from the quarter related to our office properties. Of the 869 million of gains for this portfolio, 578 million or 67% were recognized on our U.S. assets. In downtown New York, both leasing activity and rents have spiked. In addition, Brookfield Place New York valuation reflected increased occupancy. As a result of improving market conditions in Los Angeles coupled with operating synergies in our DTLA portfolio, we’ve seen appreciation in these assets. The remainder of the fair value gains were largely attributable to our properties in London where our recent sale of 125 Old Broad Street supports increased valuations. During the quarter, our retail platform generated company FFO of 117 million compared with 73 million in the prior year. The majority of this increase was a result of our increased ownership of GGP, which now stands at 33% on a fully diluted basis compared to 24% a year ago. The balance of the increase is attributable to our retail platform’s same store NOI growth of 4.7%, driven by suite-to-suite spreads on new leases of nearly 16%. Our industrial platforms generated company FFO of 9 million for the quarter, which compares to 6 million in the prior year. The increase was attributable to the acquisition of IDI in the fourth quarter of 2013 and a development gain in the current quarter, partially offset by the sale of an interest in a portfolio of industrial assets in North America earlier this year. Our multifamily and hotel segment earned company FFO of 15 million for the quarter compared to 9 million in the prior year. The increase was driven by stronger performance from our hotel portfolio including a 3.5% increase of revenue per available room at the Atlantis. Turning to our proportionate balance sheet and liquidity, our investment properties were valued at 47 billion at the end of the quarter, an increase of 17 billion since the end of 2013. This increase is attributable to the BPO merger, the previously mentioned valuation gains, as well as capital spend on our operating properties and development projects. We finished the quarter with a proportionate debt balance of 26 billion and partnership capital of nearly 19 billion, both of which increased namely due to the merger with BPO. Our proportionate debt capitalization at quarter end was 53%. On a per unit basis, our partnership capital increased from $25.23 at the end of last year to $26.33, as a result of income earned during the first nine months of 2014 offset normally by the BPO transaction. Turning to liquidity. We completed our approximately 700 million of debt refinancings on a proportionate basis during the quarter at an average interest rate of 3.42% replacing 628 million of existing debt that had an average interest rate of 5.06% and repatriating 72 million of capital in the process. Subsequent to quarter end, our wholly owned office subsidiary raised [C$300 million] (ph) in a new preferred share at a price of $25 per share yielding 4.7% per annum for the initial five-year period. These new series of preferreds replaces a legacy series, which was redeemed during the quarter. Through the issuance, we will realize a 200 basis point reduction in our coupon, which in itself adds 6 million to the bottom line annually. We closed the quarter with 878 million of corporate liquidity and 3 billion plus of total liquidity. Now, I’ll turn the call back over to Ric.

[Ric Clark:]

Thank you, John. So with the BPO transaction and the full integration of our office business now behind us, we believe that we’ve made very meaningful progress in solidifying Brookfield Property Partners as the leading globally diversified real estate business. We now have significant scalable platforms operating around the world across the office, retail, industrial, multifamily and hotel sectors. Platforms that give us the ability to identify, originate, execute and manage investments generating the highest risk adjusted returns wherever they might be found. Our platforms also give us the ability to drive performance surfacing the significant organic FFO growth that is embedded within our assets. I wanted to just quickly thank those that were able to attend our Investor Day in September and for the benefit of those who were unable to attend, during our Investor Day presentation, we outlined several growth drivers embedded within our portfolio. These are outlined in some detail in the Investor Day presentation and also within our corporate profile, both of which are accessible on our Web site. We’re pretty excited about the value that we feel that we can capture by marking to market rents on expiring leases, from increasing occupancy to historic levels and from our robust development and redevelopment programs. Due to these, we were confident in raising our annual distribution growth target from its previous level of 3% to 5% to the new projection of 5% to 8%. Although we’ve not raised our distribution this quarter, as we execute on our initiatives to unlock this embedded growth, our plan is to raise our distribution levels accordingly. We’ve also been asked by some investors recently to provide clarity on our investment strategy going forward. Our diversified business model was devised to give us the ability to leverage our global operating platforms to recycle capital out of investments projected to deliver a low yield and to investments that offer higher risk adjusted return. On average, we’re targeting annual returns of 12% to 15%. I think we shared that with you before. This is comprised of a combination of core plus, value add and opportunistic investments and to a lesser extent some core investments. Core plus and value add investments are pretty straightforward and usually generate strong current yields combined with capital appreciation and producing levered returns in the 10% to 15% range. Our opportunistic investments typically have a five to seven-year horizon and involve a greater degree of work and perceived risk. We make these investments with partners through our Brookfield asset managed sponsored fund and target minimum returns of 20% derived largely from capital appreciation. Currently, about 90% of our balance sheet is comprised of well-leased and well-located core quality assets, mostly high quality premier CBD office buildings as well as Class A regional malls. Long term, we anticipate at least 80% of our assets will be of this type with the balance made up of more opportunistic investments. This is intended to ensure stable, consistent income while providing a good upside for Brookfield Property Partners. As I mentioned, in the current environment, there’s a substantial amount of institutional capital seeking to invest in core quality properties in the most dynamic markets in developed countries. As a result, valuations are strong and we’re selling into this. A couple of recent dispositions we have made include; in late September, closed on the sale of 125 Old Broad Street in London for £320 million or roughly $512 million. This fully occupied building was sold at an implied cap rate of 5%. We made meaningful gains on this investment in a short period of time and have been really pleased with our overall London investments to-date having expanded our presence in this market in two separate transactions in 2012 and 2013 that what we think was an attractive entry point in this market in this cycle. Subsequent to quarter end, BPY announced the sale of Brookfield Place Calgary’s East Tower to our subsidiary, Brookfield Canada Office Properties or BOX. This property is currently under construction and is scheduled to be complete in late 2017. BPY sold the project to BOX on a completed and stabilized basis at a value of just over $1 billion Canadian. BOX paid BPY 235 million at closing, will fund the remaining equity investment in the project or make a final payment of roughly 64 million upon stabilization. BOX, as most of you probably know, holds all of our Brookfield’s income-producing office properties in Canada. This project is substantially leased to Cenovus and is an attractive fit with BOX’s portfolio of high quality Canadian assets. Subsequent to quarter end, we also signed a binding agreement to sell the Mexican industrial properties that we acquired as part of the Verde acquisition in late 2012. The sales price reflects a significant premium to our underwriting value. We expect to close this transaction before the end of the year and we’ll disclose further details at that time. In addition to these dispositions, we have been exploring the sale of interest in a number of stabilized office properties in the U.S. and the UK. In light of market demand, we anticipate strong interest from institutional investors for these assets and are targeting raising over $1 billion of equity from this initiative. Since the end of the second quarter, we were also active on the acquisitions front. With partners, we closed on a number of transactions and I’ll go through a few of them. Subsequent to quarter end, we closed on a $4.3 billion acquisition with roughly 357 million of BPY’s equity of a 15.6 million square foot portfolio of triple net leased automotive dealerships across the U.S. While a new type of property investment for BPY, the portfolio features similar attributes to our high quality real estate and that it is well occupied, basically 100% with long-weighted average lease expiry of over nine years. These dealerships have embedded stability of cash flow from their auto parts and service businesses that make up the bulk of their income and they’re far less volatile than relying on new car sales. Our business plan contemplates a number of opportunities to add value primarily through expanding our footprint as the industry consolidates, as well as land reclassifications through higher value uses in some instances. We also recently expanded our multifamily business by acquiring 4,000 units multifamily portfolio in Manhattan for roughly $1 billion. A 110 million of equity at BPY’s share was used for this investment. Similar to multifamily properties in the southern U.S., our strategy is to commence an accretive, highly replicable renovation program on approximately 60% of the apartment units over the next eight years. In addition, each of these apartments buildings stand to benefit from significant upside catalysts within their neighborhoods, notably the Columbia University expansion in Upper Manhattan and the Cornell Technology Campus currently being built on Roosevelt Island. In August, together with investors, we also acquired a newly constructed 276,000 square foot, 100% leased office building in the Faria Lima section of São Paulo, Brazil for $312 million or 100 million of equity at BPY’s share. The building is located in the heart of the most prestigious business region in São Paulo. Itau Bank, Brazil’s largest private bank, has leased the entire building under a 10-year fully committed lease. So during and subsequent to the quarter, we also acquired interests in four U.S. hotels, including the Diplomat Hotel in South Florida. The Diplomat is one of the largest convention center hotels in the region with 1,000 rooms and over [200,000] (ph) square feet of conference space, located directly on the beach. As a result of our strong relationships, we were able to buy this hotel at 60% of its original construction cost and have invested $76 million of equity at BPY’s share. Also, subsequent to quarter-end, we signed an agreement to acquire the Revel Resort & Casino in Atlantic City, New Jersey through an auction process following the shuttering of the property earlier this year. We submitted the winning bid at $110 million on a property that was completed just two years ago at a cost of around $2.5 billion. This was a unique opportunity to acquire a brand new first-class property situated in a destination city at a substantial discount to replacement cost. We see synergies with other resort/casino investments that we’ve made in the past, notably Atlantis in the Bahamas and the Hard Rock Hotel and Casino in Las Vegas, and we plan to leverage these operations to maximize the value of our investment in Revel. Since the Revel transaction is an operational turnaround of an entity going through a complicated bankruptcy proceeding, we will partner with Brookfield’s private equity group, which has substantial expertise in executing this type of investment. From a financial standpoint, this transaction will be a very small investment on our balance sheet. However, it’s a good example of our ability to move quickly and decisively capitalizing on the strength of the greater Brookfield organization to acquire high-quality real estate at attractive terms. The last sort of thing before we get to questions, I’d highlight a few notable transactions from our operational highlights. Within our office division, during the quarter, we signed 3.2 million square feet of leases in our core office portfolio, increasing occupancy 90 basis points to 91.7%. I should point out that Q3 leasing achieved average rents that were 45% above rent on leases that expired during the quarter. Year-to-date, we have leased 6.9 million square feet increasing occupancy since the beginning of the year by 260 basis points. With leases in serious negotiation, which we hope to close by the end of the year, we are targeting leasing about 80.6 million square feet during 2014 and hope to end the year with occupancy at 93%. As I mentioned, New York City and London are currently two strong real estate markets. Capitalizing on this, we’ve recently completed several notable transactions. In late September, we signed three leases with Hudson’s Bay Company, the parent of Saks Fifth Avenue in Lower Manhattan comprising over 5,000 square feet of space. This includes an office lease of 400,000 square feet split between 225 Liberty Street and 250 Vesey Street at Brookfield Place where Hudson’s Bay and Saks will relocate the U.S. headquarters. With these leases in place, the releasing of Brookfield Place New York is nearly complete. Approximately 400,000 square feet of office space is still available. So we’ve gotten a lot done on the leasing front at Brookfield Place this year. In addition, we continued to make progress on the Manhattan West project. Our $284 million redevelopment of Five Manhattan West formally known as 450 West 33rd Street kicked off during the quarter. With its large open floor plan, Five Manhattan West continues to draw considerable interest from tech and media sector tenants. In this property, we recently signed a 173,000 square foot lease with a digital marketing firm, R/GA, at rental rates substantially exceeding our 2011 acquisition underwriting assumptions. We also are in advanced discussions with tenants for our planned 2 million square foot office tower to be built at the northeast corner of Manhattan West, and hopefully we’ll have more to talk about that on a future conference call. In London, during the quarter, we completed a 432,000 square foot lease with Amazon, which formally launches our mixed-use Principal Place office project. For the first time in many years, I’d add that we are seeing attractive risk adjusted returns on development opportunities. With our inventory of sites in gateway markets, we’ve been a first mover, executing anchor leases and launching several office projects. With Principal Place, we now have six active office developments underway across three continents totaling 4.6 million square feet. These projects are over 60% preleased on average and when complete and stabilized will add 266 million of NOI to the partnership. Now moving to our retail investments, within our retail platform, rents on new leases were 60% higher than expiring leases and occupancy across the portfolio remains healthy at 95.5%. As a reminder, the vast majority of our retail holdings are held through our ownership interest in General Growth Properties and to a lesser extent, Rouse Properties. And I trust that many of you follow the results for the quarter that were recently reported. Associated with the office lease I mentioned earlier, we agreed to open a new 85,000 square foot Saks Fifth Avenue department store at Brookfield Place New York. Saks Fifth Avenue will be the first luxury department store in Lower Manhattan and, as the anchor to our new retail center, has cemented Brookfield Place as the luxury shopping destination in the area. We were also able to secure a 55,000 square foot Saks office outlet store at our One Liberty Plaza property downtown located on the eastside of the World Trade Center immediately adjacent to both Century 21 and the retail center at the World Trade Center. General Growth Properties continued to deploy significant amount of free cash flow into its redevelopment program and new urban street retail investments. The $650 million redevelopment of the Ala Moana mall in Honolulu is progressing as planned and 80% preleased. GGP also closed on the acquisition of interests in 522 Fifth Avenue in New York City, as well as the Miami Design District. Now moving on to our industrial operations, we leased 3.2 million square feet during the quarter, increasing occupancy to 91% at quarter-end. Occupancy stands at 96.2% in our European operations and 89.9% in our North American operations. Our portfolio in the U.S. includes a number of warehouses that were completed over the past two years that are still completing the lease-up phase. At the end of the third quarter, I should point out, we have 10 million square feet of active industrial developments in the U.S. and Europe. For these projects, we plan to invest $160 million and are expecting average yields on cost in excess of 8%. In our multifamily operations, we finished the quarter with average rent increases of 10% compared to the prior year due to strong market conditions and rent increases on newly renovated units. Occupancy was 94.1% at the end of the quarter, which was consistent with the prior year. Additionally, we continued to progress our refurbishment program, completing the renovation of 1,100 units during the quarter. With our platform at Manhattan West scheduled for completion later this month, we’re planning on commencing construction on this project’s apartment tower by year-end. The rental market in Manhattan is extremely robust, and plan on investing about 300 million of equity in this apartment project and expect to stabilize NOI of approximately $40 million once completed. We London, we recently began marketing for sale condo units in our residential tower at Principal Place. Initial demand for these units has been strong, as anticipated. In fact, we have commitments on roughly half the units at this point. I think the Amazon lease for the office component of this center has really cemented this long-term success. I guess just sort of repeating what John mentioned earlier, we had strong results from our hotel portfolio notably Atlantis, which had a strong third quarter compared to the same period last year with RevPAR up 3.5%. So we have a big business and I could go on for a while, but I want to get out of weeds and on to your questions, what’s on your mind if anything. I’d wrap up by saying looking forward, given the environment, the position of our assets within our market and the embedded growth levers that I mentioned, we believe that we’re well positioned to deliver above average growth. 2016, for example, we anticipate generating over $190 million of incremental NOI, as John mentioned, for leases that we have signed but are not yet producing revenue. With nearly 70% of our invested capital in the U.S. we stand to benefit further, I believe, from the U.S. economic recovery in our assets. As well, in particular, our greatest exposure is to the Manhattan real estate market in when rents have begun to meaningfully accelerate over the past six months. Our $5 million of redevelopment and development projects, if executed per plan, should contribute another $411 million of incremental NOI by 2018. Further increases should come from our investing in capital recycling initiatives. So with those as our remarks, operator, I now turn the call over to questions to investors and analysts.

[Operator:]

Thank you. (Operator Instructions). We’ll go first to Mark Rothschild of Canaccord Genuity.

[Mark Rothschild:]

Hi. Good morning. One of the things that was disclosed at the Investor Day was that the core real estate opportunity fund is close to being fully invested. I assume you guys are marketing a new fund, and I’m not sure how much you can comment on that, but do give us an update on where you are on that? And until you have a new fund, does that make it difficult to complete additional large acquisitions without raising new equity? And I realize you have some asset sales underway.

[Ric Clark:]

Yes. So just on the funds front, the rules on fundraising are – they’re pretty complicated and so just to make sure we don’t step out of bounds, I can’t really say anything about any possible new funds. But I will say BPY does participate in a Brookfield-sponsored opportunity fund. That fund had equity of $4.4 billion to which BPY’s commitment was roughly 1.4 billion and that fund is largely invested.

[John Stinebaugh:]

I’ll maybe add one thing, and Mark it’s John. The way these things typically work is there’s a number of different closes of the fund. So we would anticipate that we will have access to capital to be able to continue making investments just based on how fund raising typically works.

[Mark Rothschild:]

Okay. And in regard to the new level of distribution growth that you’ve targeted, how does this relate to a payout ratio? Are you still targeting the same payout ratio? And I’m asking – thinking about that some of your investments, in particular, General Growth only pays out dividends and you don’t get the full cash flow. So it might be difficult to maintain a high payout ratio going forward.

[John Stinebaugh:]

So I’ll take that one and Ric and Brian can jump in. But we are targeting the same payout ratio against company FFO. And in the near term, the payout ratio will probably be a little bit higher than the target, but as Ric talked about, we do have a significant amount of NOI that is from leases that have been signed that is not yet begun to contribute. It will be coming on over the next couple of years that we’ll not only support the payout ratio but support growth along with the mark-to-market upside we’ve got and the development and redevelopment projects that are going to be coming on line over the next three to five years. With respect to General Growth, they currently have got a pipeline of very attractive redevelopment projects and some development projects. From our standpoint, we look at – we’re basically investing in that business. We think that it makes sense in light of the returns that we expect to deploy capital into those projects rather than paying it out. But over time to the extent that their pipeline were to not have the level that it currently has, then certainly we as participants on the board would look to figure out the best way to return capital to shareholders. Alternatively, if they continue to originate very strong redevelopment projects then we look at that as financing investments that are going to further the growth of the business.

[Mark Rothschild:]

So going out a couple years once you have – all the leasing have taken effect, especially in Lower Manhattan, where would you like the payout ratio to be, whether it’s just on an FFO or a AFFO basis?

[John Stinebaugh:]

On an FFO basis, Mark, we feel comfortable with the 80% target that we put out there, but I think it will be a little bit higher than that in the near term. But as we get the growth in NOI that we expect from the initiatives that Ric talked about, we think the 80% level is a good level.

[Mark Rothschild:]

Okay. Thanks a lot.

[Operator:]

Thank you. (Operator Instructions). We’ll go next to Mario Saric of Scotia Bank.

[Mario Saric:]

Hi. Good morning. Just maybe on your capital recycling initiatives and I guess your general motivation to sell assets and how that’s changed over the past three months given changes in your unit price, as well as changes in the private market pricing, which seems like cap rates are continuing to come down. So can you maybe touch on how motivated you are to sell assets, to provide the equity to buy assets as opposed to maybe de-levering the balance sheet a little bit and issuing equity, for example, given the share price strength based on the opportunity that you’re seeing?

[Brian Kingston:]

Hi, Mario, it’s Brian. I’m not sure that what’s changed over the last three months has really changed our motivation or the strategy overall. The way we’ve been looking at it is for those assets that are mature and would attract very low cap rates, they maybe a little bit lower today but for those types of assets, the strategy really is to release capital out of those and reinvest in maybe some of the higher returning ones that Ric touched on a little bit earlier, and that will continue to the case. Obviously, strengthening property markets where cap rates are coming down is helpful in all of that and we are seeing lots of demand for the type of assets that we had already targeted for sale. But it hasn’t really changed, I’d say, the volume, the pace or even the individual assets that we’re considering. I think it makes the execution a little bit easier than it was.

[Mario Saric:]

Okay. I guess I’m just trying to get a sense of how relevant a fluctuating unit price may be in terms of your desire to sell assets.

[Brian Kingston:]

I think if you look at where the share price is trading today, it’s still a substantial discount to our IFRS value and so we really just look at what the lowest cost of capital is. And at the moment selling assets at kind of cap rates that we think we can execute these transactions on is much more accretive than issuing equity at these levels.

[Ric Clark:]

That’s another thing. It’s up a bit. I think it’s still – the market still is the same.

[Mario Saric:]

That’s right. And I think Ric mentioned that you’re looking at selling (inaudible) in the U.S. and the UK. I didn’t hear Australia. Is Australia something that is on the radar for you as well?

[John Stinebaugh:]

It is and it has been, but I’d say we are further along in discussions at this point in the two markets that I mentioned.

[Mario Saric:]

Okay. And then just in terms of that discount NAV, Brian, that you referenced below 15% or so today. I guess in the past, you’ve highlighted liquidity, lack of analyst converge and a couple of other factors that may be driving that discount. Today, as we stand, internally what would you feel are the two biggest kind of drivers driving that pretty substantial discount NAV?

[John Stinebaugh:]

Mario, it’s John. I’ll take a crack at that. I do think that we need to continue getting analyst coverage, so we’re working to get that up. We’re pleased that you and Mark currently cover us, but we’d like to get some U.S. coverage in addition and broaden out the coverage. So that’s definitely one thing. I think also we are doing a lot of marketing. In Canada, I think the story is very well understood and we have got strong support. I’m encouraged. Recently, it looks like we’re starting to pick up a number of investors in the U.S. market that buy into our value proposition and have been supporting the stock and the story recently, but I do think we have more work to do in the U.S. market to broaden the awareness and the understanding of our value proposition.

[Mario Saric:]

All right, okay. And then just maybe the last question, just on Brookfield Place New York. The 190 million incremental through 2016, presumably that includes incremental retail NOI. John, I’m just wondering if you can give us a sense as to the timing of that 190 through 2016, like how much we may see in the first half of next year versus the latter half of next year?

[John Stinebaugh:]

So just to clarify, the 190 is all leases that have been signed, but are not yet contributing NOI. The lion share that is Brookfield Place New York but it also would include the lease that we recently signed at Five Manhattan West as well as the lease we signed at 75 State Street in Boston. But the rollout of that I think that you will start to see NOI into '15 and by the end of '15, we will be able to get a significant amount of that. And then into '16 we should hit the run rate level. But let’s say mid-'16 we should be benefiting for pretty much all that was mentioned.

[Mario Saric:]

Okay, great. Thank you.

[Operator:]

Thank you. At this time, I’d like to turn the conference back over to Mr. Ric Clark for any additional or closing remarks.

[Ric Clark:]

Thanks, everyone, for dialing in today. We appreciate your support. Obviously, if there’s any questions that come up that were unanswered on today’s call and anything you want to explore, please feel free to give any of us a call. And we continue our investor outreach and both John and I and Matt will be out on the road and hope to visit as many of you during the next coming quarter. So thanks again for your support.

[Operator:]

That does conclude today's conference. Thank you for your participation.