Brookfield Property Partners L.P.
Q4 2014 Earnings Call Transcript

Published: 4 Feb 2015

[Operator:]

Good day. Welcome, ladies and gentlemen to the Brookfield Property Partners Fourth Quarter and Full Year Results Conference Call. As a reminder, today's 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. Who is joined by our CFO John Stinebaugh and our President and Chief Investment Officer, Brian Kingston, Ric?

[Ric Clark:]

Thank you, Matt. Good morning everyone. 2014 was the first full year of operations for Brookfield Property Partners and I am happy to say that it is a very active and productive one for us. Our overall financial performance was solid and unitholders benefited meaningfully from fair value gains. John is going to walk you through our financial highlights in just a few a minutes. In addition to solid financial performance we have accomplished a number of the important objectives that we had established at the beginning of the year and I think laying a very solid foundation for future growth for Brookfield Property Partners. When Brookfield Property Partners was fund-out of Brookfield Asset Management in April of 2013 we were overweight assets held through public securities or in ineffective ownerships structures. One of the key priorities for us for 2014 was to complete a transformative traction to address this and to essentially re-launch BPY in the public market. Accordingly we completed a transaction last June this is not new news to folks, it's a privatized Brookfield Office Property which included the issuance of $3.3 billion of BPY equities. We're pleased with the market's reaction to this important first step from the closing of the tender offered for office properties through the end of the year BPY units delivered a total return of 23% outperforming the S&P, the RMZ and the majority of our peers. But we haven't stopped at BPO, as you know for more than 10 years we've held a 22% capital investment in Canary Wharf as part of an inefficient corporate structure which gave us very little visibility into operations, asset management and growth potential. As a follow on to the successful Brookfield Office Property's transaction last week we learned that our joint venture bid with QIA to acquire Canary Wharf’s controlling entity Songbird has an overwhelming support from its shareholders paving way for us to move ahead with the transaction to acquire the balance of Canary Wharf not previously owned by Brookfield or by QIA. Given the positive results of the tender offer our joint venture can now move forward with the acquisition of this great estate. With 6.4 million square feet of the highest quality office and retail assets and 11 million square feet of future residential and office development density, and enhanced transportation connectivity via crossrail coming online shortly we believe that Canary Wharf is one of the world’s most unique and special commercial projects. This acquisition is expected to close later this quarter, we'll obviously have more details for you on Canary Wharf and its prospects after the transaction closes but for now I'll just say it's a very exciting long-term investment for us and another major step forward in providing greater insight into the value and growth potential of Brookfield Property Partners. Now another major priority for 2014 for us is the topic that would not be new to these conference calls, which is the releasing of the void at Brookfield Place New York following the exploration of a large lease in September of 2013. The exodus of Merrill Lynch was the result of inter-combinations with Bank of America brought the complex occupancy down to 59%. Thanks to the hard work of our New York team in executing the office leasing and retail redevelopment as planned coupled with a sharp turnaround in the office leasing market in New York we executed 3 million square feet of leases in Lower Manhattan during 2014, as a result of all this I am pleased to report that Brookfield Place New York closed the year at 95% leased, with our new retail space essentially all pre-committed. An amazing accomplishment and something we're very proud of. For those of you who haven't had a chance to come Downtown and look at the progress at Brookfield Place New York and I’d invite you to come down the majority of the renovation is nearing completion, portings and walls blocking construction are coming down almost every week and the grand opening of our new retail shops opening in late March. So when you get a chance please come down to see it it's really a remarkable transformation. Now going into 2013 we owned a number of construction-ready sites in some of the world's most dynamic markets in light of current valuations for quote real estate a third priority of ours last year was to launch several of these projects effectively building new Class A properties rather than acquiring existing older stock at significant premiums through replacement cost. During 2014 we capitalized on the robust leasing market in London, signing about three-quarters of a 1 million square feet of anchored leases to help kick off two of our projects in that market. In total we have active office, logistics, and residential development projects amounting to about 19 million square feet totaling approximately $4 billion at cost. We have another 3 million square feet of office developments positioned for commencement which we hope to be in a position to launch in 2015 of course under the right circumstances. As a result of these accomplishments Brookfield Property Partners is well positioned for significant growth as we see cash flow from many of these initiatives that I talked about begin to contribute to our income statement in 2016. Backed by projected annual growth in our company FFO per unit of 8% to 11% for the next five years last September you might have noticed that we announced an increase in our annual distribution growth rate targets to between 5% and 8%. Accordingly Brookfield Property Partners’ Board of Directors has approved a 6% increase in our dividend starting with an exploit of repayments. To with those remarks as a high level recap of our year I will turn the call over to John to go through our quarterly and annual financial results. John?

[John Stinebaugh:]

Thanks Ric. For the quarter, we reported company FFO of 190 million or $0.27 per unit versus 146 million or $0.28 per unit in the fourth quarter of 2013. The significant increase in Company FFO was primarily driven by the acquisition of additional interest in Brookfield Office Properties and General Growth Properties, contribution from new investments and same-store property growth in our retail and office operations. On a per unit basis, Company FFO was essentially flat due to the issuance of equity to fund these investments and development projects that do not fully contribute to company FFO but as Ric mentioned will drive growth over the next five years. Net income attributable to unitholders was 1.5 billion versus 190 million in the prior year this substantial increase was driven by fair value gains in our office and retail operations due to improved occupancy, as well as strengthening market conditions and valuations in property markets globally. Turning to our segments, our office platform generated Company FFO of 150 million in the fourth quarter compared with 78 million in the prior year quarter. The increase was primarily was due to the merger. Compared to the prior year quarter occupancy in our core office portfolio rose to 92.1% from 89.3% and in-place rent grew to 3,070 per square feet to 2,994 due to significant leasing activity in lower Manhattan and 45% uplifts in rents upon rollover leases during the quarter. In our office platform we recognized over a $1 billion of fair value gains in the fourth quarter reflecting greater leasing activity and strengthening market conditions. Of the total nearly 95% was attributable to our U.S. portfolio driven by our New York assets. During the quarter our retail platform generated company FFO of 137 million compared with 114 million in the prior year quarter. The majority of the increase was a result of our acquisition of additional interest in GGP in November of last year. The balance is attributable to same-property NOI growth of 2.3% driven by suite-to-suite spreads of nearly 18.3% for execute leases commencing in 2014. In our retail platform we recognized over 680 million of fair value gains during the quarter due to a reduction in the market discount rate on certain properties, improved leasing conditions and a significant increase in the share price of GGP which translated into appreciation of our warrants. Our industrial multifamily hotel and other platforms posted company FFO of 30 million compared to 3 million in the comparable period in 2013. The increase in company FFO was largely due to new investments and a stronger performance at the Atlantis Hotel in the Bahamas. For the quarter our industrial platform increased its occupancy to 91.7% from 86.8% in the prior year while our multifamily platform generated same-property NOI growth in excess of 10% as the result of rent increases following the completion of renovations of over 1,400 units during the year. The Atlantis produced year-over-year increase in revenue per average room of 3% and EBITDA of 6% due to higher average daily rates and execution of cost savings initiatives. Turning to our proportionate balance sheet and liquidity, our investment properties plus developments were valued at 48.5 billion at December 31, an increase of 18 billion since the end of 2013. The increase was largely attributable to the BPO merger, as well as acquisition activity and the valuation gains. We finished the quarter with a proportionate debt balance of 27 billion which increased once again mainly due to the BPO merger. In addition our corporate debt balance reflects draws on our credit facilities to finance the new investments that we made during the quarter. We plan on paying down a significant amount of our corporate credit facilities over the next two quarters with proceeds from the sale of stabilized assets. At quarter end our partnership capital was over 20 billion resulting in a proportionate debt to capitalization that was 52%. On a per unit basis our partnership capital increased by 12.4% from the end of last year to 28.35 primarily as result of 4 billion of valuation gains that we recognized during the year. Turning to liquidity, we completed 102 million of debt refinancings during the quarter on a proportionate basis at an average interest rate of 3.34% so repatriating 9 million of capital. In December we issued 1.8 billion of preferred equity to Qatar Investment Authority which has an average coupon of 6.5% and is exchangeable into BPY units at a price of 25.70. We are very pleased with this significant endorsement for our global diversified strategy by QIA one of the world’s larger investment funds. And proceeds from the issuance will largely be used to fund our investment in the 50/50 joint venture with QIA to acquire the balance of Canary Wharf. As a result of the preferred equity issuance, QIA now owns an approximate 9% interest BPY on an as exchange basis and has the right to appoint one member to our Board of Directors. And now I’ll turn the call back over to Ric.

[Ric Clark:]

Thank you, John. I will take the next few minutes just to point out a few operational highlights within our office and retail divisions not to take anything away from our hospitality, multifamily or industrial divisions that office and retail make up 90% of our business and in the interest of time I’ll stick to comments on those areas. So within our existing office portfolio, we had a tremendous year of leasing over 10 million square feet and increasing occupancy by 280 basis to 92.1% in our core portfolio and in the process of capturing rent increases at average 32%, strong fundamentals and performance in New York City and London sold over into many of our other markets leading to a solid operational year from our office division. As mentioned earlier, we signed anchored leases with Amazon and Schroders to kick off two of our London development projects and we hope to launch the first office tower at Manhattan West sometime in the first half of 2015. We did complete the platform at Manhattan West in New York late last year effectively creating 2.5 acres of land in positioning this site for future development. On the heels of this accomplishment in January we broke ground on a 62 storey, 844 units residential tower and we’ve also commenced the redevelopment of 5 Manhattan West the building formerly known as 450 West 33rd Street where we have signed over 300,000 square feet of leases recently, so a lot of positive progress at Manhattan West during 2014 as well as in London and we expect to continue to move forward at Manhattan West, we’re working towards announcing the commencement of construction of one Manhattan West. The next phase of this project a 2 million square foot office tower and hope we will get to that very soon. As in our office operations our investments in shopping malls and retail centers also produced strong results for the year, as you know the bulk of our retail holdings are through our investment in General Growth Properties. I appreciate that many of you on the call follow General Growth Properties so I won’t reiterate what they said on their call last week other than to say that demand for stores within GGP's malls remain strong their same-store leasings ending the year at a healthy 97.2%. GGP continues to execute on its redevelopment program and the multilevel expansion of Ala Moana Center in Honolulu should open later this year. General Growth Properties has also made some compelling investments in street retail over the last 16 months which they have announced and most recently announcing an acquisition with a partner of the Crown Building at 57th and 5th avenues in Manhattan, this is an iconic and irreplaceable piece of street retail perhaps the best retail corner in the world. And as General Growth Properties retail assets are some of the best in the U.S. and frankly some of the best in the world. So during 2014 on the investment front, we sold interest in $2.2 billion of assets raising net proceeds of $1.5 billion. We utilized these proceeds to pay our BPO acquisition facility down to 1.1 billion and to fund a portion of the 3.6 billion in new investments that we made for the year. During the fourth quarter we remained active on the acquisition front closing on several transactions including interest in India office parks portfolio, a net lease portfolio in the U.S. called the Capital Automotive and a New York City multifamily portfolio with 4,000 apartments units. There is a lot of additional things we’ve accomplished for the year and a lot of detail within our unitholder letter and supplemental posted on our Web site, so I’d encourage you to have a look at those things for additional detail and maybe I’ll just spend the next minute or so on the call going through our view of the macroeconomic environment and highlighting some of our priorities for the rest of the year. On the macroeconomic front I’d say our outlook for 2015 is a bit of a mixed bag which we think is actually good for us. The recovering in the United States, the United Kingdom is maintaining its momentum while Europe continues to wrestle with stagnating growth and concerns of deflation. Complicating the European picture, the recent Greek election is a warning of the potential political backlash in Southern Europe against austerity policies promoted by the North. In developing markets such as Brazil and China, economic growth continues to decelerate and the foreign still appears to be in retreat in these markets. Conversely in India, India is showing positive signs led by the reforms of the Modi government which has led to increased interest by foreign investors. Although the recent sharp decline in oil prices has created uncertainty in financial markets it has created a sort of tax break in many geographies which should benefit profitability, business expansion and general economic growth through increased consumer spending. In terms of the impact of these macro-economic factors on our business low interest rates should continue to support the valuations of our real-estate and allow us to execute attractive long-term financings of our assets. The strong U.S. dollar will provide some headwinds as our cash flow from Australia, Canada and UK is divided. However over the past year or so we've put in place a significant number of hedges to help protect our equity investment in these markets. The declines in oil prices will undoubtedly impact our office properties in energy-dependent markets such as Houston and Calgary as oil and gas companies will likely pull back on new capital investments, on a relative basis though we have modest exposure to these markets and believe that the positive benefits of lower oil prices on many business could well lead to improved performance in our other office markets but also within our industrial properties. The extra disposable income in the consumers' pockets should also help our retail platform, but the positives should overwhelm the negatives for us to the extent that developments in Europe and lower oil prices create stress in spots or sectors around the world we will of course be on the lookout for value investments that can be created by these dynamics. So our priorities for 2015 not a lot new here versus last year our active development portfolio I would say currently sits at a healthy 57% level of pre-leasing commitments with 20 months on average to go until delivery of these projects, we’re in great shape, and of course meaningfully increasing the lease commitments for these projects is a principle priority for us in 2015 as will be securing anchor tenants to launch our next office development projects namely Manhattan West in New York City and 100 Bishopsgate in London. With the Brookfield Office Properties and pending Canary Wharf deals we have made very solid progress rationalizing the structure of our holdings and reducing our investments through public entities. However we continue to own a few investments for which we feel we did not get full credit rationalizing our investments to provide greater transparency of their value it will continue to be a priority in 2015. Lowering our leverage and increasing our corporate liquidity by significantly paying down the Brookfield Office Properties’ acquisition and corporate credit facilities is something that we will be focusing on in 2015 as well. With the strength of the U.S. market we expect to continue to monetize some of our U.S. holdings in 2015, redeploying capital raise by these efforts and do more accretive investments in the current environment we believe that developing markets particularly Brazil and also parts of Europe may yield investment opportunities with attractive risk adjusted returns. We have a robust acquisition and deposition pipeline and as I said earlier expect to be active in these areas in 2015. If interested during the Q&A period maybe Brian could respond to any questions that you have in this regard. So these are the major I guess areas of focus for us for the year but of course we'll continue to monitor the economic environment and adapt if necessary to continue to work to create value for unitholders. Lastly before we get to your questions followers of Brookfield Real-Estate activities over the past nearly three decades will know the importance of Gordon Arnell's input into our strategy and accomplishments, after many years of dedicated service to Brookfield Gordon has retired from the Brookfield Property Partners’ Board. Gordon has been a trusted advisor and mentor and friend to many of us during as long in great association with Brookfield. His wisdom, insight and input into our strategy will forever be an important part of the Brookfield story. Although we're saying good-bye to Gordon, we have recently welcomed two new directors to our Board Dr. Soon Young Chang, and also Ms. Lisa Shalett. Both bring unique experiences and perspectives to the Brookfield Property Partners’ Board and we're happy to have them join us in the Brookfield Organization. With that operator we'd be happy to take questions from investors and analysts. Thank you. [Operator Instructions] We will take our first from Mark Rothschild with Canaccord.

[Mark Rothschild:]

Maybe starting with the distribution increase, I understand that you guided to an annual increase at the Investor Day, but considering that most of the cash flow from the leases in lower Manhattan, a lot of the cash flow growth hasn't really come in yet. What prompted you to do it now as opposed to waiting till the actual growth occurred in the cash flow?

[John Stinebaugh:]

Mark it's John, so with a lot of the things that Ric talked about the lease up with Brookfield Place, the significant mark-to-market opportunities we've got within our portfolios in office and retail as well as the development projects that are going to come online, we feel very comfortable that we've got visible growth over the next five years and we increased or we gave some guidance regarding FFO growth of 8% to 11%. In light of that we thought it made sense to do was to begin giving so to speak a down payment in terms of increased dividend in recognition of this visible growth that we perceived, so that was our thought process.

[Ric Clark:]

I think our view and the view of the Board is that rather than have very large spikes in dividends that occur when there is very meaningful growth and our FFO occurs in the near-term it's better to make some smaller increases as we go forward as John said a down payment on the future.

[Mark Rothschild:]

You've talked in the past about reducing leverage. I was curious how you look at the preferred to QIA and if you look at that more as equity or debt? And what you would look to dispose of this year in your office properties to reduce leverage?

[John Stinebaugh:]

So starting with the QIA securities, we look at them very much as equity because they can only be settled in shares, they are convertible at 25.70 there is three tranches at 7, 10 and 12 years. So with the growth prospects of our business we looked at it as a way of essentially issuing equity at our IFRS value at the end of Q2 when we were negotiating the economic terms with QIA, because they can only be settled in equity, we look at that as an equity component of our capital structure. Regarding the asset sales we have got in the next quarter it might bleed into the second quarter asset sales that will generate net proceeds of in excess of $700 million. We are selling a portfolio of assets in DC and we are in late stage negotiations on that, so approximately a 50% interest. We're also looking at selling interest in the office holding that we've got at 75 State Street in Boston, probably a similar level of interest in that and we would retain operatorship in both of those circumstances. In addition one of the things we did do is we did put on hold a bit some of the other asset sales initiatives that we have got in order to see what happened with the bid for Canary Wharf. But with now that it's going forward we're going to launch asset sales of additional assets that including interest in some buildings in New York, likely interest in some buildings in Australia and then a building in London. And in total we think that these initiatives will be able to generate net proceeds in excess of a $1 billion. So with those proceeds we will look to pay down fully the acquisition facility and pay down our lines as well as fund other working capital initiatives that we have.

[Mark Rothschild:]

And maybe just one last question before I turn it back. In regards to Canary Wharf, is it possible that you can quantify at all how this will impact your IFRS NAV? Will you be marking up further the current investment you have in Canary Wharf and how the impact the net math difference or the addition to FFO per unit?

[John Stinebaugh:]

So Mark we're still in the tender offer period. I am limited in what I could say is forward-looking about that deal because of UK regulations. But what I can say is that the existing Canary Wharf that we've got on the books is marked at less than what the offer price of 350 per pound per share with Songbird on a look through basis to Canary Wharf.

[Mark Rothschild:]

You can't quantify anything else?

[John Stinebaugh:]

We can't because to the extent that we do we've got a live tender that's outstanding and any forward-looking statements regarding the transaction have got to be vetted and disclosed through that regulatory process.

[Operator:]

We will go next to Mario Saric with Deutsche Bank.

[Mario Saric:]

Hi good morning it’s Scotiabank. Just on the back of some of that commentary with respect to asset dispositions, your disclosed cap rates or discount rates came down about 20 basis points on the retail and industrial side quarter over quarter. We've seen U.S. and Canadian 10-year bond yields come down 40 to 50 basis points year-to-date, so presumably your IFRS valuations may not necessarily reflect the incremental decline in bond yields. Are you generally seeing further cap rate compression in the markets in which you're looking to dispose of assets year-to-date? Or are we starting to see spreads to the underlying tenures starting to expand because perhaps lenders are putting floors in place on the mortgage time?

[Ric Clark:]

Brian, do you want to speak that?

[Brian Kingston:]

Sure I guess as a general comment I think as we've seen interest rates coming down over the last number of years. Cap rates have moved down with them but it hasn't been a one-to-one relationship. So I think the spreads that you referred to with interest rates coming down 40 basis points and cap rates coming down something less than that is pretty consistent with what we've seen overall. We’re definitely seeing particularly in the stronger markets such as the U.S. and the UK, cap rates are firming up and there is a number of transactions that are happening at pretty sharp yield, so I think you’re starting to see that reflected in our evaluations.

[Mario Saric:]

And then maybe on the office side with respect to acquisitions, how does that impact your acquisition pipeline? You mentioned the robust disposition pipeline, but how many opportunities are you looking at on the acquisition side? And partially given then is, likely in the market or in the market with respect to another private property fund, how should we think about cap rates coming down and robustness of your acquisition pipeline going forward?

[Brian Kingston:]

I think it’s one of the great things about our platform and the size and scale of it is that we do see a wide range of opportunities particularly in the markets where we’ve had a much larger presence like Canada, the U.S. and Brazil and Australia and really what John and Ric were referring to earlier is we have a number of assets that we have either acquired over the last couple of years or developed in the last 10 years which has largely stabilized fully leased and there is a future investor appetite at that very type yields for those and we’re really taking advantage of an opportunity to harvest some capital in most cases as John ran through. We’re not actually selling out entirely but just reducing our disposure to those assets and then taking that capital and redeploying it into new investment opportunities and sometimes it’s in other markets but frankly we’re still seeing quite a bit in our acquisition pipeline in the U.S. and often times it’s investing in assets where there is some leasing to be done or some rehab capital required on the assets that where we can really put the office machine behind it and create new value and generate additional upside as opposed to just holding mature assets at lower yields.

[Mario Saric:]

Okay, so given John's comment on potentially $1 billion of net proceeds from asset sales, should we anticipate BPY to be a material net buyer of assets in 2015?

[Brian Kingston:]

Well, look at I think we with the acquisition of BPO clearly we took on some acquisition debt to do that and so a portion of those net proceeds from the assets sales John was referring to earlier is going to go reduce that leverage. So I would say on a net basis we’re probably a net seller but those numbers that he listed off were just the sale side of 1 billion the other will be acquisitions that will certainly offset that and as you said it won’t just be in U.S. it will be in a number of other market as wells, but it won’t be entirely one way.

[Mario Saric:]

And then just maybe on the operational side, I noticed that US office occupancy was up quarter-over-quarter most markets, but the NOI contribution in markets like Midtown New York, Houston, Boston, was actually down quarter over quarter despite pretty positive mark-to-market on the lease renewals. Is that just a matter of the timing of the leases coming through? In terms of the cash flowing back?

[Brian Kingston:]

Yes that now would be -- that is just timing some of it that we’ve done a lot of leasing as we pointed out and not all of them have kicked in just yet, so 2015 is a bit of transitional year particularly in the office division and 2016 is where you will see the ramp-up in our FFO.

[Mario Saric:]

And then just on the office side, you've done a really good job of increasing occupancy over the past five quarters or so. So now you're at 92.1 that's still below BPO's historical average. I'm just curious as to how much further runway do you see in that portfolio in terms of occupancy over the next 12 months?

[Brian Kingston:]

I think if you look back over I don’t know it’s 10 or 15 years for us, we’ve probably averaged around mid-90s occupancy and our office portfolios did a great job going into economic downturn, we did have a lot of leasehold over at the beginning, our rollover came later so we did well when everybody else was not doing so well at the beginning of the crisis and then our vacancy came later, so anyways long-winded way of saying we fully expect to get back up to the mid 90s, 95% or higher in our core portfolio. We do have an element of opportunistic office assets that we owned and that will be a little more sort of I guess peaks and troughs when it comes to that. Typically what we’re doing is buying buildings that have a lot of vacancies we are leasing them up and then selling them, but in the core portfolio which is the bulk of our office holdings I would expect mid 90s to be the average so 300 basis points or more.

[Mario Saric:]

So there's still a lot of runway to go there. The last question that I had is just on your hedges. I was just wondering what the duration of your Australian and British pound hedges was?

[Brian Kingston:]

In terms of the book first of all what we’re doing is hedging new equity and we’ve got roughly the two major exposures that we have are the Australian dollar and we’re 65% hedged and the pound we’re roughly 80% hedged. The Canadian dollar has an offset because we do have the Canadian dollar denominated preferreds which pretty much fully offset the net equity that we've got. So the program is basically rolling hedges that the duration is typically a year or less.

[Operator:]

We'll go next to Michael Bilerman with Citi.

[Michael Bilerman:]

Ric, you in your opening comments talked about rationalizing other investments because you don't think you're getting fair value in the stock. I was wondering if you could elaborate a little bit in terms of what you were implying or talking about.

[Ric Clark:]

So we still -- I don't know what the percentage is down through but we still own some investments in public entities and I think overtime no immediate plans overtime we'll have to decide if we want to continue to hold those investments in public securities or if there is something else that we could do. So, we could sell, we could buy or something like that, so no immediate plans but something that we're thinking through.

[Michael Bilerman:]

Well I guess the obvious one is here the biggest one is GDP and then you have got Rouse and then Brookfield Office up in Canada. I don’t think there is any other major ones in there, is there?

[Ric Clark:]

No that'd be the three.

[Michael Bilerman:]

So I guess the Brookfield Office seems logical from a structure perspective. And then you have Rouse, which is not such a big investment, and then the Big Kahuna, which is General Growth. And that's probably the one I want to get a little bit more color in terms of how I guess -- how do you, as Brookfield, as part of the recap plan, originally think about it? But not being a controlling shareholder either in that entity as you were in the case of Brookfield?

[Ric Clark:]

So I guess in General Growth properties it's been a phenomenal investment for us, the assets are world-class, there are not many portfolios that are near as high quality as that and the management team is exceptional, they've done a great job for all investors including Brookfield. So long-term we'll have to decide, no decisions are made, I mean I think within Brookfield Property Partners we said on many occasions where a substance over reform kind of investor we're in the business of making money in the real-estate business sites. Having said that I think holding public securities is a bit unnatural for us and we'll have to see. But at the moment I'd say we've got a lot of digesting to do with Brookfield Office Properties and then the pending Canary Wharf transaction. And we also are pretty excited about the General Growth properties business plan and its future. So we're happy with our investment for now and we'll just have to see how it plays out.

[Michael Bilerman:]

And then can you talk a little bit about the property fund fundraising and how that's going and where levels are at today?

[Ric Clark:]

So Brookfield Property Partners was an investor in Brookfield sponsored opportunity fund we had roughly 30% of the equity in that fund it was a $4.4 billion growth fund or total fund and the investments, that equity has largely been invested, with very little money left in that fund. So right now we're sort of thinking about the next follow on to that and the rules around fund raising are pretty, I guess they're pretty tight so I am limited on what I can say on the phone right now. But if there is to be a follow-on fund you would expect Brookfield Property Partners to participate in it and I'd say there is lots of appetite from institutional investors for vehicles like this.

[Michael Bilerman:]

Can you talk a little about institutional investor interest just overall given what's happened both from an energy perspective in oil as well as the U.S. dollar and currency movements worldwide? And you certainly have the cross current of what's happening in terms of QE globally. But I'm just curious in your discussions with institutional investors that want to commit capital to a Real Estate product, how are they thinking about property type, how are they thinking about geography? And has there been any change in the sentiment at all on behalf of those investors to commit new capital?

[Ric Clark:]

So starting with the last part of your question as far as appetite to commit new capital, we've seen no noticeable change in demand in institutional investors. In fact you can imagine all the phone calls that we're getting from folks when they heard the news about Canary Wharf, just registering their interest in buying interest in high quality assets. So for sure that demand is still there notwithstanding what's going on in the energy markets and the demand is there from Middle East driven Sovereign as well. As far as any changes in specific geographies or asset types for sure there is at the moment probably less interest in oil dominated office markets like Houston and like Calgary. Interestingly we've yet to see any change in tenant demand in Houston but we do expect that energy companies doing a pull back on new capital spending and that will impact growth in that market but we haven't seen it yet. Probably there has been a little bit more of a pull back in Calgary on the demand side. But from an institutional investor standpoint I would -- we're not seeing as much interest in those markets right now, so probably a yellow flag has been raised on new investments in those markets. But other than that it's sort of business as usual and a lot of entities looking to put a lot of money to work.

[Michael Bilerman:]

And then I want to come back on the public versus private stakes. I guess as Brookfield Property Partners grows globally across property type verticals would you ever envision now that you've simplified a lot on the office side about listing a global office landlord? Or your view collectively has been while Brookfield Asset Management's got some targeted public vehicles where it does it energy, it does its property investing, and so forth; that you wouldn't want to downstream any of your holdings that you've now consolidated into new listed entities?

[Ric Clark:]

Michael you have followed us for a number of years and you know we're very open minded and if we think there is the ability to do something different that will create value for unitholders of course it's something we will think about. But just to be careful because I know there is some media on the call, there is no current plan to do anything like that. So we kind of keep our eye on what's going on in the world and what's going on in different markets and the bottom-line is we're looking to create value for unitholders. But currently we're really happy with what we're doing our diversified strategy has worked really well, it's given us the ability to put a lot of money to work in a lot of different places, so it's sort of business as usual.

[Operator:]

[Operator Instructions] We will take our next from Steve Sakwa with Evercore ISI.

[Steve Sakwa:]

Just wanted to follow-up on your energy comment, I can appreciate it's probably too early in the oil downdraft to have seen a real pullback in demand. But I just am curious from your perspective, what is the level and for what period of time would we need to see oil at a low level before you to really begin to see that pullback? I guess that's the first question.

[Ric Clark:]

John, our resident energy expert may be you can...

[John Stinebaugh:]

Sure. One thing that we've seen is that what just really drives office demand is the capital expenditure within the sector. So we think that there will be a pull back in demand to the extent that you are seeing significant reductions in capital budgets amongst, right now mostly the upstream companies. In terms of the view regarding oil prices, we think that we're probably going to be in a environment that is in the $50 ballpark for some period of time. I don't know exactly how long but the sense that we get is that with a lot of the drilling that's taking place and the investment that's been made into the projects up in the oil sands that you probably are going to see some production growth before you start to see declines in production as a lot of these shale wells start to tail off after initial production. Eventually as demand returns you are going to have to have in our view higher oil prices to support the new drilling to meet that demand, but the wildcard's going to be how long it takes. And so we think you are probably going to be in a price environment around 50 for some period of time but then it's going to have to recover to support new investment.

[Steve Sakwa:]

And then Ric, I just wanted you to touch on the industrial and apartment platforms. And maybe talk about what you're seeing on the development front from your own companies. And how aggressive are you looking to expand development pipelines in those businesses and if you're not, what is the acquisition environment look like for purchases in both departments and industrial?

[Ric Clark:]

So we've been very active in both of these sectors and have been growing these platforms. There is still a small part of our business that we expect will become more meaningful overtime. We have been doing both acquisitions and development on the multifamily side, we just bought a 4,000 unit as I mentioned portfolio in Manhattan and we have bought several 1,000 other units throughout the year mostly in Texas and in the Southeast part of the United States. So I think we're going to continue to be active, we're finding a lot of apartments sort of in the B, B+ quality range where we can come in and put our platform behind fixing up the apartments and fix the $10,000 per unit and then capture market rent increases by doing that and I think we will do a lot of that in 2015. On the industrial front starting a couple of years ago and ending probably a year ago we made some major acquisitions of portfolios, we've combined those businesses together and now we have really been doing sort of tuck-in acquisitions, and we have probably been more active buying industrial properties in Europe than we had in the United States, it’s very competitive on the acquisition front in industrial in the U.S., but we have been developing we’ve got a really nice landbank within our industrial platform we’ve got about 14 million square feet of industrial developments going on probably two-thirds of that in U.S. and the third in Europe so we’ll do more of that. I think one of the industries benefiting a bit from lower energy prices are businesses in general and that’s been a positive within our industrial business as well as within our retail business.

[Steve Sakwa:]

Just to follow-up on that 14 million-foot development pipeline, do you expect that number to increase, stay stable or decline if we were to look out 12 months from now?

[Ric Clark:]

We have and we've been positioning about two or three million additional square feet for potential development, but I think before we launch those developments and borrowings -- a lot of times our developments are fully committed before we begin to execute on them so if we get big tenants we probably do that. I don’t know how much more we’ll on a speculative basis, I think we’re doing one in Europe but that’s part of the 14 million. So anyway I think 2 million or 3 million more we might add to that but part of it depends on leasing.

[Steve Sakwa:]

And just as lastly going back on the multifamily, it sounds like you're buying B, B plus, assets in larger portfolios. Are you running into Blackstone and live core as the main competition? Who are you're seeing when you're going up on these portfolio deals?

[Ric Clark:]

Brian, do you want to speak to that?

[Brian Kingston:]

Yes, look at -- I do think there are the once you’ve mentioned there specifically we do see, I think it’s very competitive though they’re not the only one, but I think it really just depends on the market and the asset class but there is a lot of capital in that space which to your earlier question about development, we have to start doing some selective development in certain markets where pricing does exceed replacement cost and just to make versus buying to support.

[Operator:]

There are no further questions at this time. I would like to the turn it back to Ric Clark for any additional or closing remarks.

[Ric Clark:]

Thanks, operator, so thanks everyone on the call. We had a exciting and productive year, and made great progress towards our goals and we’re excited about 2015 and the years after that. I think we have set Brookfield Property Partners up very well for future growth and we appreciate very much your support throughout the year and have to thank our management teams around the world who have done a great job on executing on our business plan, so thank you everyone. We’ll be hopefully meeting with you soon and certainly talk to you on our next quarterly conference call.

[Operator:]

This concludes today’s conference. Thank you for your participation.