Brookfield Property Partners L.P. — FY 2023 Form 20-F
Reporting period: Fiscal year ended December 31, 2023; the filing was signed March 1, 2024. This is an annual report, not a standalone Q4 filing. Financial statements are audited and prepared under IFRS as issued by the IASB, in U.S. dollars. Amounts below are U.S. dollars unless stated otherwise.
Business context
BPY owns and operates global commercial real estate through Office, Retail and LP Investments segments, with a Corporate segment for central costs and financing. Brookfield Corporation owns all BPY LP Units and controls BPY; those units are no longer publicly traded. BPY’s listed securities are preferred units. The partnership consolidates the Operating Partnership despite holding a 36% direct managing general partnership interest; reported consolidated figures include non-controlling interests.
Financial results and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Total revenue | $9,483 million | $7,365 million |
| Net income (loss) | ($1,849) million | $996 million |
| Interest expense | $4,823 million | $2,683 million |
| Net fair value losses (gains) | ($673) million | $20 million gains |
| NOI (non-IFRS) | $4,537 million | $3,654 million |
| FFO (non-IFRS) | ($324) million | $586 million |
| Company FFO (non-IFRS) | ($187) million | $584 million |
| Operating cash flow | ($670) million | ($53) million |
| Investing cash flow | ($2,981) million | $7,811 million |
| Financing cash flow | $1,943 million | ($6,458) million |
| Cash and cash equivalents, year-end | $2,341 million | $4,020 million |
| Total assets, year-end | $131,577 million | $112,516 million |
| Debt obligations, year-end | $68,712 million | $58,562 million |
| Total equity, year-end | $48,587 million | $41,737 million |
- Commercial property NOI was $3,643 million and hospitality NOI was $894 million. Commercial property margin was 61.4%, down 1.6 percentage points from 2022.
- About 49% of debt was floating-rate at year-end, versus 62% a year earlier. Management estimates a 100-basis-point rate increase would add approximately $336 million to annual interest expense on floating-rate debt and $97 million upon refinancing fixed-rate debt due within a year.
- Consolidated debt-to-capitalization was 57%, unchanged from 2022. Debt obligations included $28,662 million classified as current and $40,050 million as non-current.
- Cash flow from operations did not cover distributions and other cash needs in 2023. BPY says it bridged the gap through asset sales, including partial interests in office properties and LP Investment dispositions; these dispositions generated approximately $1.4 billion of net cash inflows.
Material changes versus 2022
- Revenue rose about 29%, but BPY moved from net income to a net loss. Management attributes the deterioration primarily to a $2,140 million increase in interest expense, fair value losses, and a $947 million decline in share of earnings from equity-accounted investments.
- Interest expense increased mainly because of higher rates, increased debt balances and financing activity. Fair value losses in Office reflected discount- and capitalization-rate expansion and revised cash-flow assumptions; Retail reported fair value gains, including on an investment in a U.S. department store chain.
- NOI increased about 24%, while FFO and Company FFO turned negative. Results were materially affected by the Manager Reorganization and Acquisition of Foreign Investments, which added properties, revenue, expenses and debt to the reported base. The revenue increase should therefore not be read as wholly organic growth.
- Total debt rose approximately $10.2 billion, principally reflecting the Acquisition of Foreign Investments, asset acquisitions and foreign-exchange translation, partly offset by repayments. Cash declined by approximately $1.7 billion.
- BPY issued $1.6 billion of mandatory convertible non-voting preferred shares to a BNRE subsidiary in August 2023, receiving notes receivable; conversion is expected to transfer a partial interest in BPY’s BSREP IV investment to BNRE.
Outlook, risks and unusual items
- Management expects leasing, occupancy improvements and asset recycling to support cash flows, and identifies lower-than-historical U.S. office occupancy as an opportunity. It provides no quantified earnings or cash-flow guidance and cautions that occupancy, rents and cash flows are not assured.
- Management expects to extend, repay or refinance most 2024–2025 maturities, but secured debt obligations scheduled to mature in 2024 total approximately $22.5 billion before considering extension options. Extension options apply to a substantial portion of maturities; the filing does not establish that refinancing is assured.
- BPY disclosed suspended contractual payments on approximately 1% of non-recourse mortgages, excluding debt on assets in receivership, and ongoing creditor modification or restructuring discussions. Failure to reach agreement could result in additional properties being transferred to lenders.
- Assets held for sale totaled $1,852 million and included five U.S. office assets, four U.S. malls, two U.S. hotels and one U.S. logistics asset, with intended sales of controlling interests within 12 months. Planned disposals may be delayed, according to management.
- Key risks include office demand and hybrid-work trends, elevated interest rates and refinancing, property valuation uncertainty, tenant defaults and lease rollover, retail-sector pressures, illiquid assets, foreign-exchange exposure, climate and environmental liabilities, and cybersecurity incidents. Property valuations rely significantly on management estimates; investment properties are Level 3 fair-value measurements.
- Brookfield controls BPY and provides management under a Master Services Agreement. The annual management fee is based in part on a 1.05% rate applied to specified equity and CanHoldco amounts; related-party transactions, asset sales to Brookfield advisory clients, conflicts of interest and limited termination rights merit attention.
- No material governmental or legal proceedings were reported as pending or threatened, and management stated that known claims were not expected to have a material adverse effect. Management concluded disclosure controls were effective and internal control over financial reporting was effective, excluding Watermark Lodging Trust; the auditor did not attest to internal-control effectiveness.
- After year-end, BPY acquired a San Francisco portfolio of 75 multifamily assets in a foreclosure process on January 18, 2024, and repaid C$600 million of notes on February 29, 2024.
Most important facts for investors to verify
- Review the audited financial statements and non-IFRS reconciliations, particularly the drivers of negative FFO and Company FFO and the effect of related-party reorganizations on comparability.
- Check the maturity schedule, extension-option terms, covenant compliance, refinancing progress and status of the mortgages with suspended payments or assets in receivership.
- Assess whether operating cash flow, liquidity facilities and realized sale proceeds can meet debt service, preferred distributions, capital commitments and other obligations without relying on delayed or uncertain asset sales.
- Examine valuation assumptions and sensitivities, especially Office discount and capitalization rates, and confirm whether held-for-sale assets transact near carrying value.
- Review the terms, conversion timing and cash implications of the BNRE-related preferred-share and note-receivable arrangements, along with BPY’s management fees and other Brookfield transactions.
- Confirm preferred-unit distribution declarations and arrears directly from subsequent filings; distributions are cumulative for these securities but remain subject to legal, cash and contractual constraints.