Brookfield Property Partners REITWEEK INVESTOR PRESENTATION JUNE 3, 2020
Brookfield Property Partners (“BPY”) • Brookfield Asset Management’s (“Brookfield”) primary vehicle to make investments across all strategies in real estate • Our goal is to be the leading global owner and operator of high-quality real estate, generating an attractive total return for our unitholders comprised of: 1 2 3 Current yield supported Distribution growth Capital appreciation by stable cash flow from in-line with earnings of our asset base a diversified portfolio growth 2
Investment Highlights Proven Strategy & Sponsor Alternative asset manager with global expertise, investing discipline and access to capital Irreplaceable Core Assets in diverse, supply-constrained markets Unique Access to Brookfield’s diversified private real estate funds Principal Place, London Outsized Growth in earnings and shareholder distributions Strong Financial Position with ample liquidity Ala Moana, Honolulu Radian Residences, Boston 3
Diversified Investment Strategy Stable cash flows on core portfolios enhanced by investment in opportunistic strategies Core Office and Core Retail LP Investments Brookfield Place, New York Fashion Show Mall, Las Vegas Simply Self Storage, Osprey, FL Targeting Opportunistic Returns Targeting Core+ Returns • Approximately 15% of BPY’s • Approximately 85% of BPY’s balance sheet balance sheet • Invested in high-quality, well-located trophy assets and • Invested in mispriced development projects portfolios and/or properties with significant value-add 4
Global Investor with Local Expertise ~$202B Total RE AUM 1 | 30 Offices | ~22K Operating Employees 2 CANADA $9B EUROPE & MIDDLE EAST $35B ASIA PACIFIC UNITED STATES 3 $20B $135B BRAZIL $3B 1) At the Brookfield Property Group level which includes assets of BPY and Brookfield-managed funds. 2) Employee figures are as of December 31, 2019. 3) AUM in the Bahamas are included within our US AUM figure. 5
Irreplaceable Core Assets Iconic assets in gateway markets Brookfield Place , New York Shops at Merrick Park, Miami Brookfield Place, Toronto Ala Moana, Honolulu 6
Irreplaceable Core Assets Premium Assets Hold Their Values Through Cycles Brookfield Office Occupancy Brookfield Retail Occupancy 100% 100.0% 80% 80.0% 60% 60.0% 40% 40.0% 20% 20.0% 0% 0.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Brookfield Retail Average In-Place Rent 1 Brookfield Office Average In-Place Net Rent $60.00 $100.00 $80.00 $40.00 $60.00 $40.00 $20.00 $20.00 $0.00 $0.00 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1) Reflects retail tenants <10K square feet. 7
Unique Access to High Growth/High Return Strategies Office & Multifamily Development • The pre-eminent office and multifamily development franchise in the world’s most dynamic cities • Over the past 10 years, we have developed 1 : New York: 7.9 million sq. ft 5 Manhattan West One Blue Slip New York Brooklyn London: 5.4 million sq. ft. Toronto: 3.2 million sq. ft. Calgary: 1.4 million sq. ft. Perth: 1.3 million sq. ft. Sydney: 1.1 million sq. ft. Dubai: 1.1 million sq. ft. Total: 21.4 million sq. ft. Principal Place The Eugene 1) Includes completed projects and those currently under construction London New York Over the next 3 years, our development program will deliver an additional $400M of annual NOI 8
Unique Access to High Growth/High Return Strategies Retail Redevelopment • Our 2,000-person development team combined with our national retail footprint provides us with the ability to redevelop our shopping centers into dynamic live/work/play urban environments Ala Moana Center Before After 9
Unique Access to High Growth/High Return Strategies Private Funds Investing CFFO & Realized Gains from LP • Investments 2 Brookfield is a leading global real estate manager with $200 billion of real estate 800 assets under management and a top- 700 quartile performance track record 25% gross IRR 1 since 2006 ‒ 600 • BPY’s $5 billion investment in these funds 500 gives investors exposure to investment $ Millions strategies typically reserved for pension 400 and sovereign wealth fund clients 300 200 100 0 2015 2016 2017 2018 2019 1) Represents average gross investment returns in Brookfield-sponsored private opportunistic and value-add real estate funds 2) Realized LP Investment gains are presented net of carried interest and other transaction costs 10
Track Record of Earnings and Distribution Growth $1.57 $1.32 Annual CFFO and realized gains growth of 7% since 2014 $1.13 $1.00 Annual distribution growth of 6% since 2014, in line with earnings growth 2014 2019 CFFO and realized gains Distributions (per unit) 11
Strong Financial Position • We finance primarily at the asset level and on a non-recourse basis ‒ 8% of total debt is recourse to BPY • Well-laddered debt maturity profile ‒ Average term to maturity of 5 years • Ample Liquidity ‒ Total liquidity of $7.2 billion • Actively recycle capital from mature assets where value has been maximized ‒ Over the past 5 years we have generated approximately $13 billion of net proceeds from asset sales at a premium to IFRS carrying values 12
COVID-19 Update Primary focus during this period has been on the safety of our people, our customers and tenants, and the communities in which we do business We have recently shifted our focus to gradually reopening our retail centers and office buildings, with an unwavering commitment to ensuring the health and safety of all occupants (119 centers open as of May 31, 2020) While retail and hospitality have been materially impacted, April and May rent collections in our office, multifamily and other sectors was largely unaffected Liquidity position remains strong with more than $7 billion available in undrawn credit lines and cash on hand; near-term debt maturities very manageable and secured by strong-performing assets with non-recourse mortgages Contractual, recurring cash flows and access to liquidity continue to support our current distribution payout of $1.33 per annum 13
Looking Forward - Office A recent (post-COVID-19) survey 1 indicated that only 12% of the U.S. workforce would • rather work from home full-time, and 70% prefer to work in the office all five days of the week • With social distancing norms and post-COVID-19 health & safety protocols established, tenants are beginning to rethink office space layouts to provide more personal space for their employees which could increase companies’ physical footprints 1) Source: Gensler Research Institute Work From Home Survey - May 2020 14
Retail Market Update Brick and mortar and e-commerce combine to create omnichannel sales network BRAND AWARENESS Customer Point of Increases retention and drives sales across all channels (Halo Effect) Acquisition Sale FLOW OF SALES Reduces shipping costs and leads to Total incremental sales Brand Store Returns LAST MILE DISTRIBUTION Building Center Reduces supply chain costs and Value leads to incremental sales Pickup Distribution Location Center 15
Stores Drive Revenue at Scale Digitally native brands expanding physical store fleets to amplify revenue expansion Store Expansion by the Numbers Case Study: Location Growth Drives Outsized Revenue Growth 524 $719M $750M new stores have opened since 2017 across 22 leading Digital-native Brands $500M $349M 73 850 Est. Peloton Revenue $250M and Physical Stores by $184M $171M Year 42 new store locations have been 24 announced for the Top 100 Digital- 17 $0M native Brands over the next five years 2016 2017 2018 2019 # of Stores Annual Revenue (M) Costs reduced by 40% 1 when moving digital fulfillment from distribution centers to stores • Costs reduced by 90% 1 when customers order online and pick up at a store • 1) Target CEO on CNBC 11/20/2019 Sources: Coresight Research “Fast Retail: Opportunities for Digitally Native Brands” 2019, JLL Retail “Digital Brands Get Phy sic al” 2018, Peloton IPO Filings, Chain XY, Aggdata, TrueVentures, Vox, Retail Insider, Marketwatch 16
Even for industry leaders in shipping, fulfillment costs are a key hurdle to profitability as their fulfillment expense growth outpaces digital sales growth Amazon Digital Sales and Fulfillment Expenses 2016 - 2018 Growth Rate +35% Online Store Sales $123.0B $108.4B $91.4B +86% Marketplace Sales $42.7B $31.9B $23.0B $(17.6)B $(25.2)B Fulfillment Expenses +93% $(34.0)B 2016 2017 2018 Fulfillment Expense as a Amazon’s fulfillment expense ratio of 15% 18% 21% % of Digital Sales 21% is significantly more costly than the Brookfield Properties average occupancy cost of 13.5% Amazon continues to make significant investments in physical retail (e.g., Whole Foods, Amazon 4-star) and is prioritizing marketplace sales (vs. owned inventory) to offset burgeoning fulfillment and operating costs related to Digital commerce 17 Source: Amazon 2018 Annual Report
For omni-channel retailers, the most profitable model is to buy online and pick up in-store Additional Initial Sale Return Loss Net Sale Purchase $0.23 $1.07 $0.30 $1.00 $1.00 $0.23 $0.18 $.95 $.77 $1.00 $0.23 Source: “Shopping Centers: America’s First and Foremost Marketplace,” ICSC, October 2014. 18
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