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Hotels, mall closures drive $1.5 billion loss for Brookfield Property

TORONTO — Mall closures and investments in hotels dragged down earnings this spring for Brookfield Property Partners L.P., which on Thursday said it lost money in the second quarter.

"Our hospitality business bore the brunt of the impact from the economic shutdown as hotels were either closed or operated under minimal occupancy resulting from travel restrictions,” said a letter to unitholders from chief executive Brian Kingston.

Brookfield Property, which reports in U.S. dollars, is the real estate arm of Toronto-based Brookfield Asset Management Inc., and owns, operates and develops real estate properties.

The company said it lost $78 million from property closures in the hospitality space during the second quarter, with Kingston noting that hotels, unlike offices and retailers, do not usually have long-term leases.

Rent collections among retailers were just 34 per cent after malls temporarily closed due to the COVID-19 pandemic, the company said.

"As our tenants start to get their businesses back up and running, we have been working closely with those most affected by the shutdown, providing financial accommodations including rent deferrals and even abatements to our smaller (retail) tenants," said Kingston.

Overall, the company reported a net loss of $1.512 billion, or $1.26 per unit, for the three months ending June 30.

During the same period a year ago, the company earned $23 million, or 12 cents per unit, when the company had a $38-million windfall from mergers and acquisitions.

Funds from operations were $178 million during the quarter, down from $362 million in the year-ago period.

Subsidiary Brookfield Property REIT Inc. declared a dividend of 33.25 cents per share on Thursday.

The company noted it was trying new techniques to help drive business to retail properties.

"We brought 'pop-up' drive-in theaters to a handful of our mall parking lots across the country, utilized our parking garages for outdoor dining and teamed up with Fit:Match to have kiosks in select malls where people can receive a 3D body scan to easily find their sizes at different retailers and shop for clothes without having to try them on,” said Kingston.

Despite weakness in malls and hotels, rent collection for offices was "largely uninterrupted" during the second quarter, with rents actually rising 16 per cent on leases that were signed this spring, said Kingston.

"(Until) a vaccine is discovered and widely available, it is likely that companies will need to have portions of their employees working remotely as they simply don't have enough space currently to accommodate them all," said Kingston in the letter.

"In the long run, however, we do not think remote working represents a threat to the office as we know it. In fact, concerns around social distancing and density ratios are very likely to drive additional office demand in the future."

This report by The Canadian Press was first published Aug. 6, 2020.

Companies in this story: (TSX:BPY:UN)

The Canadian Press




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