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transcript
Brookfield Property Partners
CORPORATE PROFILE
AUGUST 2019
Table of Contents
2
About Brookfield Property Partners (“BPY”) Page 4
Organic Growth Page 9
Operating Segments Page 15
Structure and Governance Page 30
3
Brookfield Property Partners (“BPY”) is 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:
1Current yield supported
by stable cash flow from
a diversified portfolio
of assets
25% ‒ 8% annual
distribution growth
3Capital appreciation
of our asset base
4
About Brookfield Property Partners
5
A World-Class, Diversified Real Estate Portfolio
Irreplaceable Core Assets
in diverse, supply-constrained markets
Destination Locations
for high-quality global companies and brands
Outsized Growth
in earnings and shareholder distributions
Unique Access
to Brookfield’s diversified private real estate funds
Best-in-Class Sponsor
Alternative asset manager with global expertise,
investing discipline and access to capital
Atlantis, BahamasWoodlands Mall, Houston
Principal Place, London
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1) As of June 30, 2019 and on a proportionate basis.
2) Based on BPY’s 6/28/19 closing price of $18.93 on the Nasdaq Stock Market.
Global Owner, Developer and Operator of High-Quality Real Estate
Core Office
• 143 premier office properties totaling 96 million
square feet (msf) in gateway markets around the world
as well as over 11 msf of core office and multifamily
development projects currently underway
Core Retail
• 123 best-in-class retail properties totaling over 120 msf
throughout the United States
LP Investments
• High-quality assets and portfolios with operational
upside across office, retail, multifamily, logistics,
hospitality, triple net lease, self storage, student housing
and manufactured housing sectors
>$85B TOTAL ASSETS
Investment Portfolio Characteristics
$28BUNITHOLDER EQUITY
$0.33QUARTERLY DISTRIBUTION / UNIT
7.0%DISTRIBUTION YIELD
1
2
1
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Core Office and Core Retail
Diversified Investment Strategy
Stable cash flows on core portfolios enhanced by investment in opportunistic
strategies
LP Investments
Brookfield Place, New York Fashion Show Mall, Las Vegas Conrad Hotel, Seoul
Targeting 10% to 12% Total Returns
• Approximately 85% of BPY’s balance sheet
• Invested in high-quality, well-located trophy assets and development projects
Targeting 20% Total Returns
• Approximately 15% of BPY’s balance sheet
• Invested in mispriced portfolios and/or properties with significant value-add
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Global Investor with Local Expertise
UNITED STATES3
$137B
ASIA PACIFIC
$14B
BRAZIL
$3B
EUROPE & MIDDLE EAST
$31B
CANADA
$9B
1) At the Brookfield Property Group level which includes assets of BPY and Brookfield-managed funds.
2) Employee figures are as of December 31, 2018.
3) AUM in the Bahamas are included within our US AUM figure.
~$194B Total RE AUM1 | 30 Offices | ~19K Operating Employees2
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Organic Growth
10
Track Record of Earnings and Distribution Growth
Earnings and distribution growth for
five consecutive years since launch
Annual CFFO growth of 8%
Annual distribution growth of 6%
67% payout ratio
2014 2015 2016 2017
$1.06
$1.12
$1.00
$1.18
$1.11
$1.18
$1.36
$1.44
$1.26
$1.48
8%CAGR
2018
6%CAGR
CFFO Distribution (per unit)
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Growth in LP Investment Gains
Realized Gains on LP Investments (per unit)
We have earned realized gains from our
LP investments in private funds
In the early years, these gains were from
the sale of individual assets or smaller
portfolios
As these funds mature, and investment-
level business plans are executed, the
pace and size of realizations will
increaseLTM2014 2015 2016 2017
$0.14
$0.35
$0.07
$0.54
$0.40
2018
$0.51
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Earnings provide ample coverage for distributions and will support distribution growth in-line with target of 5%-8% annually
Future Earnings Growth
Realize significant earnings from our LP investments including, on average, $500 million in annual realized gains
Generate annual CFFO growth for the next 5 years with a target of 7-9% driven by achieving same-property growth and completion of active developments on-time and on-budget
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Payout Ratio
Target payout ratio leaves sufficient retained cash to protect distribution levels, sustain
properties and fund future growth:
In US$ millionsLTM 2018 2017
Company FFO $ 1.41 $ 1.48 $ 1.44
LP investment realized gains1 0.51 0.40 0.54
Annual earnings 1.92 1.88 $ 1.98
Distributions to Unitholders (1.29) (1.26) (1.18)
Retained for property maintenance and growth $ 0.63 $ 0.62 $ 0.80
Payout ratio 67% 67% 60%
1) Reflects income earned in our LP Investments segment when investments are realized that is not otherwise included in CFFO but represents a key component of our
investment return, net of carried interest.
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BPY = Compelling Investment Opportunity
An investment today has the potential
to offer a very attractive return to
shareholders
Yield backed by cash flow from a
portfolio of high-quality assets
Entry point at discount to average
analyst NAV of ~$27 per unit
Potential for significant capital
appreciation
Investment Appreciation Distributions
$ 19
Opportunity1Today
$ 19
$ 8
BPY unit
price
Discount
to analyst
NAV
1) Based on a 5-year hold period.
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Operating Segments
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Iconic assets in gateway markets
Brookfield Place, New YorkBrookfield Place, Perth
Canary Wharf, LondonBrookfield Place, Toronto
Core Office Portfolio
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Core Office Portfolio
Of our top 20 office tenants, 12 are tenants in Brookfield buildings
in more than one city; 7 are tenants in at least three cities
• 143 premier office properties totaling approximately 96 msf in gateway cities around the
globe, including: New York, London, Toronto, Los Angeles, Houston, Sydney, Washington, DC
and Berlin
• Portfolio is 92.4% occupied with an average remaining lease term of 8.3 years
• Embedded 7.2% mark-to-market opportunity on expiring leases
• Properties generally financed with non-recourse, asset-level debt
• We offer an integrated, multifaceted real estate business with comprehensive operating
and real estate management capabilities
• Our diversified global structure gives us a competitive advantage in the marketplace as we
are able to leverage relationships across geographies and business lines
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Development Projects Delivered Over the Past Three Years
18
London Wall Place
London
The Eugene
New York
Principal Place
London
5 Manhattan West
New York
One Blue Slip
Brooklyn
~5.0M SFPREMIER
OFFICE SPACE
>2,000APARTMENT
UNITS
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Multifamily
Principal Place – Residential, London3 303 241 17% Q4 2019
Southbank Place, London3 669 295 20% Q4 2019
Wood Wharf – 8 Water St. & 2 George St., London 371 192 5% Q4 2019
Greenpoint Landing Bldg. F, New York 348 347 6% Q1 2020
Newfoundland, London 545 316 4% Q2 2020
Wood Wharf – 10 Park Drive, London3 269 129 31% Q2 2020
Wood Wharf – One Park Drive, London3 430 281 30% Q2 2021
Subtotal 2,935 $1,801
Total Active Developments 11,264 $6,546
Office % Pre-Leased SF 000s
($M) Total
Cost1 Yield on Cost
Date of
Completion2
1 Bank Street, London 89% 715 326 7% Q3 2019
100 Bishopsgate, London 75% 938 1,111 7% Q3 2019
ICD Brookfield Place, Dubai 21% 1,156 387 10% Q4 2019
One Manhattan West, New York 86% 2,081 778 6% Q4 2019
Manhattan West Retail 34% 82 131 5% Q4 2020
Four Manhattan West (hotel/condos) - 159 145 5% Q2 2021
Wood Wharf – Office, London 44% 423 159 8% Q2 2021
Bay Adelaide North, Toronto 78% 820 380 6% Q1 2022
Two Manhattan West. New York - 1,955 1,329 6% Q1 2023
Subtotal 51% 8,329 $4,746 7%
Active Development Projects
1) In US$ Millions and represents BPY’s share of investment.
2) Stabilization typically occurs between 12-18 months post completion.
3) Represents condominium/market sale developments. Anticipated return on cost is presented instead of yield on cost for these developments.
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Trophy retail assets that mirror the quality of our office properties
The Woodlands Mall, Houston Ala Moana, Honolulu
Jordan Creek, Des Moines Miami Design District
Core Retail Portfolio
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Core Retail Portfolio
• 123 best-in-class malls and urban retail properties totaling over 120 msf throughout the
United States, comprised of 10 urban properties, 3 lifestyle centers and 110 regional shopping
centers which include 13 neighborhood centers
• Same-property occupancy of 95.0%
• Initial rent spreads of 7%1 for leases commencing in the trailing 12 months
• Highly productive stores with $777 NOI-weighted tenants sales/sf
1) Excluding certain short-term renewals at Ala Moana Center. This metric is weighted by NOI.
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Class A+ Shopping Centers
Inserting new technology into our malls has been a major driver to elevate the
shopping experience – from retail and dining to entertainment and leisure
• Our class A+ mall portfolio represents approximately 8% of the high-quality retail
space in the United States, including 3 of the top 5 assets.1 Although total retail
space in the U.S. is likely to contract in the coming years, high-quality malls continue to
demonstrate meaningful outperformance and serve as the centerpiece of all retail
activity in the U.S.
• The declining performance of traditional department stores has created opportunities to
recapture square footage within our existing centers and improve their productivity by
introducing more dining, entertainment and fitness venues as well as native e-retailer
‘pop-up’ and permanent stores.
• Significant development and redevelopment opportunities in our core retail portfolio with
expected ROIs of between 6-9%.
1) Source: CNBC.com article from 1/29/18.
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E-commerce vs Brick-and-Mortar? NOT a Zero-Sum Game…
93% of all retail sales are owed all or in part to brick-and-mortar presence1
Amazon Bonobos Rent the Runway
Online-to-offline examples
E-Commerce Brick-and-Mortar ONE Channel
1) Source: U.S. Census Bureau
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Project Description
($M) Total
Cost1
Expected
Return on
Investment
Date of
Stabilization
Active Developments
The SoNo Collection, Norwalk, CT Ground up development 460 6% 2022
Active Redevelopments
Paramus Park, Paramus, NJ Sears redevelopment for Stew Leonard’s 21 7% 2021
Stonestown Galleria, San Francisco, CAAnchor redevelopment for retail and
entertainment149 7-8% 2022
Other projects, various locations 90 7-9% 2020-2022
Active Developments / Redevelopments $720
Core Retail Development Sites
1) Represents BPY’s share of investment.
Active Planning
Ala Moana, Honolulu, HI Residential tower 160 5-7% 2025
North Point, Alpharetta, GA Sears redevelopment – residential 63 5-7% 2022
Northbrook Court, Northbrook, ILMacy’s redevelopment – retail expansion
and residential 138 5-7% 2022
Oxmoor Center, Louisville, KYSears redevelopment for Top Golf +
restaurants 29 6-7% 2022
Streets at Southpoint, Durham, NC Mixed use densification 107 6-8% 2024
Tysons Galleria, McLean, VAMacy’s redevelopment for iPic and multi-
level small-shop expansion 124 6-7% 2021
Valley Plaza Mall, Bakersfield, CA Sears backfill for multi-tenant spec 18 7-9% 2021
Other projects, various locations 216 7-9% 2021-2025
Active Planning $855
Total Retail Developments $1,575
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Acquiring mispriced assets with upside to earn outsized returns
LP Investments
Center Parcs, UK
The Diplomat Resort & Spa, Florida
Aster Town Center, Colorado
Conrad Hotel, Seoul
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LP Investments
Invest on a Value Basis
• Acquire high-quality assets at a discount to replacement cost or
intrinsic value
• Execute multifaceted transactions that utilize structuring
capabilities
• Seek contrarian investments via market dislocations and other
inefficiencies
Leverage Brookfield
Platform
• Focus on geographies and sectors where Brookfield has
informational, operational and other competitive advantages
• Utilize Brookfield’s relationships to originate proprietary
investments
• Target large-scale investments
Enhance Value through
Operating Capabilities
• Execute clearly defined strategies for operational improvement:
‒ Leasing: increasing occupancy and rental rates
‒ Development: expanding or redeveloping/repositioning
properties
• Achieve opportunistic returns through NOI growth
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Case Study: IDI Gazeley returned 31% Gross IRR in 5 years
• Assembled a 64M SF global logistics business through the acquisition of 3 industrial
companies in North America and Europe
30M SFCOMPLETED
DEVELOPMENT
31%GROSS IRR
3.2xGROSS MOC
50M SFAREA LEASED
16%RENT INCREASED
88 – 95%CHANGE IN OPERATING
OCCUPANCY 2013-2017
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Case Study: Simply Self Storage returned 46% Gross IRR in 2.5 years
• Acquired 90-asset, 6.8M SF portfolio and operating company in early 2016 and grew
business to over 200 assets totaling ~16M SF
$1.3BGROSS SALE PRICE1
$162MNET PROCEEDS TO BPY2
46%GROSS IRR
2.6xGROSS MOC
32%VALUE INCREASED PSF
1) Partial sale of business
2) Includes proceeds from portfolio refinancing following transaction
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Fund Inception
Total
Equity
BPY
Stake
Projected
Gross IRR
Projected
Gross MOC
RE Opportunity Fund I 2006 11.0% 1.9x
RE Opportunity Fund II 2007 20.0% 2.1x
RE Turnaround Fund 2009 38.6% 2.3x
Strategic Real Estate
Partners I 2012 $4.4B 31% 24.0% 2.6x
Strategic Real Estate
Partners II2015 $9.0B 26% 17.0% 2.1x
Strategic Real Estate
Partners III2017 $15.0B 7% 20.0% 1.9x
Total 22.7% 2.1x
Opportunistic Real Estate Funds Track Record
GGP Acquisition
Closes
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Structure and Governance
31
Corporate Structure
30%
Brookfield
Infrastructure
Partners
(BIP)
63%
Brookfield Business
Partners
(BBU)
61%
Brookfield Renewable
Partners
(BEP)
55%
Brookfield Property
Partners
(BPY/BPR1)
Core Office Core Retail
Brookfield Asset Management(BAM)
Core office assets
Canary Wharf
Core-plus funds
Class A
U.S. Mall
Portfolio
Real estate opportunity funds
Value-add multifamily funds
Real estate finance funds
Other direct investments
LP Investments
1) Brookfield Property REIT Inc. (Nasdaq: BPR)
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Governance
BPY/BPR’s governance is structured to provide alignment of interests with unitholders
• BPY and Brookfield Property REIT (“BPR”) have an established Master Services Agreement with Brookfield
− Brookfield provides executive oversight of BPY/BPR and services relating to the origination of
acquisitions, financings, business planning and supervision of day-to-day management and
administration activities
− Management fee, on an annualized basis, equal to 0.5% of the total capitalization of BPY/BPR, subject
to a minimum fee of $50 million
− Equity enhancement distributions, on an annualized basis, equal to 1.25% of the increase in
BPY/BPR’s market capitalization over the initial capitalization of approximately $11.5 billion
− Credit applied for management fees paid on investment in Brookfield-sponsored funds
• Incentive distributions based upon increases in distributions paid to unitholders over pre-defined thresholds
− 15% participation by Brookfield in distributions over $1.10 per unit
− 25% participation by Brookfield in distributions over $1.20 per unit
− Credit applied for incentive fees paid on investments in Brookfield-sponsored funds
• BPY/BPR’s general partner has a majority of independent directors
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Favorable BPY Structure
• As a global real estate investor, we have structured BPY to provide flexibility to pursue its strategy and
to limit negative tax consequences to our unitholders
• BPY is a Bermuda-based, publicly-traded partnership that owns or has interests in holding corporations
primarily in the U.S., Canada, Australia, Western Europe, Brazil, India and South Korea
• Structure is favorable relative to Master Limited Partnerships (MLPs), and we are committed to
structuring our activities to avoid generating UBTI and ECI1
1) BPY does not provide legal or tax advice to any third party and as such strongly recommends that each prospective investor review all documentation with their legal and
tax advisors.
BPY’s Structure
Type of Entity Bermuda-based, publicly-traded partnership
UBTI1 No
ECI1 No
U.S. Tax Slip Issued1 K1
Canadian Tax Slip Issued1 T5013
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Ability to Invest Through a U.S. REIT
BPR BPY
Distributions ✓ ✓ Distributions are identical in amount and timing
Exchangeable ✓ N/AClass A BPR shares are exchangeable 1:1 for BPY
units or the equivalent value in cash
Liquidation Value ✓ ✓ Liquidation values are equalized
Structure and Index
Eligibility
Delaware
Corp.;
1099 Issuer
Bermuda-
based LP;
K1 Issuer
As a U.S.-domiciled REIT, BPR is eligible for many
equity indexes that exclude LPs
Majority Owner BPY BAM
BPY and its affiliates control ~92%1 of the
outstanding voting shares of BPR and BAM has an
economic interest of ~55% in BPY
BPR, a publicly traded U.S. REIT (Nasdaq: BPR), is a subsidiary of BPY and was created to
offer economic equivalence to a BPY unit but in the form of a U.S. REIT security.
1) As of June 30, 2019.
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Be good stewards
in the communities
in which we
operate
Our ESG Principles
Mitigate the
impact of our
operations on
the environment
Conduct business
according to
the highest
ethical and legal
standards
Ensure the
well-being and
safety of
employees
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Contacts
Contact Title E-Mail Address Phone Number
Brian Kingston Chief Executive Officer brian.kingston@brookfield.com (212) 978-1646
Bryan Davis Chief Financial Officer bryan.davis@brookfield.com (212) 417-7166
Matt Cherry SVP, Investor Relations matthew.cherry@brookfield.com (212) 417-7488
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Important Cautionary Notes
All amounts are in U.S. dollars unless otherwisespecified. Unless otherwise indicated, the statistical andfinancial data in this document is presented as of June30, 2019.
This presentation contains “forward-looking information”within the meaning of applicable securities laws andregulations. Forward-looking statements includestatements that are predictive in nature, depend upon orrefer to future events or conditions, include statementsregarding our operations, business, financial condition,expected financial results, performance, prospects,opportunities, priorities, targets, goals, ongoingobjectives, strategies and outlook, as well as the outlookfor North American and international economies for thecurrent fiscal year and subsequent periods, and includewords such as “expects,” “anticipates,” “plans”, “believes,”“estimates”, “seeks,” “intends,” “targets,” “projects,”“forecasts,” “likely,” or negative versions thereof and othersimilar expressions, or future or conditional verbs such as“may,” “will,” “should,” “would” and “could”.
Forward-looking statements include, without limitation,statements about target earnings and distribution growth,the growth potential of our existing and new investments,return on invested capital, gains on mark-to-marketreleasing and occupancy, targeted same-store growthand returns on redevelopment and development projects,the availability of suitable investment opportunities, andthe availability of financing and our financing strategy.
Although we believe that our anticipated future results,performance or achievements expressed or implied bythe forward-looking statements and information are basedupon reasonable assumptions and expectations, thereader should not place undue reliance on forward-looking statements and information because they involveknown and unknown risks, uncertainties and otherfactors, many of which are beyond our control, which maycause our actual results, performance or achievements todiffer materially from anticipated future results,performance or achievement expressed or implied bysuch forward-looking statements and information.
Factors that could cause actual results to differ materiallyfrom those contemplated or implied by forward-lookingstatements include, but are not limited to: risks incidentalto the ownership and operation of real estate propertiesincluding local real estate conditions; the impact orunanticipated impact of general economic, political andmarket factors in the countries in which we do business;the ability to enter into new leases or renew leases onfavorable terms; business competition; dependence ontenants’ financial condition; the use of debt to finance ourbusiness; the behavior of financial markets, includingfluctuations in interest and foreign exchanges rates;uncertainties of real estate development orredevelopment; global equity and capital markets and theavailability of equity and debt financing and refinancingwithin these markets; risks relating to our insurancecoverage; the possible impact of international conflictsand other developments including terrorist acts; potentialenvironmental liabilities; changes in tax laws and othertax related risks; dependence on management personnel;illiquidity of investments; the ability to complete andeffectively integrate acquisitions into existing operationsand the ability to attain expected benefits therefrom;operational and reputational risks; catastrophic events,such as earthquakes and hurricanes; and other risks andfactors detailed from time to time in our documents filedwith the securities regulators in Canada and the UnitedStates.
We caution that the foregoing list of important factors thatmay affect future results is not exhaustive. When relyingon our forward-looking statements or information,investors and others should carefully consider theforegoing factors and other uncertainties and potentialevents. Except as required by law, we undertake noobligation to publicly update or revise any forward-lookingstatements or information, whether written or oral, thatmay be as a result of new information, future events orotherwise.
In considering investment performance informationcontained herein, prospective investors should bear inmind that past performance is not necessarily indicativeof future results and there can be no assurance thatcomparable results will be achieved, that an investment
will be similar to the historic investments presented herein(because of economic conditions, the availability ofinvestment opportunities or otherwise), that targetedreturns, diversification or asset allocations will be met orthat an investment strategy or investment objectives willbe achieved.
This presentation includes estimates regarding marketand industry data that is prepared based on itsmanagement's knowledge and experience in the marketsin which we operate, together with information obtainedfrom various sources, including publicly availableinformation and industry reports and publications. Whilewe believe such information is reliable, we cannotguarantee the accuracy or completeness of thisinformation and we have not independently verified anythird-party information.
This presentation makes reference to net operatingincome (“NOI”), funds from operations (“FFO”), andCompany funds from operations (“CFFO”). NOI, FFO andCFFO do not have any standardized meaning prescribedby International Financial Reporting Standards (“IFRS”)and therefore may not be comparable to similar measurespresented by other companies. The Partnership usesNOI, FFO and CFFO to assess its operating results.These measures should not be used as alternatives toNet Income and other operating measures determined inaccordance with IFRS but rather to provide supplementalinsights into performance. Further, these measures donot represent liquidity measures or cash flow fromoperations and are not intended to be representative ofthe funds available for distribution to unitholders either inaggregate or on a per unit basis, where presented.
For further reference, specific definitions of NOI, FFO,and CFFO are available in the Partnership’s pressreleases announcing its financial results each quarter.