Bloomberg News

Brookfield Office Raises FFO Projection as Leasing Tops Record

November 09, 2011

Nov. 4 (Bloomberg) -- Brookfield Office Properties Inc., the owner of Manhattan’s World Financial Center, raised its forecast for full year funds from operations after breaking the 2007 leasing record for its buildings.

FFO, which gauges a property owner’s ability to generate cash, will be $1.12 to $1.14 a share in 2011, New York-based Brookfield said in a statement today. The landlord previously forecast $1.05 to $1.10.

Brookfield this year sharpened its focus on office real estate, merging its residential land business with another unit of its parent, Brookfield Asset Management Inc., a few months after buying interests in 19 Australian commercial properties. Leases signed in the third quarter included a 527,000 square- foot (49,000 square-meter) extension with Talisman Energy Inc. in Calgary and a 277,000 square-foot renewal and expansion for RBC Wealth Management in Minneapolis.

“We have achieved the principal priorities we have set for the year, completing 8.2 million square feet of leasing and recycling capital from mature assets into more accretive opportunities,” Chief Executive Officer Ric Clark said in the statement.

Brookfield fell 1.5 percent to $16.50 at 9:42 a.m. in New York. The stock dropped 29 percent in the third quarter as concern grew that a slowing U.S. economic recovery and the effects of Europe’s debt crisis will reduce demand for office space. The 81-member Dow Jones U.S. Real Estate Index decreased 16 percent in the period.

Third Quarter

Third-quarter FFO dropped to $155 million, or 30 cents a share, from $159 million, or 32 cents, a year earlier, as interest expenses on commercial real estate debt climbed 88 percent. The results exceeded analysts’ projection of 27 cents, the average of 14 estimates in a Bloomberg survey.

The company is facing rising vacancies in its 12.9 million square feet of lower Manhattan skyscrapers. Bank of America Corp. agreed to keep about 767,000 square feet at 2 and 4 World Financial Center inherited with its 2009 acquisition of Merrill Lynch & Co., Brookfield said on Nov. 1. That leaves the landlord with more than 3 million square feet of former Merrill space to re-lease at the complex. The Merrill leases expire in 2013.

Brookfield also acquired Bank of America’s 49 percent stake in 4 World Financial Center, Merrill’s former headquarters.

“The onus is on Brookfield to prove they can secure some tenants to start whittling down that 3 million square-foot hole,” Michael Knott, an analyst with Green Street Advisors Inc. in Newport Beach, California, said in a telephone interview before today’s report.

The landlord also has 540,000 square feet of empty former Goldman Sachs Group Inc. space at 1 New York Plaza.

Brookfield had 111 properties totaling 79 million square feet at the end of the third quarter. It has been in the spotlight because of its ownership of Zuccotti Park, the lower Manhattan home to the Occupy Wall Street protests against corporate greed. The movement has spawned similar demonstrations around the world.

(Brookfield Office Properties will conduct a conference call today at 11 a.m. New York time. To listen, see BPO US <EQUITY> EVT <GO>.)

--Editors: Kara Wetzel, Ross Larsen

To contact the reporter on this story: David M. Levitt in New York at dlevitt@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net


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