Bloomberg News

Brookfield Office Rallies on Lower Manhattan Lease Talks

February 01, 2013

Brookfield Office Properties Inc. (BPO) rose the most in 17 months after the landlord said it is negotiating letters of intent with two potential tenants for space at lower Manhattan’s World Financial Center.

There is a “high probability” that leases for the combined 1.5 million square feet (139,000 square meters) will be completed, Chief Executive Officer Dennis Friedrich said today on a conference call with analysts.

“We’re at the stage of massaging or finalizing the financial and some of the other major terms,” Friedrich said. “It’s a pretty advanced stage. There’s always a chance that things could go on an off track, but we’re feeling pretty good about where these are moving, and we’ve been working on them for a little while.”

Brookfield, lower Manhattan’s largest office landlord, has about 3 million square feet of pending vacancies at World Financial Center, which is being renamed Brookfield Place. Most of that is space Bank of America Corp. (BAC:US) inherited with its 2009 takeover of Merrill Lynch & Co. Those leases will expire by the end of the year.

Melissa Coley, a spokeswoman for New York-based Brookfield, declined in an e-mail to identify the potential tenants or say how much space each is seeking.

Shares of Brookfield jumped 6.3 percent to $17.49, the biggest gain since August 2011.

Earnings Projection

The stock is rallying because of the optimistic statements on lease negotiations as well as confirmations of earlier earnings projections, said Karine MacIndoe, an analyst with Toronto-based BMO Capital Markets.

“There were some downgrades earlier this week that were suggesting that the consensus was too high for this year, but they reaffirmed it,” said MacIndoe, who rates (BPO:US) Brookfield a buy. “Then the conference call added the juice.”

Investors had been assuming there was little to no progress on filling the Bank of America space, so any positive news is good for the shares, she said.

Brookfield said today that it signed four leases totaling 228,000 square feet at the World Financial Center since the beginning of the fourth quarter. Two of the deals, for a combined 66,000 square feet, were new agreements. The others were a renewal and a renewal with an expansion.

The company today projected 2013 funds from operations of $1.16 to $1.20 a share. That’s more than the average $1.11 estimate of 12 analysts surveyed by Bloomberg.

FFO, a cash-flow measure used by real estate companies, was of $141 million, or 28 cents a share, in the fourth-quarter, beating the average analyst estimate of 24 cents.

Deloitte, Viacom

Brookfield has lost out on potential World Financial Center leases before. In 2010, it had a tentative deal with Deloitte LLP for as much as 630,000 square feet at 4 World Financial Center when the accounting firm decided instead to move to Rockefeller Center. Deloitte was one of several tenants who sublet space from Merrill.

Last year, Brookfield “tried real hard” to get Viacom Inc. (VIAB:US) to move to the complex from Times Square, then-Chief Executive Officer Ric Clark said during a conference call in May. The media company decided to stay in its Midtown tower when SL Green Realty Corp. (SLG:US) made an “aggressive” bid, he said.

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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    (Bank of America Corp)
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