Brookfield Office Brookfield Office Properties -- 2nd Q 2012 Report

  Brookfield Office - Brookfield Office Properties -- 2nd Q 2012 Report

RNS Number : 2786J
Brookfield Office Properties Inc.
03 August 2012




Brookfield Office Properties Reports Strong Second Quarter 2012 Results



All Dollar References Are in U.S. Dollars Unless Noted Otherwise



NEW YORK, NY--(Marketwire - August 3, 2012) - Brookfield Office Properties
Inc. (NYSE: BPO) (TSX: BPO) today announced that net income attributable to
common shareholders for the quarter ended June 30, 2012 was $217 million or
$0.38 per diluted share, compared with $631 million or $1.11 per diluted share
in the second quarter of 2011. The year-over-year difference is attributable
to significant fair value gains recognized on investment properties in the
prior period under IFRS accounting.



Funds from operations ("FFO") for the quarter ended June 30, 2012 was $171
million or $0.30 per diluted common share, compared with $166 million or $0.30
per diluted common share during the same period in 2011.



Commercial property net operating income for the second quarter of 2012
increased to $342 million, compared with $217 million in the second quarter of
2011, largely due to the impact of the property acquisitions and the
consolidation of the U.S. Office Fund.



OUTLOOK

"With significant new acquisitions in London, Seattle and Washington, DC, we
captured a number of properties with both positive current cashflows and
growth potential as we rework the assets. Furthermore, the environment is
presenting us with a number of opportunities in our current and new markets,"
stated Dennis Friedrich, chief executive officer of Brookfield Office
Properties. "We remain focused on monetizing our development pipeline and
keeping our portfolio well-occupied in the face of stable but slower leasing
markets."



HIGHLIGHTS OF THE SECOND QUARTER

Leased 2.6 million square feet of space during the quarter at an average net
rent of $28.59 per square foot, representing a 34% increase over expiring net
rents in the period. The portfolio occupancy rate finished the quarter at
93.4%, up from 92.9% at the end of the first quarter. Highlights from the
second quarter include:





New York - 1.3 million square feet

· A 17-year, 1.2-million-square-foot renewal and expansion with Morgan
Stanley at One New York Plaza



Houston - 404,000 square feet

· A five-year, 164,000-square-foot renewal with Chevron at 1600 Smith St.

· An 11-year, 110,000-square-foot new lease with Rosetta Resources at
Heritage Plaza



Los Angeles - 275,000 square feet

· A three-year, 94,000-square-foot renewal with the U.S. Secret Service
at Ernst & Young Plaza

· A 10-year, 54,000-square-foot renewal and expansion with Jackson Lewis
LLP at Ernst & Young Plaza



Acquired a portfolio of office buildings and development sites in the City of
London for approximately $871 million. The portfolio includes four operating
assets totaling 884,000 square feet and two development sites which can
accommodate approximately 1.4 million square feet of density. The acquisition
is being funded through available cash resources, the assumption of $106
million of debt, and additional property-level debt expected to be put in
place prior to close. Brookfield Office Properties took assignment of an
option agreement on London Wall Place in a 50/50 joint venture with Oxford,
subsequent to the second quarter. The closing date for 99 Bishopsgate,
Principal Place and other smaller assets is September 30, 2012 and 125 Old
Broad Street and Leadenhall Court are expected to close in June 2013.



Entered the Seattle market with the acquisition of Metropolitan Park East and
West office towers in Seattle for $210 million. Situated in the region's
largest concentration of technology and life science companies, the
856,000-square-foot Class A office campus is located adjacent to Interstate 5
and the South Lake Union submarket. The towers are a combined 83% leased.



Acquired 799 9^th Street, NW in Washington, DC for $106 million. Located in
the burgeoning East End submarket, the 265,000-square-foot property is 10
stories, LEED Gold-certified, and proximate to two Class A Brookfield Office
Properties assets, 650 Massachusetts Ave., NW and the Victor Building.



Completed new property-level financings totaling $1.3 billion, netting
proceeds of $600 million, including the financing and refinancing of $1.2
billion of debt in North America at an average rate of 4.0% with an average
term of 4.6 years, generating net new proceeds of $600 million and
representing a 135-basis-point savings over existing debt, and the refinancing
of $140 million of debt in Australia for an average term of 3.4 years at an
average rate of 7%, representing a 105-basis-point savings.



Issued C$150 million of senior unsecured notes with an April 16, 2018 maturity
date and a yield of 4.00%. The proceeds on the issue were used to repay
higher-rate debt in an effort to continue to capitalize on the
low-interest-rate environment and extend maturities.



Secured anchor tenant to commence second office tower of Bay Adelaide Centre
in downtown Toronto.Deloitte signed a 420,000-square-foot lease for 43% of
Bay Adelaide Centre East. Constructionon the 44-story, 980,000-square-foot
tower will begin later this year with an expected completion date of late 2015
/ early 2016, which coincides with several large office lease expiries in the
financial core.



Achieved practical completion of the 953,000-square-foot Perth development
project, which has been renamed "Brookfield Place Perth." Tenants BHP
Billiton, PricewaterhouseCoopers and Barrick Gold, occupying 100% of the
45-story tower, have commenced their move-ins. 



Dennis Friedrich began his tenure as CEO of Brookfield Office Properties on
July 1, 2012.Tom Farley becamesole president, and continues in his role as
global chief operating officer. Mark Brown assumed Mr. Friedrich's prior role
as global chief investment officer. Ric Clark has become chairman of the board
of directors.Gordon Arnell is staying on as a director; Dennis Friedrich has
become a director; and Bruce Flatt has stepped down as a director.



Dividend Declaration
The Board of Directors of Brookfield Office Properties declared a quarterly
common share dividend of $0.14 per share payable on September 28, 2012 to
shareholders of record at the close of business on September 1,
2012.Shareholders resident in the United States will receive payment in U.S.
dollars and shareholders resident in Canada will receive their dividends in
Canadian dollars at the exchange rate on the record date, unless they elect
otherwise. Common shareholders have the option to participate in the company's
Dividend Reinvestment Program, in which all or a portion of cash dividends can
be automatically reinvested in common shares.The quarterly dividends payable
for the Class AAA Series F, G, H, J, K, L, N, P and R preferred shares were
also declared payable on September 28, 2012 to shareholders of record at the
close of business on September 14, 2012.



Net Operating Income and FFO
This press release and accompanying financial information make reference to
net operating income and funds from operations on a total and per share basis.
Net operating income is defined as income from property operations after
operating expenses have been deducted, but prior to deducting financing,
administrative, fair value adjustments and income tax expenses. Brookfield
Office Properties defines FFO attributable to common shareholders as income
before fair value adjustments, income taxes and certain other non-cash items
as and when they arise, less non-controlling interests in the foregoing. FFO
is determined as FFO from consolidated properties, FFO from equity accounted
investments and FFO from discontinued operations. The company uses net
operating income and FFO to assess its operating results. Net operating income
is important in assessing operating performance and FFO is a widely-used
measure to analyze real estate. The company provides the components of net
operating income and a full reconciliation from net income to FFO with the
financial information accompanying this press release.The company reconciles
FFO to net income as opposed to cash flow from operating activities as it
believes net income is the most comparable measure. Net operating income and
FFO are both measures which do not have any standard meaning and therefore may
not be comparable to similar measures presented by other companies.



Forward-Looking Statements
This press release, particularly the "Outlook" section, contains
forward-looking statements and information within the meaning of applicable
securities legislation. Although Brookfield Office Properties believes that
the anticipated future results, performance or achievements expressed or
implied by the forward-looking statements and information are based upon
reasonable assumptions and expectations, the reader should not place undue
reliance on forward-looking statements and information because they involve
assumptions, known and unknown risks, uncertainties and other factors which
may cause the actual results, performance or achievements of the company to
differ materially from anticipated future results, performance or achievement
expressed or implied by such forward-looking statements and information.
Accordingly, the company cannot give any assurance that its expectations will
in fact occur and cautions that actual results may differ materially from
those in the forward-looking statements.Factors that could cause actual
results to differ materially from those set forth in the forward-looking
statements and information include, but are not limited to, general economic
conditions; local real estate conditions, including the development of
properties in close proximity to the company's properties; timely leasing of
newly-developed properties and re-leasing of occupied square footage upon
expiration; dependence on tenants' financial condition; the uncertainties of
real estate development and acquisition activity; the ability to effectively
integrate acquisitions; interest rates; availability of equity and debt
financing; the impact of newly-adopted accounting principles on the company's
accounting policies and on period-to-period comparisons of financial results,
and other risks and factors described from time to time in the documents filed
by the company with the securities regulators in Canada and the United States,
including in the Annual Information Form under the heading "Business of
Brookfield Office Properties - Company and Real Estate Industry Risks," and in
the company's most recent interim report under the heading "Management's
Discussion and Analysis." The company undertakes no obligation to publicly
update or revise any forward-looking statements or information, whether as a
result of new information, future events or otherwise, except as required by
law.



Conference Call
Analysts, investors and other interested parties are invited to participate in
the company's live conference call reviewing second quarter 2012 results on
Friday, August 3, 2012 at 11:00 a.m. eastern time.Scheduled speakers are
Dennis Friedrich, chief executive officer, and Bryan Davis, chief financial
officer.Management's presentation will be followed by a question and answer
period.



To participate in the conference call, please dial 877.397.0292, pass code
9902354, five minutes prior to the scheduled start of the call. Live audio of
the call will also be available via webcast at
www.brookfieldofficeproperties.com. A replay of this call can be accessed
through September 3, 2012 by dialing888.203.1112, pass code 9902354. A replay
of the webcast, as well as a podcast download, will be available at
www.brookfieldofficeproperties.com for one year.



Supplemental Information
Investors, analysts and other interested parties can access Brookfield Office
Properties' Supplemental Information Package before the market open on August
3, 2012 at www.brookfieldofficeproperties.com under the Investors/Financial
Reports section. This additional financial information should be read in
conjunction with this press release.



Brookfield Office Properties Profile
Brookfield Office Properties owns, develops and manages premier office
properties in the United States, Canada and Australia. Its portfolio is
comprised of interests in 112 properties totaling 80 million square feet in
the downtown cores of New York, Washington, D.C., Houston, Los Angeles,
Toronto, Calgary, Ottawa, Sydney, Melbourne and Perth, making Brookfield the
global leader in the ownership and management of office assets. Landmark
properties include the World Financial Center in Manhattan, Brookfield Place
in Toronto, Bank of America Plaza in Los Angeles, Bankers Hall in Calgary,
Darling Park in Sydney and Brookfield Place in Perth. The company's common
shares trade on the NYSE and TSX under the symbol BPO. For more information,
visit www.brookfieldofficeproperties.com.



CONSOLIDATED BALANCE SHEETS
(US Millions, except per share
amounts)                                June 30, 2012        December 31, 2011
Assets
Investment properties
      Commercial properties                $      21,198         $      19,258
      Commercial developments                        675                 1,412
Equity accounted investments^(1)                   2,421                 2,256
Receivables and other                              1,197                 1,290
Restricted cash and cash
equivalents                                           93                    69
Cash and cash equivalents                            281                   434
Assets held for sale^(2)                             335                   425
Total assets                               $      26,200         $      25,144
Liabilities
Commercial property debt                   $      11,243         $      10,635
Accounts payable and other
liabilities                                        1,189                 1,072
Deferred tax liabilities                             632                   547
Liabilities associated with
assets held for sale^(3)                             170                   217
Capital securities                                   847                   994
Total liabilities                                 14,081                13,465
Equity
Preferred equity                                   1,095                 1,095
Common equity                                      9,470                 9,080
Total shareholders' equity                        10,565                10,175
Non-controlling interests                          1,554                 1,504
Total equity                                      12,119                11,679
Total liabilities and equity               $      26,200         $      25,144
Book value per common share                $       18.63         $       17.90
Book value per common share -
pre-tax                                    $       19.84         $       18.94
(1)                     Includes properties and entities held through joint
                        ventures and associates
(2)                     Comprises $334 million of commercial properties and $1
                        million of other assets at June 30, 2012 (December 31,
                        2011 -- $423 million and $2million, respectively)
(3)                     Comprises $162 million of commercial property debt and
                        $8 million of other liabilities at June 30, 2012
                        (December 31, 2011 -- $210 million and $7 million,
                        respectively)

CONSOLIDATED STATEMENTS OF INCOME
(US Millions)                  Three Months Ended          Six Months Ended
                            06/30/12        06/30/11     06/30/12     06/30/11
Total revenue                 $   569         $   388     $  1,099     $   768
Net operating income
Commercial operations             342             217          654         433
Interest and other
income                             20              46           42          73
                                  362             263          696         506
Expenses
Interest
    Commercial property
    debt                          152             101          290         202
    Capital securities -
    corporate                      12              14           26          29
General and
administrative                     37              33           74          68
Depreciation                        4               2            7           4
Income before gains
(losses), share of net
earnings (losses) from
equity accounted
investments and income
taxes                             157             113          299         203
Fair value gains                  167             320          460         450
Share of net earnings
from equity accounted
investments^(1)                    21             354           68         472
Income before income tax
expense                           345             787          827       1,125
Income tax expense
(benefit)                          77              96          157         129
Net income from
continuing operations             268             691          670         996
Income (loss) from
discontinued operations            (7 )            35           (2 )        61
Net income                        261             726          668       1,057
Non-controlling
interests                          44              95           99         120
Net income attributable
to common shareholders        $   217         $   631     $    569     $   937
(1)             Includes valuation losses of $6 million and gains of $287
                million, respectively, for the three months ended June 30,
                2012 and June 30, 2011, and gains of $16 million and $341
                million for the six months ended June 30, 2012 and June 30,
                2011, respectively

                               Three Months Ended         Six Months Ended
                              06/30/12     06/30/11     06/30/12     06/30/11
Earnings (loss) per share
attributable to common
shareholders - basic
Continuing operations           $  0.41       $ 1.16      $  1.07       $ 1.69
Discontinued operations           (0.01 )       0.07        (0.01 )       0.12
                                $  0.40       $ 1.23      $  1.06       $ 1.81
                               Three Months Ended         Six Months Ended
                              06/30/12      06/30/11    06/30/12      06/30/11
Earnings (loss) per share
attributable to common
shareholders -diluted
Continuing operations           $  0.39       $ 1.05      $  1.00       $ 1.54
Discontinued operations           (0.01 )       0.06            -         0.11
                                $  0.38       $ 1.11      $  1.00       $ 1.65
RECONCILATION TO FUNDS FROM OPERATIONS
(US Millions, except per
share amounts)               Three Months Ended          Six Months Ended
                            06/30/12     06/30/11     06/30/12      06/30/11
Net income (loss)
attributable to common
shareholders                $     217     $   631     $     569     $    937
Add (deduct) non-cash and
certain other items:
 Fair value and other
 (gains) losses                  (167 )      (320 )        (460 )       (450 )
 Fair value adjustments
 in earnings from equity
 accounted investments              6        (287 )         (16 )       (341 )
 Non-controlling
 interests in above items          26          77            63           86
 Income taxes                      77          96           157          129
 Discontinued
 operations^(1)                    12         (29 )          12          (37 )
 Cash payments under
 interest rate swap
 contracts                          -          (2 )           -           (3 )
Funds from operations       $     171     $   166     $     325     $    321
Preferred share dividends         (16 )       (14 )         (33 )        (28 )
FFO attributable to
common shareholders         $     155     $   152     $     292     $    293
Weighted average common
shares outstanding              508.3       508.8         508.3        508.5
FFO per common share        $    0.30     $  0.30     $    0.57     $   0.58

(1)                      Reflects fair value and other gains net of income
                         taxes
(US Millions, except per share
amounts)                           Three Months Ended     Six Months Ended
                                   06/30/12   06/30/11   06/30/12   06/30/11
Total FFO                           $   171    $   166    $   325    $   321
Less: discontinued residential
operations                                -          -          -        (13 )
Comparable FFO                      $   171    $   166    $   325    $   308
Per share                           $  0.30    $  0.30    $  0.57    $  0.55

COMMERCIAL PROPERTY NET OPERATING INCOME
(US Millions)                    Three Months Ended       Six Months Ended
                                06/30/12    06/30/11    06/30/12    06/30/11
Revenue from continuing
operations                       $   549     $   353     $ 1,057     $   706
Operating expenses                  (207 )      (136 )      (403 )      (273 )
Net operating income             $   342     $   217     $   654     $   433
DISCONTINUED OPERATIONS
(US Millions)                    Three Months Ended       Six Months Ended
                                06/30/12    06/30/11    06/30/12    06/30/11
Commercial revenue from
discontinued operations          $    13     $    14     $    27     $    27
Operating expenses                    (7 )        (6 )       (14 )       (13 )
Commercial net operating
income from discontinued
operations                             6           8          13          14
Residential development
revenue                                -           -           -          83
Operating expenses                     -           -           -         (70 )
Residential development net
operating income                       -           -           -          13
Interest and other income              -           -           -           1
Interest expense                      (1 )        (2 )        (3 )        (4 )
Funds from discontinued
operations                             5           6          10          24
Fair value and other gains
(losses)                             (12 )        31         (12 )        43
Income taxes related to
discontinued operations and
other                                  -          (2 )         -          (6 )
Discontinued operations          $    (7 )   $    35     $    (2 )   $    61



Contact:
Melissa Coley
Vice President, Investor Relations and Communications
Tel: 212.417.7215
Email: melissa.coley@brookfield.com

                     This information is provided by RNS
           The company news service from the London Stock Exchange

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NRABBGDIUGGBGDX -0- Aug/03/2012 11:22 GMT