Related News:
Brookfield to Exit Housing, Pursues Pure Office Play
Brookfield Properties Corp., the commercial real estate landlord with $1.2 billion in residential assets, plans to exit the housing business to focus on owning and running office space worldwide.
Brookfield is in talks to merge its Carma Development unit, known for building homes in oil-rich towns of western Canada and Texas, with Brookfield Asset Management’s Brookfield Homes Corp. Brookfield Properties also plans to pay Brookfield Asset Management $1.4 billion for a 41 percent stake in 16 Australian office holdings, the companies said in statements today.
Brookfield Properties, a subsidiary of Toronto-based Brookfield Asset Management, will change its name to Brookfield Office Properties Inc. to reflect the shift in focus.
“What we envision is having the -- or one of the -- highest quality collections of office assets in the most important developed countries in the world,” Brookfield Properties Chief Executive Officer Richard “Ric” Clark said on a conference call. “Not in every market, but very focused on the best, most resilient markets.”
The U.S., Canada, Australia and the U.K are target markets, he said.
Selling Brookfield Properties’ home-building unit, which the New York-based company said in a separate statement today contributed about $33 million in revenue in the second quarter, will free the landlord to invest more in offices.
‘Ton of Sense’
“It makes a ton of sense,” Karine MacIndoe, a Toronto- based real estate analyst with BMO Capital Markets, said today in a telephone interview. “There’s a fair amount of distress coming down the pipeline related to debt refinancing that these guys could take advantage of, and having global exposure could help in that.”
She rates the shares “outperform.”
Expanding into Australia and the U.K. puts Brookfield in harmony with multinational corporations who need office space in financial capitals, said Clark.
“Major businesses that are involved in real estate decision making, we find, are located in one of our major cities,” Clark said. “It’s typically one person who’s in charge of those things.”
Brookfield Office will have stakes in 62 U.S. office sites, 31 in Canada, 16 in Australia and one in the U.K.
Ten of the Australian holdings it’s investing in are in Sydney, four in Melbourne and two in Perth. The purchase is forecast to close in the third quarter, Brookfield Properties said.
Nussbaum’s Opposition
The overall plan is “a net negative to shareholders,” UBS real estate analyst Ross Nussbaum said in a note to investors today.
“Expense synergies are unlikely,” he wrote. “We see added complexity and a less focused management team. Additional foreign exchange exposure is undesirable.”
Brookfield Properties second-quarter funds from operations climbed nearly 70 percent to $209 million, or 40 cents a share, it said today in a separate news release. The shares were little changed at $15.53 in New York Stock Exchange composite trading at 2:36 p.m.
FFO is a measure of cash flow that excludes depreciation and other items. It doesn’t conform to generally accepted accounting principles.
To contact the reporter on this story: David M. Levitt in New York at dlevitt@bloomberg.net
Rate These Stories
Rate this Page