Brookfield Properties Reports First Quarter 2010 Results
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Brookfield Properties Reports First Quarter 2010 Results

CORRECTION…by Brookfield Properties Corp.
In the Dividend Declaration section of the release, the fourth sentence should read: The quarterly dividends payable for the Class AAA Series F, G, H, I, J, K, L and N preferred shares were also declared payable on June 30, 2010 to shareholders of record at the close of business on June 15, 2010. (sted: The quarterly dividends payable for the Class AAA Series F, G, H, I, J, K, L and N preferred shares were also declared payable on June 1, 2010 to shareholders of record at the close of business on June 15, 2010.)

All dollar references are in U.S. dollars unless noted otherwise.

NEW YORK, May 06, 2010 - Brookfield Properties Corporation (BPO: NYSE, TSX) today announced that in accordance with International Financial Reporting Standards (IFRS), net income attributable to shareholders for the three months ended March 31, 2010 was $252 million or $0.48 per diluted share. On a comparative basis, due to valuation changes the company would have recorded a loss of $589 million or $1.51 per diluted share during the same period in 2009.

These results and all future results will be reported under International Financial Reporting Standards (IFRS) and historical results have been restated to IFRS for comparison purposes. A reconciliation of the results as reported to a Canadian GAAP equivalent has been included in the company's supplemental information package available at www.brookfieldproperties.com.

Funds from operations ("FFO") was $136 million or $0.25 per diluted share for the three months ended March 31, 2010, compared with $105 million or $0.27 per diluted share during the same period in 2009.

Commercial property net operating income for the first quarter of 2010 was $171 million, compared with $153 million during the first quarter of 2009. Residential property net operating income for the first quarter of 2010 was $15 million, compared with $6 million during the first quarter of 2009.

Brookfield's managed portfolio occupancy rate finished the quarter at 94.8% versus 95% at end of last quarter due to the reclassification of Bay Adelaide Centre in Toronto as an operating versus development property.

HIGHLIGHTS OF THE FIRST QUARTER

Leased 2.3 million square feet of space at an average net rent of $21 per square foot, which represents a 25% improvement versus the average expiring net rent of $17 on this space in the quarter. Renewals represent 70% of the total with new leases representing the remainder. Highlights include:

Houston - 1,252,000 square feet
  • A 20-year, 1.2-million-square-foot lease renewal and expansion with KBR at KBR Tower and 500 Jefferson St.
Toronto - 296,000 square feet
  • A new 15-year, 107,000-square-foot lease with National Bank of Canada at Exchange Tower 
  • A new 10-year, 59,000-square-foot lease with Thomson Reuters at Bay Adelaide Centre
New York - 276,000 square feet
  • An 8-year, 158,000-square-foot lease renewal and expansion with Royal Bank of Canada at One Liberty Plaza and Three World Financial Center
Calgary – 128,000 square feet
  • A 12-year, 39,000-square-foot lease renewal and expansion with RBC Dominion Securities at Bankers Hall
  • A 5-year, 30,000-square-foot lease renewal with Rogers Wireless at Altius Centre
Acquired 50% interest in commercial property development in London, marking the company’s initial expansion outside of North America. With a $64 million investment, the company entered into a 50/50 joint venture with Great Portland Estates on the 100 Bishopsgate site in the heart of the City of London, which is comprised of existing commercial real estate and has been approved for future development and expansion.

Converted subsidiary BPO Properties into premier Canadian office REIT
named Brookfield Office Properties Canada (TSX: BCR.UN) subsequent to quarter-end. The transaction included the sale of Bay Wellington Tower from Brookfield Properties to BCR for $100 million in cash, the assumption of debt, and the issuance of units of BCR valued at $20.90 per unit. Following the transaction, Brookfield Properties maintains an approximate 90% ownership interest in BCR, but has expressed its intention to decrease its interest in the future to enhance market liquidity of the REIT.

Improved the company’s liquidity
through increasing the corporate revolver to $463 million and raising $266.8 million through a preferred share equity offering. Brookfield Properties issued 11 million preferred shares, Class AAA, Series N, at C$25 per share.

Acquired a 51% interest in a $590 million loan
which is secured by the equity in a portfolio of office properties in the Washington, D.C. area. Brookfield Properties’ interest is 55% with the balance held by institutional clients.

Announced a reduction in the number of directors.
Shareholders approved at yesterday's annual general and special meeting a resolution reducing the size of the board from twelve to ten. Bruce Flatt and Linda Rabbitt will no longer serve as directors of Brookfield Properties Corporation. Independent directors continue to comprise the majority of the board.

OUTLOOK
“With fundamentals in our largest markets – New York, Washington DC, Toronto and Houston –trending upward, we are beginning to see rental rate growth,” stated Ric Clark, CEO of Brookfield Properties Corporation. “With a current focus on a number of strategic initiatives and capital deployment, we remain positive about Brookfield Properties’ position in a recovering economy.”

* * *

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 Properties defines FFO attributable to shareholders as income before fair value adjustments, depreciation, 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 unconsolidated joint ventures 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 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 Properties – Company and Real Estate Industry Risks,” and in the company’s annual 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.

Dividend Declaration
The Board of Directors of Brookfield Properties declared a quarterly common share dividend of $0.14 per share payable on June 30, 2010 to shareholders of record at the close of business on June 1, 2010. 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, I, J, K, L and N preferred shares were also declared payable on June 30, 2010 to shareholders of record at the close of business on June 15, 2010.

Conference Call
Analysts, investors and other interested parties are invited to participate in the company’s live conference call reviewing 2010 first quarter results on Thursday, May 6, 2010 at 11:00 a.m. eastern time. Scheduled speakers are Ric Clark, Chief Executive Officer; Steve Douglas, President; 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 877.409.7635, pass code 65318132, five minutes prior to the scheduled start of the call. Live audio of the call will also be available via webcast at www.brookfieldproperties.com. A replay of this call can be accessed through June 6, 2010 by dialing 800.642.1687, pass code 65318132. A replay of the webcast, as well as a podcast download, will be available at www.brookfieldproperties.com for one year.

Supplemental Information

Investors, analysts and other interested parties can access Brookfield Properties’ Supplemental Information Package before the market open on May 6, 2010 at www.brookfieldproperties.com under the Investor Relations/Financial Reports section. This additional financial information should be read in conjunction with this press release.

Brookfield Properties Profile
Brookfield Properties owns, develops and manages premier office properties. Its current managed portfolio is comprised of interests in 93 properties totaling 70 million square feet in the downtown cores of New York, Boston, Washington, D.C., Los Angeles, Houston, Toronto, Calgary and Ottawa, making it one of the largest owners of commercial real estate in North America. Landmark assets include the World Financial Center in Manhattan, Brookfield Place in Toronto, Bank of America Plaza in Los Angeles and Bankers Hall in Calgary. The company’s common shares trade on the NYSE and TSX under the symbol BPO. For more information, visit www.brookfieldproperties.com.

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

CONSOLIDATED BALANCE SHEET

(US Millions, except per share amounts)

March 31, 2010

December 31, 2009(1)

 



 

 

Assets



 

 

Investment properties



 

 

   Commercial properties

$

9,746

$

9,513

   Commercial developments


449

 

469

Equity accounted investments(2)


2,196

 

1,851

Residential developments


1,261

 

1,235

Receivables and other


2,100

 

1,924

Restricted cash and cash equivalents


39

 

39

Cash and cash equivalents


116

 

104

Assets held for sale(3)


311

 

311

 

$

16,218

$

15,446

 



 

 

Liabilities and equity



 

 

Commercial property debt

$

5,188

$

5,151

Residential development debt


364

 

177

Accounts payable and other liabilities


757

 

793

Deferred income tax liability


547

 

516

Liabilities related to assets held for sale(4)


164

 

174

Capital securities – corporate


1,043

 

1,009

Non-controlling interests – fund subsidiaries


283

 

260

Non-controlling interests – other subsidiaries


165

 

169

Preferred equity – subsidiaries


376

 

363

Preferred equity – corporate


561

 

304

Common equity


6,770

 

6,530

 

$

16,218

$

15,446

Book value per share

$

13.49

$

13.02

Book value per share – pre-tax

$

14.54

$

14.02

(1) Restated for adoption of IFRS
(2) Includes the company’s investment in the U.S. Office Fund as well as other properties and entities held through joint ventures
(3) Comprises $308 million of commercial properties and $3 million of other assets at March 31, 2010 (December 31, 2009 -- $307 million and $4 million, respectively)
(4) Comprises $152 million of commercial property debt and $12 million of other liabilities at March 31, 2010 (December 31, 2009 -- $156 million and $18 million, respectively)



CONSOLIDATED STATEMENT OF INCOME

 

 

  Three  months ended March 31

(US Millions)



 

 


2010

 

2009(1)

Total revenue



 

 

$

392

$

310

Net operating income



 

 



 

 

Commercial operations



 

 


171

 

153

Residential operations



 

 


15

 

6

 



 

 


186

 

159

Interest and other income



 

 


18

 

7




 

 


204

 

166

Expenses



 

 



 

 

Interest expense



 

 



 

 

     Commercial property debt



 

 


71

 

72

     Capital securities – corporate



 

 


14

 

12

General and administrative expense



 

 


28

 

27

Depreciation



 

 


3

 

3

Income before fair value gains (losses), share of net earnings (losses) from equity accounted investments and income taxes


88

 

 

52

Fair value gains (losses)



 

 


69

 

(386)

Share of net earnings (losses) from equity accounted investments(2)


147

 

(293)

Income (loss) before income tax expense



 

 


304

 

(627)

Income tax expense (benefit)

 

 


31

 

(34)

Net income (loss) from continuing operations


 

 


273

 

(593)

Income from discontinued operations


 

 


4

 

3

Net income (loss) for the period



 

 

$

277

$

     (590)

Non-controlling interests



 

 


25

 

(1)

Net income (loss) attributable to shareholders


 

 

$

252

$

     (589)

(1) Restated for adoption of IFRS
(2) Includes fair-value gains of $93 million in 2010 and losses of ($342) million in 2009



 

 

  Three  months ended March 31

(US Dollars)



 

 


2010

 

2009(1)

Earnings (loss) per share attributable to shareholders – basic and diluted



 

 



 

 

Commercial operations



 

 

$

0.47

$

(1.52)

Discontinued operations



 

 


0.01

 

    0.01

 



 

 

$

0.48

$

(1.51)

(1) Restated for adoption of IFRS


RECONCILIATION TO FUNDS FROM OPERATIONS

 

 

Three months ended March 31

(US Millions, except per share amounts)



 

 


2010

 

2009(1)

Net income (loss) attributable to shareholders


 

 

$

252

$

(589)      

Add (deduct) non-cash and extraordinary items:


 

 


       

 

 

Depreciation



 

 


3

 

     3

Income taxes



 

 


31

 

  (34)

Fair value adjustments



 

 


(69)

 

   386

Non-controlling interests in above items



 

 


12

 

 (3)

Fair value adjustments in earnings from equity accounted investments



 

 


(93)

 

342

Funds from operations



 

 

$

136

$

105

Preferred share dividends



 

 


(9)

 

(1)

FFO to common shareholders



 

 

$

127

$

104

Weighted average common shares outstanding


 

 


505.4

 

 391.2

Funds from operations per share


 

 

$

0.25

$

0.27

(1) Restated for adoption of IFRS


COMMERCIAL PROPERTY NET OPERATING INCOME

 

 

Three months ended March 31

(US Millions)



 

 


2010

 

2009(1)

Revenue from continuing operations (2)



 

 

$

291

$

264

Operating expenses



 

 


    (120)

 

    (111)

Net operating income



 

 

$

171

$

153

(1) Restated for adoption of IFRS
(2) Including fee income


RESIDENTIAL DEVELOPMENT NET OPERATING INCOME

 

 

Three months ended March 31

(US Millions)



 

 


2010

 

2009

Revenue



 

 

$

90

$

41

Operating expenses



 

 


      (75)

 

(35)

Net operating income



 

 

$

15

$

6



DISCONTINUED OPERATIONS(1)

 

 

Three months ended March 31

(US Millions)



 

 


2010

 

2009

Revenue from discontinued operations



 

 

$

14

$

13

Operating expenses



 

 


(7)

 

(7)

Net operating income from discontinued operations



 

 


7

 

6

Interest expense



 

 


          (3)

 

          (3)

Funds from discontinued operations



 

 

$

4

$

3

(1) Includes four assets held for sale in Minneapolis
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