More 3Q Fun! Brookfield’s Results Include Merrill Lynch Mulling

Brookfield Properties, which, along with its holdings in Canada and across the States, owns the World Financial Center downtown and is developing two sleek skyscrapers on Ninth Avenue, held its third quarter earnings conference call this morning.

While there was plenty of talk about the impact of Hurricane Ike on its Southwestern holdings and its massive lease transaction with Petro-Canada in Calgary, the topic likely most on New Yorkers’ minds is the status of Merrill Lynch’s 4.2 million-square-foot headquarters at World Financial Center. The firm was recently bought by Bank of America, which, along with the Durst Organization, just completed its new headquarters at One Bryant Park.

The phone call did little to sate anyone’s curiosity.

“Our renewal talks are on hold pending [Merrill’s] acquisition by Bank of America,” said Brookfield’s leasing head. “As far as we can tell, the integration efforts are in early stages as far as assessing each firm’s real estate holdings…”

 

Here’s the release below:

NEW YORK–(BUSINESS WIRE)–Oct. 29, 2008–Brookfield Properties Corporation (BPO: NYSE, TSX) today announced that net income for the three months ended September 30, 2008 was $174 million or $0.44 per diluted share, compared to $3 million or nil per diluted share during the same period in 2007. The current period includes a $127 million net gain or $0.32 per share on the sale of a 50% interest in one property in Toronto, while the prior period included a $5 million net gain or $0.01 per share on the sale of two properties. The current period also includes a one-time net cost of $8 million or $0.02 per share as a result of the impact of the damage caused by Hurricane Ike. The prior period also included one-time transaction costs of $35 million or $0.09 per diluted share.

Funds from operations (“FFO”) was $152 million or $0.38 per diluted share for the three months ended September 30, 2008 compared with $146 million or $0.36 per diluted share during the same period in 2007. Excluding the impact of Hurricane Ike, FFO was $160 million or $0.40 per share.

Comparable commercial property net operating income for the third quarter of 2008 was $341 million, compared to $324 million during the third quarter of 2007. This excludes the impact of damage from Hurricane Ike which otherwise reduced commercial property net operating income to $328 million. Residential operations were stable and contributed $45 million of net operating income, compared with $43 million during the same period in 2007.

During the third quarter, Brookfield Properties leased 1.9 million square feet of space in its managed portfolio at an average net rent of $28.42 per square foot, which represents a 22% improvement over the average in-place net rent at the beginning of the quarter. The company’s managed-portfolio occupancy rate finished the quarter at 96.0%.

HIGHLIGHTS OF THE THIRD QUARTER

Completed a number of financings, including:

Renewed $300 million corporate revolving credit facility with

Brookfield Asset Management Inc. into 2010;

Completed a bridge facility of C$300 million on Petro Canada

Centre, Calgary, subsequent to the third quarter for a one

year term, raising net proceeds of C$25 million at ownership.

With the recent signing of a one million square foot lease,

this asset will be permanently financed in 2009; and

Extended or refinanced a further $155 million through 2009 and

beyond, including a 12-year, 6.24% fixed rate refinancing of

22 Front Street, Toronto.

Closed on the disposition of a 50% interest in TD Canada Trust Tower for gross proceeds of C$425 million and a net gain of $127 million. The 51-story, 1.1-million-square-foot tower is part of the company’s 2.6-million-square-foot Brookfield Place office and retail complex in Toronto’s financial district.

Sustained net $8 million of non-recoverable property losses to Houston ass ets from Hurricane Ike. Losses resulted from wind and water damage from compromised roofs and windows, and other associated collateral damage. Permanent or temporary clean-up and repairs have been completed. All properties have been reopened and are functioning normally.

Repurchased 1.269 million common shares during the quarter for a total of $22.3 million at an average price of $17.59 per share. Subsequent to the quarter, the company acquired a further 200,000 shares at an average price of $13.97. Since the inception of the company’s normal course issuer bid in 1999, Brookfield Properties has invested $457.2 million, acquiring 38.2 million common shares at an average price of $11.96.

Advanced developments under construction:

Bay Adelaide Centre, Toronto, was topped off on September 23;

the project remains on schedule for Q3 2009 completion and is

72% leased;

Bankers Court, Calgary, which is 100% leased, was topped off

on September 5. Curtain wall installation is nearing

completion;

Two Reston Crescent, Virginia, received its Certificate of

Occupancy subsequent to the third quarter;

77 K Street, Washington, DC, was completed in the third

quarter;

1225 Connecticut Ave., Washington, DC, curtain wall was

completed and mechanical equipment and electrical switchboards

installed; substantial completion is expected in the fourth

quarter 2008; and

Manhattan West, New York, continued early works on the

railroad track bed in preparation for caisson installation.

Leased 1.9 million square feet of space. New leases represent 28% of the total while renewals represent the remaining 72%. Third quarter leasing highlights include:

Calgary – 1.1 million square feet

One-million-square-foot extension and expansion for 15 years

with Petro-Canada at Petro-Canada Centre

New 78,000-square-foot lease for ten years with Petrobank

Energy at Petro-Canada Centre

Toronto – 247,000 square feet

New 99,000-square-foot lease for ten years with Citco at

Hudson’s Bay Centre

Minneapolis – 140,000 square feet

119,000-square-foot renewal for four years with Neiman Marcus

at Gaviidae Common

Houston – 122,000 square feet

49,000-square-foot expansion for 11 years with Devon Energy at

Three Allen Center

OUTLOOK

“With a well-leased portfolio and low near-term lease rollover exposure, Brookfield Properties is strongly positioned to maintain steady financial performance through the economic downturn. At the same time, we are working to generate additional liquidity in order to take advantage of opportunities that will undoubtedly arise in this market,” stated Ric Clark, President & CEO of Brookfield Properties Corporation.

More 3Q Fun! Brookfield’s Results Include Merrill Lynch Mulling