* Plans to convert into a pure-play office company
* To enter Australian market, exit homes
* FFO $0.40/shr vs $0.32/shr last year
* Leased 1.3 mln sq feet in second quarter
* Shares fall more than 3 pct in Toronto, New York
(Adds details, commentary. In U.S. dollars unless noted)
By Ka Yan Ng and Isheeta Sanghi
OTTAWA/BANGALORE, July 30 Brookfield Properties
Corp BPO.TO, one of Manhattan's biggest landlords, posted a
70 percent rise in funds from operations on Friday, and said it
plans to transform itself into a pure-play office property
As part of the conversion, Brookfield plans to acquire 8
million square feet of space in 16 office properties in
Australia from controlling shareholder Brookfield Asset
Management Inc (BAMa.TO) for A$1.6 billion ($1.44 billion).
The second part of the plan is to exit the residential land
and housing business, which has grown substantially over the
years, particularly in Western Canada. The property company
said it plans to start discussions with Brookfield Homes Corp
BHS.N about a possible merger of its residential business
with Brookfield Homes.
Ric Clark, chief executive at Brookfield Properties,
described the transformation as a whole as "very profitable".
"These transactions collectively will position Brookfield
Properties as the only publicly listed Class A office company
that has a presence in four of the world's most developed
countries," he told analysts on a conference call.
The stock failed to react positively to the news, sliding
3.55 percent to C$15.47 in Toronto, and down 3.3 percent to
$15.04 in New York.
The Australian office properties, which Brookfield said it
has been studying for a year, are attractive because they are
compatible with the company's existing focus on tenants in the
financial services, resource and government sectors. The
offices are located in Sydney, Melbourne and Perth.
Toronto-based Brookfield Properties said it will fund the
deal from its available liquidity of $1.3 billion and from a
$750 million subordinate bridge acquisition facility from
To reflect its repositioning, Brookfield Properties said it
will rename itself Brookfield Office Properties. Its ticker
symbols remain the same in Toronto and New York.
FFO RISES, "SERIOUS" LEASING TALKS
The company said funds from operations for the second
quarter rose to $209 million, or 40 cents per share, from $123
million, or 32 cents per share, last year.
Funds from operations is a property sector measure that
strips out the effects of depreciation and other factors from
Brookfield said the results included a realized gain of $53
million, or 10 cents a share.
In the latest quarter, Brookfield said it leased 1.3
million square feet of space, up from 750,000 square feet
leased in the year-before quarter. Its managed portfolio
occupancy rate finished the quarter at 94.8 percent.
Clark said the company was in "serious discussions" on
leasing more than 4.3 million square feet of space, and could
potentially top 2008's overall completed leasing of 6.4 mln
square feet by yearend.
"Although it's a little bit early to say this with complete
confidence," he added.
Brookfield operates in several high-profile U.S. markets,
including Manhattan, with buildings such as the World Financial
Center. A large chunk of its revenue comes from New York, one
of the key cities in its 70 million-square-foot portfolio.
Clark said New York, Washington, and Toronto appear to be
in full recovery mode supported by economic fundamentals.
(Reporting by Ka Yan Ng in Ottawa and Isheeta Sanghi in
Bangalore; Editing by Prem Udayabhanu and Peter Galloway)