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Improved leasing market boosts Brookfield

Brookfield Office Properties CEO Ric Clark

Neville Elder/Neville Elder 2007

Brookfield Office Properties says the companies who fill its office towers in key markets such as New York and Washington are acting more decisively when it comes to leasing office space, as it reported fourth-quarter results that were just above analysts' expectations.

The company, which has offices in most large Canadian and U.S. cities, said funds from operations in the quarter were 40 cents a share, the same as last year. Analysts had expected 39 cents. Brookfield cited an improving leasing market for the gains.

"Having achieved leasing activity of 6.9-million square feet in 2010, our second highest annual leasing volume ever and 50 per cent higher than 2009, we begin 2011 observing confidence returning to our primary office markets," chief executive officer Ric Clark said.

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The company issued full-year guidance, saying funds from operations should come in around $1.05 to $1.10 a share as leasing rates stay the same as in 2010, slightly lower net operating income because of lease rollovers in New York and Boston and a Canadian dollar trading at parity with the U.S. dollar.¢

Royal Bank analyst Neil Downey said the guidance was lower than he expected, as he predicted the company's shares could come under some pressure.

"BPO appears to be further behind the curve on re-leasing efforts than we'd like to see," he said.

The company had a very busy quarter. It refinanced approximately $1-billion of loans at lower interest rates, generating net proceeds of almost $500-million. It raised another $750-million through other initiatives, including a preferred shares issue and the sale of Canadian Western Bank Place and the Enbridge Tower in Edmonton. Meanwhile, it spent $435-million on acquisitions in Houston and Washington.

Its occupancy rate at the end of its fiscal year was 95 per cent, and leased 2.2-million square feet of space during the fourth quarter at an average net rent of $36 a square foot.

"Full year leasing totalled 6.9 million square feet, 1.5 times 2009's full year leasing activity and above the company's five-year average leasing total of 6.5 million square feet," the company said.

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