Brookfield Office Properties Inc. (
, a real estate investment trust (REIT), reported second quarter
2012 FFO (funds from operations) of 30 cents per share, beating the
Zacks Consensus Estimate by 3 cents. However, the FFO was in line
with the year-ago number. Total FFO stood at $171.0 million
compared with $166.0 million in the year-ago quarter.
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Total revenue during the quarter was $569.0 million, up 46.7% from
$388.0 million in the year-ago period. Moreover, revenue
substantially surpassed the Zacks Consensus Estimate of $554.0
Same-store occupancy marginally dipped to 93.2% from 93.6% in the
prior-year quarter. However, overall occupancy rose to 93.4% from
93.3% a year ago. The overall occupancy growth was attributable to
rise in occupancy in the company's Canadian portfolio, partially
offset by a dip in occupancy in the company's Australian portfolio.
Brookfield's commercial property net operating income stood at
$342.0 million, up 57.6% from $217.0 million, mainly due to the
impact of the property acquisitions and the consolidation of the
U.S. Office Fund.
During the quarter, the company leased 2.6 million square feet of
space at an average net rent of $28.59 per square foot. It
represents a 34% increase over expiring net rents during the
Acquisitions & Dispositions
In continuation of its ongoing acquisition activity, Brookfield has
acquired a portfolio of office buildings and development sites in
London. The portfolio, spanning approximately 2.3 million square
feet, was acquired for $871.0 million. Brookfield has also debuted
in the Seattle market with the acquisition of Metropolitan Park
East and West office towers. The 856,000-square-foot Class A office
campus has been acquired for $210.0 million.
In addition, the company also acquired 799 9th Street, NW located
in Washington, DC. The 265,000-square-foot property has been
acquired for $106.0 million.
During the second quarter, Brookfield financed a loan to the tune
of $1.2 billion for a property in North America, bearing an average
rate of 4.0% and having an average term of 4.6 years. The company
generated net proceeds of $600 million and saved 135-basis points
over the existing debt through this deal.
In addition, the company also refinanced a loan worth $140 million
for a property in Australia, bearing an average rate of 7% and
average term of 3.4 years. Consequently, the company saved
105-basis points over the existing debt.
Brookfield has a healthy balance sheet with very manageable
near-term debt maturities and plenty of cash. At the end of the
second quarter 2012, the company had cash and cash equivalents of
$281.0 million and total outstanding debt of $12,147 million.
Brookfield declared a quarterly dividend of 14 cents per share, to
be paid on September 28, 2012 to common shareholders of record as
of September 1, 2012.
Based on Brookfield's significant leasing activity, ongoing
acquisition activity, strong balance sheet and liquidity position,
we expect analysts to up their estimates in the coming days.
Currently, the Zacks Consensus Estimate for 2012 and 2013 are
pegged at $1.11 and $1.16, respectively.
Brookfield carries a Zacks #2 Rank, implying a short-term Buy
rating. However, we reiterate our long-term Neutral recommendation
on the stock. One of its competitors -
Vornado Realty Trust (
- carries a Zacks #3 Rank (short-term Hold rating).
Note: FFO, a widely accepted and reported measure of REIT's
performance, is derived by adding depreciation, amortization and
other non-cash expenses to net income.