July 29, 2009 / 1:33 AM / in 8 years

Brookfield Q2 FFO seen dipping

TORONTO (Reuters) - Brookfield Properties, one of Manhattan’s biggest landlords, is expected to report lower earnings on Wednesday, and offer clues to how its office holdings are faring during recession.

Analysts expect funds from operations of 36 cents a unit, according to Reuters Estimates. Funds from operations is a real estate benchmark measure that strips out the distorting effects of depreciation and other factors from earnings.

The U.S. office market vacancy rate reached 15.9 percent in the second quarter, the highest level in four years, and rent fell by the largest amount in more than seven years as demand remained weak, a leading real estate research firm said this month.

Those numbers do not bode well for office landlords such as Brookfield. But the property company has a diversified portfolio and long term leases that do not expire all at once. Brookfield has office towers in Washington, D.C., Boston, Denver, Houston and across Canada.

“Even if the market is tough, it’s not like the vacancy rate is going to go to 10 percent from 5 percent in six months. They’re not impacted in such a material way in the short term,” said Mark Rothschild, real estate analyst at Genuity Capital Markets.

Questions remain on the fate of a large lease to Merrill Lynch now that Bank of America has acquired Merrill. Last quarter, Brookfield Properties said it is still in discussions with the company, a key tenant that occupies about 2.6 million square feet at World Financial Center in New York.

“But that doesn’t expire for a few years. So while we’re not expecting any good news, we’re not expecting anything supermaterial from their U.S. office market portfolio,” said Rothschild.

A relatively bright outlook from Manhattan office landlord SL Green Realty Corp may give some clues on the New York market.

The table below shows analyst per share forecasts for Brookfield’s results, as polled by Reuters.

Q2 FFO (per share)

Mean $0.36

Median $0.36

High $0.39

Low $0.33

Sample size 11

Year ago $0.40

Reporting by Ka Yan Ng; editing by Janet Guttsman

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