February 5, 2009 / 12:42 PM / in 9 years

UPDATE 3-Brookfield FFO up; shares rise on outlook

* Q4 FFO per share $0.49 vs $0.47

* Q4 EPS $1.16 vs $0.27

* Books net gain of $339 million in quarter

* Sees 2009 FFO $1.42-$1.49 before items

* Shares in New York, Toronto gain more than 20 pct (Adds details. Updates shares. In U.S. dollars unless noted)

By Ka Yan Ng

TORONTO, Feb 5 (Reuters) - Brookfield Properties BPO.TO BPO.N, one of Manhattan’s biggest landlords, said on Thursday its quarterly funds from operations rose, and it provided a yearly outlook that exceeded expectations, sending shares 20 percent higher.

The stock rose sharply after dropping more than 70 percent since mid-September when investors anticipated mounting job losses and rising office vacancies on Wall Street and other Brookfield markets as the financial meltdown took its toll.

But the company’s outlook issued on Thursday suggested that property markets are in better shape than first thought.

Brookfield expects 2009 funds from operations to range between $1.42 to $1.49 a share, before lease termination income, special fees and gains. That compares with 2008 funds from operations of $1.59 per share and 2009 analysts’ expectations of $1.40.

Funds from operations are a benchmark measure in the real estate sector, aimed at removing the distorting effects of depreciation.

“Historically, Brookfield has been very conservative in terms of their forward-looking guidance,” said Gail Mifsud, real estate and lodging analyst at Blackmont Capital.

“By virtue of fact that the midpoint of their guidance is 5 cents ahead of where consensus estimates are currently at, I think that’s a positive indication to the Street that things aren’t as dire either on the commercial or the residential front.”

But Mifsud cautioned that above-normal business bankruptcies in the months ahead was a “wildcard” that could cloud the outlook.

By late afternoon, the stock was up about 18 percent at C$7.55 on the Toronto Stock Exchange, off a session high at C$7.86. It was up 19.7 percent at $6.17 on the New York Stock Exchange, off a session high at C$6.43.

Funds from operations rose to $191 million, or 49 cents a share, in the fourth quarter, from $187 million, or 47 cents, a year earlier.

Analysts had expected, on average, FFO of 37 cents a share, according to Reuters Estimates.

Net income rose to $458 million, or $1.16 a share, from $105 million, or 27 cents a share. There was a net gain of $339 million in the quarter.

Brookfield revalued its future tax liability with a gain of $479 million, and that was offset by a noncash impairment charge of $140 million for discontinued operations.

Still, revenue fell to $717 million from $823 million.

The company said it is still in talks with Merrill Lynch, a key tenant that recently closed its merger with Bank of America, about the 2.6 million of office space Merrill occupies at World Financial Center in New York.

During the quarter, Brookfield leased 1.8 million square feet of space, including long-term renewals with high-profile tenants such as Imperial Oil (IMO.TO) in Calgary, Alberta, and Continental Airlines (CAL.N) in Houston.

“As the U.S. economy sorts itself out and we solidify our views on the timing of its rebound, we will ... continue to be aggressive in signing leases well in advance of maturities in all of our markets,” said Ric Clark, chief executive of Brookfield Properties. “We’re cautiously optimistic about our prospects in 2009.”

The company also affirmed its quarterly dividend of 14 cents. Some of Brookfield’s U.S. peers, such as Simon Property and SL Green Realty Corp, have chopped their payouts recently.

Brookfield’s 74-million-square-foot portfolio comprises interests in 108 properties and includes the World Financial Center in Manhattan, Brookfield Place in Toronto and Bankers Hall in Calgary. (Reporting by Ka Yan Ng; Editing by Frank McGurty)

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