February 7, 2008 / 12:40 PM / 10 years ago

UPDATE 2-Brookfield shares sag on softer 2008 outlook

(Adds details, share price, quotes; in U.S. dollars unless noted)

By John McCrank

TORONTO, Feb 7 (Reuters) - Shares of Brookfield Properties Corp BPO.TO BPO.N sagged on Thursday, after the company reported higher fourth-quarter funds from operations, but said it saw its 2008 funds coming in below 2007 levels.

Brookfield stock was down 49 Canadian cents, or 2.4 percent, at C$20.11 on the Toronto Stock Exchange by early afternoon. The shares had fallen as much as 6.5 percent earlier in the session.

Brookfield, one of Manhattan’s biggest landlords, said funds from operations were $187 million, or 47 cents a diluted share, for the quarter ended Dec. 31, largely due to strength in its commercial leasing operations. That was up from $125 million, or 35 cents a share in the year-ago quarter.

That was right on target with what analysts had expected, according to Reuters Estimates.

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

FFO for the year was $629 million, or $1.57 a share, up from $443 million, or $1.25 per diluted share in 2006.

Looking ahead, Brookfield put its full-year 2008 diluted FFO per share, prior to lease termination income, special fees and gains, at a midpoint of $1.48.

BMO Capital Markets, which had forecast Brookfield’s FFO for 2008 at $1.78, called the guidance “surprisingly low” in a note.

Brookfield said its guidance reflected a slowdown in land sales volumes, which it expects to continue through the first half of the year.

“As best we can tell, the slowdown is related to an oversupply of resale inventory and has resulted in a reduction in our expected (net operating income) in our residential business to $178 million at the midpoint,” Chief Financial Officer Bryan Davis said in a conference call.

“That’s still a healthy 25 percent return on our average invested capital in that business in an annual period, but 25 percent down from our actual 2007 results, which translates to about 15 cents on a per share basis.”

Davis added that growth in its commercial properties division would help offset some of those declines.

Earnings for the fourth quarter rose to $105 million, or 26 cents a share, from $21 million, or 5 cents a share.

Net income for the year was $240 million, or 59 cents per diluted share, compared with $135 million, or 37 cents per diluted share.

During the quarter, Brookfield said it leased 3.8 million square feet of space.

For the year, it leased 8.8 million square feet at an average net rent of $30.32 a square foot, which represents a 28 percent increase versus the average in-place net rent of $23.63 per square foot on expiring leases.

The company declared a quarterly dividend of 14 cents a share payable on March 31.

Brookfield’s portfolio is comprised of interests in 109 properties and includes the World Financial Center in Manhattan, Brookfield Place in Toronto, Bank of America Plaza in Los Angeles and Bankers Hall in Calgary.

$1=$1.01 Canadian Editing by Rob Wilson

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