February 11, 2011 / 2:24 PM / 7 years ago

UPDATE 2-Brookfield Office outlook below analyst view

* Landlord sees FFO/share of $1.05-$1.10 this year

* Forecast is below analyst view of $1.12

* Serious talks on leasing 8.3 mln sq ft of space

* Company aims to be net acquirer this year

* Shares off 1 pct in Toronto, edge up in New York (Adds details. In U.S. dollars unless noted)

TORONTO, Feb 11 (Reuters) - Brookfield Office Properties BPO.TO, one of Manhattan’s largest landlords, offered a financial outlook on Friday that fell short of what analysts had expected, pushing its Toronto-listed shares lower.

The company also said it was in discussions to lease out more than 8 million square feet of space, and its chief executive estimated that the talks could result in contracts for about 6 million square feet.

Brookfield, with a portfolio of 109 properties totaling more than 78 million square feet, leased 6.9 million square feet of space in 2010, the second best year in the company’s history after 2007. The company has a five-year average leasing total of 6.5 million square feet.

In a favorable sign, overall vacancy has fallen in Brookfield’s key markets and economic conditions are on the mend, Ric Clark, Brookfield’s chief executive officer said in a conference call with analysts.

Investors focused on the company’s financial forecast, which left their shares mixed on the day. In Toronto, Brookfield fell 1.03 percent to C$17.28, but they edged up 0.17 percent to $17.53 in New York.

Brookfield sees funds from operation (FFO) of $584 million to $609 million for the year, or $1.05 to $1.10 a share. That’s below the average expectations of annual FFO at $1.12 per share of 15 analysts, according to Thomson Reuters I/B/E/S.

FFO is a measure that excludes the effects of depreciation and other factors from the earnings of property companies.

“I think that their forecasts are very modest to be honest with you. I never found Brookfield to be the kind of people who really went overboard and got too excited about themselves,” said Fred Ketchen, director of equity trading at ScotiaMcLeod.

Clark said the annual FFO share outlook would have been about 7 cents higher at $1.15 if not for the 1 million square feet in lease rollovers at properties in New York and Boston.

“No doubt filling this space is a priority for us this year,” he said.


The company’s forecast also excludes assumption of any acquisitions this year, though Brookfield said it expects to be a net acquirer.

“We are however seeing a heightened level of assets being offered for sale that are interesting and hope to be a net acquirer for the year. This is not predictable enough for us to include in guidance,” said Clark.

It was unlikely the company would enter new markets this year, but did not rule that out. Its current roster of primary markets include the downtown cores of New York, Houston, Toronto and Calgary.

Last year it added the Australian cities of Sydney, Melbourne and Perth, as it announced plans to exit the residential side of the business to focus exclusively on office properties. [ID:nSGE66T0V8]

Brookfield said other priorities this year included assessing economic viability of new developments in markets such as New York, London and Toronto, as well as more integration of its Australian properties.

Earlier, the office landlord reported a 4 percent rise in fourth-quarter FFO, rising to $216 million, or 40 cents per share, compared with $208 million, or 40 cents per share, in the year-before quarter.

It leased 2.2 million square feet of space and at an average net rent per square foot was $36 per square foot. Its managed portfolio occupancy rate finished the quarter at 95.0 percent, consistent with year-end 2009.

Reporting by Ka Yan Ng and Solarina Ho in Toronto and Amruta Sabnis in Bangalore; Editing by Frank McGurty

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