October 29, 2010 / 2:19 PM / in 7 years

UPDATE 3-Brookfield optimistic on offices in New York, D.C.

* “Universal confidence” seen in New York, Washington

* Q3 FFO $0.32/share vs $0.28/share a year earlier

* Occupancy rate finished quarter at 95.1 pct

* Eyeing two assets in undisclosed markets (Adds details and share price activity. In U.S. dollars unless noted)

TORONTO, Oct 29 (Reuters) - Brookfield Office Properties BPO.N BPO.TO said on Friday it was seeing “universal confidence” in its important New York and Washington markets, signaling further recovery in the office properties market.

The Canadian company, which is one of Manhattan’s biggest landlords and has extensive holdings throughout North America, said it leased 1.1 million square feet of space in the third quarter, up from 693,000 square feet leased a year earlier.

Average net rent per square foot rose 9 percent to $25. The company’s managed portfolio occupancy rate finished the quarter at 95.1 percent, up 30 basis points from the previous quarter.

Chief Executive Ric Clark said that while economic concerns still linger, “leasing demand has steadily improved, at least for high quality office properties in economically dynamic and resilient markets.”

“During the quarter, the trend of improving operating fundamentals continued in most of our markets. The central business districts of New York City and Washington D.C. continue to be the markets where there’s universal confidence and noticeable visibility in this improvement,” he said.

At the same time, he’s noticed that these two cities, as well as London, are finding buyers for properties at record prices.

“The door on asset trades has opened though as capital from all over the world is chasing high-quality merchandise,” said Clark. “What we’re seeing is there are a handful of owners who are looking to basically make some trades before the end of the year in order to book gains or raise cash.”

The company, which changed its name from Brookfield Properties Corp in July and announced it would restructure to be a pure-play office firm, said it is currently mulling two properties in undisclosed markets, with a total value of up to $500 million.

PURE-PLAY TRANSFORMATION

Earlier on Friday, Brookfield reported a 37 percent rise in quarterly funds from operations (FFO) due to an increase in the amount of office space leased and higher rents.

FFO, a measure that strips out the effects of depreciation and other factors from the earnings of property companies, rose to $169 million, or 32 cents a share, in the third quarter from $123 million, or 28 cents a share, a year earlier.

Brookfield indicated it was “on track” to achieve its 2010 FFO outlook of about $1.36 per share, helped by income from debt buybacks at a discount as well as a full-quarter’s worth of contribution from its new Australian holdings.

As part of its transition, Brookfield said it had agreed to sell the company’s residential land unit for about $1.2 billion during the quarter, which is seen closing in the first quarter next year. It also acquired 16 properties in Australia.

Brookfield shares, which traded at a discount because of its residential unit, were under pressure on Friday after edging up at the start of the session. Analysts say the corporate restructuring will likely boost the stock in the longer term.

“We believe BPO will be in its own league and be the ‘go to name’ for investors seeking global exposure,” said Canaccord Genuity analyst Shant Poladian, who maintained a “buy” rating.

New York-listed Brookfield shares slipped 0.68 percent to $17.40, while the Toronto shares were off 0.73 percent at C$17.74, on Friday afternoon.

Brookfield shares in both Toronto and New York have gained more than 15 percent since the company announced its intention to convert to a pure-play office firm in July [ID:nSGE66T0V8].

$1=$1.02 Canadian Reporting by Isheeta Sanghi in Bangalore and Ka Yan Ng in Toronto; Editing by Prem Udayabhanu and Peter Galloway

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