Brookfield Office Properties reports Q1 2011 FFO of US$155M compared with US$133M a year ago, earnings of US$306M versus $250M a year ago; CEO says company's outlook on 2011 performance 'positive'

Michelle Rivera

NEW YORK , May 6, 2011 (press release) – Brookfield Office Properties Inc. (BPO: NYSE, TSX) today announced that net income attributable to common shareholders for the quarter ended March 31, 2011 was $306 million or $0.54 per diluted share, compared with $250 million or $0.44 per diluted share in the first quarter of 2010.

Funds from operations (“FFO”) for the quarter ended March 31, 2011 was $155 million or $0.28 per diluted common share, compared with $133 million or $0.25 per diluted common share during the same period in 2010.

Commercial property net operating income for the first quarter of 2011 increased to $216 million, compared with $171 million in the first quarter of 2010, largely as a result of the contribution from the Australian portfolio acquired in September 2010.

OUTLOOK

“We are encouraged by the record leasing activity accomplished during the quarter as we witnessed accelerated recovery in our primary markets,” stated Ric Clark, president and chief executive officer of Brookfield Office Properties. “With a solid backlog of advanced leasing discussions, developments positioned to commence in our primary markets, and progress toward our strategic goals, we remain positive about our 2011 performance.”

HIGHLIGHTS OF THE FIRST QUARTER

Leased 2.8 million square feet of space during the quarter at an average net rent of $30.40 per square foot. This leasing volume surpasses the five-year average first quarter leasing volume by 89%. The portfolio occupancy rate finished the quarter at 93.6%. Highlights from the quarter include:

Toronto – 777,000 square feet

* A 10-year renewal with Bank of Montreal for 503,000 square feet at First Canadian Place; Bank of Montreal is committed to over one million square feet at First Canadian Place through 2024
* An 11-year renewal with Lombard Canada Ltd. for 144,000 square feet at 105 Adelaide St.

Calgary – 763,000 square feet

* A 15-year renewal and expansion with Enbridge Inc. for 300,000 square feet at Fifth Avenue Place
* A 17-year renewal with Suncor Energy Inc. for 196,000 square feet at Suncor Energy Centre

New York – 514,000 square feet

* A new 15-year lease with Oppenheimer Funds for 235,000 square feet at Two World Financial Center
* A new 15-year lease with Commerzbank for 173,000 square feet at Two World Financial Center

Melbourne – 224,000 square feet

* A 10-year lease with the Commonwealth of Australia for 205,000 square feet at Defence Plaza

Los Angeles – 166,000 square feet

* A seven-year lease with Lockton Insurance Brokers for 72,000 square feet at Ernst & Young Plaza

Sydney – 98,000 square feet

* A six-year lease with Parsons Brickerhoff for 85,000 square feet at Ernst & Young Centre

Completed the pre-leasing of the City Square development in Perth with a 90,000 square foot lease with PricewaterhouseCoopers and a 54,000 square foot lease with Barrick Gold subsequent to quarter-end. The development is expected to be completed in early 2012.

Completed the transformation into a pure-play office owner and operator by divesting of residential real estate division. Brookfield Office Properties’ residential land business has merged with Brookfield Homes Corporation to form Brookfield Residential Properties Inc. (NYSE, TSX: BRP). Brookfield Office Properties has received a C$480 million note and 51,500,000 common shares of BRP representing a 51% equity interest. Brookfield Asset Management has agreed to purchase all BRP shares not subscribed for in the rights offering described below. Brookfield Office Properties will receive $10 per BRP share or $515 million in total on closing of the rights offering.

Filed a preliminary prospectus outlining the details of the rights offering subsequent to the first quarter which will enable BPO shareholders to purchase shares of BRP at a price of $10 per share, trade their right or let their right expire. The rights will be listed on the NYSE and TSX commencing May 9 and May 10, 2011, respectively, and will be exercisable until June 10, 2011. Shareholders of record on May 12, 2011 will receive one right for each common share of BPO they hold on the record date.

Refinanced or secured new financing of $1.2 billion, generating net proceeds of approximately $242 million, including:

* One Shelley Street, Sydney, for A$193 million at a BBSY + 2.15% interest rate and five-year term
* 1200 K Street, NW, Washington, DC, for $138 million at a 5.879% interest rate and ten-year term
* Queen’s Quay Terminal, Toronto, for C$90 million at an interest rate of 5.4% and ten-year term
* 1550 and 1560 Wilson Blvd, Arlington, VA, for $70 million at an interest rate of LIBOR + 2.50% and five-year term
* 650 Massachusetts Ave NW, Washington, DC, for $69 million at LIBOR + 2.75% interest rate and five-year term
* Bethesda Crescent, Bethesda, MD, for $62 million with a 5.576% interest rate and ten-year term
* 1400 K Street, NW, Washington DC, for $54 million with a 5.30% interest rate and seven-year term
* Renewed corporate revolving credit facility for $565 million for a five-year term at LIBOR + 2.1%.

Refinanced an additional $630 million subsequent to the first quarter, including:

* Landmark Square (Los Angeles), One Allen Center and Continental Center I (Houston) for $265 million at an interest rate of LIBOR + 3.25%
* Two Allen Center, Houston, for $200 million at an interest rate of 6.45% for a seven-year term
* Three Allen Center, Houston, for $165 million at an interest rate of 6.12% for a five-year term

Repaid, directly and indirectly, $382 million of U.S. Office Fund acquisition financing.

Sold a 49% interest in Heritage Plaza, Houston, to an institutional investment fund for approximately $60 million.

Elected two additional directors, F. Allan McDonald and Bruce Flatt.

Officially changed name of company to “Brookfield Office Properties Inc.” following shareholder approval at Annual General Meeting on May 4. The name change reflects company’s global pure-play office strategy.

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Dividend Declaration
The Board of Directors of Brookfield Office Properties declared a quarterly common share dividend of $0.14 per share payable on June 30, 2011 to shareholders of record at the close of business on June 1, 2011. Shareholders resident in the United States will receive payment in U.S. dollars and shareholders resident in Canada will receive their dividends in Canadian dollars at the exchange rate on the record date, unless they elect otherwise. Common shareholders have the option to participate in the company’s Dividend Reinvestment Program, in which all or a portion of cash dividends can be automatically reinvested in common shares. The quarterly dividends payable for the Class AAA Series F, G, H, I, J, K, L, N and P preferred shares were also declared payable on June 30, 2011 to shareholders of record at the close of business on June 15, 2011.

Net Operating Income and FFO
This press release and accompanying financial information make reference to net operating income and funds from operations on a total and per share basis. Net operating income is defined as income from property operations after operating expenses have been deducted, but prior to deducting financing, administrative, fair value adjustments and income tax expenses. Brookfield Office Properties defines FFO attributable to common shareholders as income before fair value adjustments, income taxes and certain other non-cash items as and when they arise, less non-controlling interests in the foregoing. FFO is determined as FFO from consolidated properties, FFO from equity accounted investments and FFO from discontinued operations. The company uses net operating income and FFO to assess its operating results. Net operating income is important in assessing operating performance and FFO is a widely-used measure to analyze real estate. The company provides the components of net operating income and a full reconciliation from net income to FFO with the financial information accompanying this press release. The company reconciles FFO to net income as opposed to cash flow from operating activities as it believes net income is the most comparable measure. Net operating income and FFO are both measures which do not have any standard meaning and therefore may not be comparable to similar measures presented by other companies.

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