Brookfield Aims for Pure Office Play

NEW YORK CITY—Brookfield Properties Corp. said Friday it’s taking steps to transform itself into a pure-play office company. To be known as Brookfield Office Properties, the renamed firm is buying a stake in 16 Australian towers from Brookfield Asset Management for $1.6 billion and will divest its remaining residential business.

The Australian office properties, located in Sydney, Melbourne and Perth, total eight million square feet and have a total value of $3.4 billion, BOP says. They’re currently 99% leased. BOP plans to fund the purchase with $1.3 billion in cash and a $750-million bridge acquisition facility from BAM. The transaction is expected to close by the end of this quarter.

In a statement, BOP’s CEO Ric Clark says the strategy “will position Brookfield Properties at the forefront of the global office property scene.” He cites “great operational synergies” from “expanding internationally to dynamic gateway cities such as Sydney, Melbourne and Perth, Australia, with similar characteristics to our current North American markets.” Currently, BOP has a 70-million-square-foot office portfolio across the US, Canada and the UK.

BOP said Friday it’s starting discussions with Fairfax, VA-based Brookfield Homes Corp. about a possible merger with BOP’s Carma Developers division, thus completing an exit from the residential sector that began with the creation of Brookfield Homes in 2003. If the merger goes through, BOP would divest its interest in the residential business through a stock offering. Brookfield Homes operates primarily in California and the Washington, DC metro area, while Carma’s holdings are mainly in Colorado, Texas and Alberta.

In other news, BOP said Friday its funds from operations for the second quarter rose about 70% to $209 million compared with $123 million for Q2 2009. Commercial property NOI for the Q2 was $180 million, up $18 million year over year. Residential NOI increased to $33 million from $13 million a year ago.