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NEW YORK CITY-Brookfield Properties chief executive Ric Clark says he sees moderate signs of recovery such as an increase in momentum in Lower Manhattan and is “cautiously optimistic” about an economic recovery.

Clark said Brookfield was “well in line with our expectations” and that he was confident Brookfield would achieve 15% growth in funds from operations this year. The company also raised its dividend on common shares by 50% to 15 cents a share. For the three months ended June 30, Brookfield, which has more than half its portfolio in New York, earned $53 million, or 30 cents a share, before lease termination income and gains. That was up from earnings of $51 million, or 28 cents a share, in the year-before quarter. Funds from operations, before lease termination income and gains, were $90 million, or 53 cents a share, up from $82 million, or 47 cents a share, in the year-ago quarter.

Revenue fell to $301 million from $322 million. In early January, Brookfield Properties spun-off its US homebuilding subsidiary, Brookfield Homes Corp., a residential homebuilder which also develops land in master-planned communities and infill locations.

“It seems that momentum (in Lower Manhattan) is starting to build…Tenants also have been starting to relocate downtown from midtown,” Clark said. In April, Eckerd signed a 10-year lease for 9,000 sf of street level retail space in Four World Financial Center. The new Eckerd store, its first in Manhattan, will be 20% larger than a top-performing drugstore previously located in the adjacent World Trade Center retail complex. It utilizes new, never-before-leased space at the World Financial Center. At that time, Brookfield also announced the renewal of two leases at the World Financial Center with Hallmark Gold Crown and the Kodak Colortek Image Store for a total of 4,500 sf Hallmark and Kodak, forced to close by the events of September 11 built new stores, extending their leases to ten years. The company also recorded a 60,000 sf 20-year lease with American Express at Three World Financial. Clark commented that Midtown shadow space has made for increased competition for leases in that part of the city.

Additional highlights of the quarter include leasing a total of 800,000 sf of space, nearly half of it in Minneapolis and the rest in Denver, Toronto, New York, Calgary and Boston. The company is nearing completion of construction on the 300 Madison Ave. development at 42nd Street in midtown with an anticipated delivery date in the fall of 2003. The curtain wall is erected and lobby construction is nearly complete. Testing and commissioning of the mechanical, electrical and plumbing systems are 80% complete. Brookfield completed $110 million preferred share issue. The company issued 4.4 million Class AAA Preference Shares, Series G at a price of $25 per share yielding 5.25% per annum. The company also acquired 2.5 million common shares of the company at an average price of $21.19 per share during the second quarter and also purchased 574,900 additional voting common shares of BPO Properties.

Several senior management changes including the promotion of Dennis Friedrich to president of US commercial operations and the hiring of David Sternberg as senior VP responsible for running the Midwest and Mountain regions in the US were announced during the quarter. In Canada, Steve Douglas was promoted to president of Canadian commercial operations and will also remain as CFO. Tom Farley has been promoted to executive VP and COO responsible for Canadian operations. In addition, at the company’s headquarters in New York, Frederick Kelly was named senior VP, finance, responsible for managing the debt profile of the company and directing the company’s strategic initiatives. Craig Laurie was appointed senior VP, finance, responsible for corporate finance, financial reporting, tax and treasury for Brookfield and its subsidiaries.

“Through disciplined asset and capital management, we will continue to increase our return on capital, maintain growth in net asset value, and enhance value for shareholders,” Clark concluded. He added that the company is actively in discussions regarding upcoming renewals at 1.4 million sf of office space, which represents 4.5% of its portfolio.

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