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NEW YORK CITY-One of the king-sized shoes in Downtown’s office market–the 2.6 million square feet Merrill Lynch may give up at Brookfield Properties’ World Financial Center in 2013–has yet to hit the floor. “There’s nothing new to report” on progress to keep the financial services giant, now part of Bank of America, at the WFC, Brookfield CEO Ric Clark said here Friday during a Q1 investors’ conference call. He added, “We remain in dialogue” with Merrill on how much space it may want to hang onto, as well as with Merrill’s subtenants.

The first quarter saw the company’s net income reach $38 million, up from $23 million for the same quarter last year. Its funds from operations was $127 million, in line with what senior management expected if slightly short of what outside analysts had forecast, Clark said. “Overall, we’re on track for the year.”

Helping the New York City and Toronto-based Brookfield’s Q1 results was leasing activity of 1.8 million square feet, led by Target Corp.’s 886,000-square-foot renewal at 33 S. Sixth St. in Minneapolis. At the WFC, Brookfield secured a new 15-year lease with Locke, Lord, Bissell & Liddell for 110,000 square feet at Three World Financial Center, and a new 10-year sublease with Sonnenschein, Nath & Rosenthal for 125,000 square feet at Two World Financial Center during Q1.

Nonetheless, Clark noted that office vacancy increased–by an average of 80 basis point–in all 13 of Brookfield’s core office markets in the US and Canada, marking the first time this has occurred in quite a while. Dennis Friedrich, president and CEO of Brookfield’s US commercial operations, pointed out that new supply remains “very controlled” in these markets, and he observed that tenant activity is up. While this hasn’t translated into an uptick in leasing, Friedrich said, it does show that tenants are once again thinking about their future space needs.

“Until some job growth occurs, we feel pretty confident that leasing activity will be driven by renewals and a flight to quality,” he said.

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