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* Plans to convert into a pure-play office company
* To enter Australian market, exit homes
* FFO $0.40/shr vs $0.32/shr last year
* Leased 1.3 mln sq feet in second quarter
* Shares fall more than 3 pct in Toronto, New York
(Adds details, commentary. In U.S. dollars unless noted)
By Ka Yan Ng and Isheeta Sanghi
OTTAWA/BANGALORE, (Reuters) - Brookfield Properties
Corp, one of Manhattan's biggest landlords, posted a
70 percent rise in funds from operations Friday, and said it
plans to transform itself into a pure-play office property
company.
As part of the conversion, Brookfield plans to acquire 8
million square feet of space in 16 office properties in
Australia from controlling shareholder Brookfield Asset
Management Inc for A$1.6 billion ($1.44 billion).
The second part of the plan is to exit the residential land
and housing business, which has grown substantially over the
years, particularly in Western Canada. The property company
said it plans to start discussions with Brookfield Homes Corp
about a possible merger of its residential business
with Brookfield Homes.
Ric Clark, chief executive at Brookfield Properties,
described the transformation as a whole as "very profitable".
"These transactions collectively will position Brookfield
Properties as the only publicly listed Class A office company
that has a presence in four of the world's most developed
countries," he told analysts on a conference call.
The stock failed to react positively to the news, sliding
3.55 percent to C$15.47 in Toronto, and down 3.3 percent to
$15.04 in New York.
The Australian office properties, which Brookfield said it
has been studying for a year, are attractive because they are
compatible with the company's existing focus on tenants in the
financial services, resource and government sectors. The
offices are located in Sydney, Melbourne and Perth.
Toronto-based Brookfield Properties said it will fund the
deal from its available liquidity of $1.3 billion and from a
$750 million subordinate bridge acquisition facility from
Brookfield Asset.
To reflect its repositioning, Brookfield Properties said it
will rename itself Brookfield Office Properties. Its ticker
symbols remain the same in Toronto and New York.
FFO RISES, "SERIOUS" LEASING TALKS
The company said funds from operations for the second
quarter rose to $209 million, or 40 cents per share, from $123
million, or 32 cents per share, last year.
Funds from operations is a property sector measure that
strips out the effects of depreciation and other factors from
earnings.
Brookfield said the results included a realized gain of $53
million, or 10 cents a share.
In the latest quarter, Brookfield said it leased 1.3
million square feet of space, up from 750,000 square feet
leased in the year-before quarter. Its managed portfolio
occupancy rate finished the quarter at 94.8 percent.
Clark said the company was in "serious discussions" on
leasing more than 4.3 million square feet of space, and could
potentially top 2008's overall completed leasing of 6.4 mln
square feet by yearend.
"Although it's a little bit early to say this with complete
confidence," he added.
Brookfield operates in several high-profile U.S. markets,
including Manhattan, with buildings such as the World Financial
Center. A large chunk of its revenue comes from New York, one
of the key cities in its 70 million-square-foot portfolio.
Clark said New York, Washington, and Toronto appear to be
in full recovery mode supported by economic fundamentals.
($1=$1.111 Australian)
($1=$1.03 Canadian)
(Reporting by Ka Yan Ng in Ottawa and Isheeta Sanghi in
Bangalore; Editing by Prem Udayabhanu and Peter Galloway)
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WASHINGTON -(Dow Jones)- The U.S. House of Representatives earlier Friday passed a bill to allow the Federal Housing Administration to nearly triple the premiums it charges borrowers.
The legislation is a narrower version of a broader bill to put the FHA on firmer financial footing. That measure passed the House last month but remains mired in the Senate.
The measure approved by the House on Friday would raise the statutory cap on the FHA's premiums to 1.55% from 0.55%.
The Obama administration has sought the cap increase, saying it would give the FHA more flexibility to shore up its finances.
Similar language is also contained in bills that passed House and Senate committees this week to fund the Department of Housing and Urban Development.
Copyright © 2010 Dow Jones Newswires
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* Q2 FFO $1.38/share vs Street view $1.34
* Sales at mall and outlet tenants' stores up 4.9 pct
* Maintains 2010 forecast
* Shares rise 1.7 percent
(Adds CEO comments, updates stock price)
By Ilaina Jonas
NEW YORK (Reuters) - Simon Property Group Inc
reported higher-than-expected quarterly funds from
operations Friday, citing lower expenses and higher
occupancy at its malls and outlet centers.
The largest U.S. mall owner is rebounding from the economic
downturn, although it is still dealing with the bankruptcies of
some of its tenants, store closings and rent breaks it gave to
help some retailers to survive.
"We are in a recovery mode," David Simon, chairman and
chief executive, told analysts on a conference call. "The mood
is much better. It's not in the period that we were in in the
'06-07 period. It may take a little more time, but it is moving
in that direction."
The company also is cautiously spending more of its
multibillion-dollar cash pile by paying down debt, developing
new outlet centers at home and abroad, and redeveloping and
expanding certain U.S. malls, following its failed attempt to
buy rival General Growth Properties Inc.
"We are going to continue to de-lever if there are not the
acquisitions opportunities to pursue," Simon said.
The company also has dusted off plans for about 15 to 20
redevelopment projects shelved during the credit crisis, and it
plans to double its development budget to $200 million this
year. Yet Simon also said acquisition opportunities may return,
given the uncertainty of the U.S. economy.
Simon reported that second-quarter funds from operations,
or FFO, rose 55 percent to $487.7 million, or $1.38 per share,
from $313.1 million or 96 cents per share a year earlier when
it recorded a noncash charge of 42 cents a share.
Analysts on average expected $1.34 per share, according to
Thomson Reuters I/B/E/S.
FFO, a measure of performance for real estate investment
trusts, removes the profit-reducing effect of depreciation of
the company's malls and shopping centers.
Simon maintained its forecast for full-year FFO of $5.30 to
$5.40, including an earlier debt-related charge. Analysts
estimate $5.37 per share. But the original forecast anticipated
that its Prime Outlet acquisitions already occurred. David
Simon said it would be revised once that deal closes.
Quarterly net operating income, which measures the net
amount of cash properties generate, rose 1.9 percent from a
year earlier, a sign that business is improving after the
downturn.
The Indianapolis-based company owns or has an interest in
373 properties comprising 256 million square feet of leasable
space in North America, Europe and Asia. It owns such
well-trafficked malls as Roosevelt Field on New York's Long
Island and Sawgrass Mills Circle near Fort Lauderdale, Florida,
as well as outlet centers such as Woodbury Commons north of New
York City.
Simon recently lost its battle to buy General Growth, the
No. 2 U.S. mall owner. It dropped out of the bidding after
another suitor, a group lead by Brookfield Asset Management,
agreed to bankroll General Growth's exit from bankruptcy in
exchange for most of the company and more than 100 million
warrants.
As of the end of June, Simon was sitting on $2.6 billion of
cash and had access to $3.3 billion under its revolving credit
line.
"One of the great lessons of the credit crisis is having
extra cash is good thing," Sandler O'Neill analyst Alex
Goldfarb said.
The company said on Friday it expects to record a gain of
$280 million in the third quarter on the sale of Simon Ivanhoe,
which owns seven shopping centers in France and Poland, to
Unibail-Rodamco.
In the second quarter, sales at its mall and outlet
tenants' stores rose 4.9 percent to $474 per square foot from
$456 a year earlier. Mall owners receive a percentage of their
tenants' sales above a certain threshold. Higher sales also
generally allow a landlord to charge more rent.
Second-quarter occupancy increased to 93.1 percent from
92.3 percent. Average rent rose slightly, to $38.62 per square
foot from $38.49 a year earlier.
Shares of Simon were up 1.7 percent at $89.42 in late trade
on the New York Stock Exchange.
(Reporting by Ilaina Jonas; Editing by John Wallace and Steve
Orlofsky and Matthew Lewis)
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CHICAGO -(Dow Jones)- Caterpillar Inc. (CAT) said Friday it will construct a plant in Winston-Salem, N.C., to supply axles for the company's mining equipment.
Construction of the 850,000-square-foot factory is scheduled to start in November with initial production anticipated in early 2012. The plant's capabilities will include component machining, testing and assembly of axles for large mining machines.
The plant's projected employment is expected to reach about 400 people over five years. Caterpillar already employs about 1,000 people at nine sites throughout North Carolina. The state hosts the headquarters and assembly facilities for Caterpillar's compact construction equipment division.
The new plant announcement is the latest move by the Peoria, Ill., company to increase its production volumes and product lines for mining equipment.
The plant "will allow us to substantially increase our capacity, improve process capability and flow of our operations," said Hans Haefeli, vice president for the company's Advanced Components & Systems Division, in a written statement.
Caterpillar announced in June that it will enter the market for large mining shovels beginning in 2011. The company's shovel line will eventually feature up to five models ranging from a 125-ton shovel to an 800-ton model. The shovels will be produced at Caterpillar's Aurora, Ill., plant near Chicago.
Caterpillar also intends to boost production of its heavy-haul mining trucks at assembly plants in Decatur, Ill., and Chennai, India. Increased production of copper, iron ore and other mined commodities is creating increased demand for large machinery used in surface mines throughout the world.
Caterpillar, the world's largest manufacturer of bulldozers, wheel loaders and other construction equipment, is relocating its production of motor graders from Decatur to a new plant in Arkansas. The company is expected to soon announce a site for a new plant to assemble excavators that are now being produced in Aurora.
Caterpillar's stock was recently trading up 22 cents at $69.62 a share.
Copyright © 2010 Dow Jones Newswires
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NEW YORK -(Dow Jones)- Simon Property Group Inc. (SPG) has scaled back its $700 million acquisition of Prime Outlets Inc. by three properties as the U.S. Federal Trade Commission continues to review the deal for antitrust issues.
"There has been a modification to the transaction," Chief Executive David Simon said during a conference call with investors and analysts Friday. He declined to provide specifics as to why Prime Outlets was maintaining interests in the three properties or how the financials of the deal have changed because of the reduced amount of centers.
The three properties that now will remain with Prime owner Lightstone Group LLC rather than being included in the Simon deal are Prime Outlets in St. Augustine, Fla., and two development sites for outlet centers in Grand Prairie, Texas, and Livermore Valley, Calif.
"Our acquisition of Prime...is still being reviewed by the FTC and we are fully cooperating in that review," Simon reiterated.
Simon Property announced the acquisition of Prime Outlets in December. Simon Property is already the country's largest owner of retail properties by number, with 323 malls and other shopping centers. Adding Prime's 22 centers would cement Simon's dominance of the resilient outlet-center market, giving it a total of 63 outlet properties. That's twice as many as No. 2 outlet-center operator Tanger Factory Outlet Centers Inc. (SKT).
Controlling so many properties promises to give Simon an enormous advantage when negotiating leases with retailers. The company would have the clout to do multiple deals, potentially insisting that retailers take space in poorly performing locations as a condition of getting prime real estate in the most popular centers.
"U.S. antitrust authorities have consistently recognized that the retail industry is highly competitive and fragmented," Simon said.
Copyright © 2010 Dow Jones Newswires
