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Brookfield Office Properties Reports Strong Second Quarter 2011 Results

Conference Call

Analysts, investors and other interested parties are invited to participate in the company’s live conference call reviewing second quarter 2011 results on Friday, August 5, 2011 at 11:00 a.m. eastern time. Scheduled speakers are Ric Clark, chief executive officer, and Bryan Davis, chief financial officer. Management’s presentation will be followed by a question and answer period.

To participate in the conference call, please dial 888.596.2565, pass code 3780464, five minutes prior to the scheduled start of the call. Live audio of the call will also be available via webcast at www.brookfieldofficeproperties.com. A replay of this call can be accessed through September 5, 2011 by dialing 888.203.1112, pass code 3780464. A replay of the webcast, as well as a podcast download, will be available at www.brookfieldofficeproperties.com for one year.

Supplemental Information

Investors, analysts and other interested parties can access Brookfield Office Properties’ Supplemental Information Package before the market open on August 5, 2011 at www.brookfieldofficeproperties.com under the Investors/Financial Reports section. This additional financial information should be read in conjunction with this press release.

Brookfield Office Properties Profile

Brookfield Office Properties owns, develops and manages premier office properties in the United States, Canada and Australia. Its portfolio is comprised of interests in 109 properties totaling more than 78 million square feet in the downtown cores of New York, Washington, D.C., Houston, Los Angeles, Toronto, Calgary, Ottawa, Sydney, Melbourne and Perth, making it the global leader in the ownership and management of office assets. Landmark properties include the World Financial Center in Manhattan, Brookfield Place in Toronto, Bank of America Plaza in Los Angeles, Bankers Hall in Calgary, Darling Park in Sydney and City Square in Perth. The company’s common shares trade on the NYSE and TSX under the symbol BPO. For more information, visit www.brookfieldofficeproperties.com.

CONSOLIDATED BALANCE SHEETS

(US Millions, except per share amounts) June 30, 2011   December 31, 2010
 
Assets
Investment properties
Commercial properties $ 13,560 $ 12,742
Commercial developments 1,261 1,050
Equity accounted investments (1) 3,482 2,957
Receivables and other 1,912 1,596
Restricted cash and cash equivalents 18 42
Cash and cash equivalents 162 142
Assets held for sale (2)   362     1,891
Total assets $ 20,757   $ 20,420
 
Liabilities
Commercial property debt $ 7,189 $ 7,261
Accounts payable and other liabilities 793 936
Deferred tax liabilities 489 366
Liabilities associated with assets held for sale (3) 169 749
Capital securities   1,050     1,038
Total liabilities   9,690     10,350
Equity
Preferred equity 848 848
Common equity   8,765     7,959
Total shareholders’ equity 9,613 8,807
Non-controlling interests   1,454     1,263
Total equity   11,067     10,070
Total liabilities and equity $ 20,757   $ 20,420
Book value per common share $ 17.27 $ 15.75
Book value per common share – pre-tax $ 18.21   $ 16.46

(1) Includes the company’s investment in the U.S. Office Fund as well as other properties and entities held through joint ventures and associates

(2) Comprises $361 million of commercial properties, nil of residential development inventory, and $1 million of other assets at June 30, 2011 (December 31, 2010 -- $316 million, $1,244 million, and $331 million, respectively)

(3) Comprises $164 million of commercial property debt, nil of residential development debt, and $5 million of other liabilities at June 30, 2011 (December 31, 2010 -- $165 million, $489 million, and $95 million, respectively)

CONSOLIDATED STATEMENTS OF INCOME

(US Millions)   Three months ended   Six months ended
    6/30/11   6/30/10   6/30/11   6/30/10
Total revenue   $ 399   $ 307     $ 779   $ 606
Net operating income        
Commercial operations 217 180 433 351
Interest and other income     46     13       73     28
263 193 506 379
Expenses
Interest
Commercial property debt 101 76 202 147
Capital securities – corporate 14 15 29 29
General and administrative 33 31 68 59
Depreciation     2     4       4     6

Income before gains (losses), share of net earnings (losses) from equity accounted investments and income taxes

113 67

 

203 138
Fair value and other gains (losses) 320 (43 ) 450 23
Share of net earnings (losses) from equity accounted investments (1)     354     148       472     298
Income (loss) before income tax expense 787 172 1,125 459
Income tax expense (benefit)     96     13       129     42
Net income (loss) from continuing operations 691 159 996 417
Income from discontinued operations     35     33       61     50
Net income (loss) 726 192 1,057 467
Non-controlling interests     95     20       120     45
Net income (loss) attributable to common shareholders   $ 631   $ 172     $ 937   $ 422

(1) Includes valuation gains of $287 million and $85 million, respectively, for the three months ended June 30, 2011 and June 30, 2010 and gains of $341 million and $178 million for the six months ended June 30, 2011 and June 30, 2010, respectively

    Three months ended   Six months ended
    6/30/11   6/30/10   6/30/11   6/30/10

Earnings (loss) per share attributable to common shareholders - basic

       
Continuing operations $ 1.16 $ 0.25 $ 1.69 $ 0.70
Discontinued operations     0.07     0.08     0.12     0.11
    $ 1.23   $ 0.33   $ 1.81   $ 0.81
    Three months ended   Six months ended
    6/30/11   6/30/10   6/30/11   6/30/10

Earnings (loss) per share attributable to common shareholders - diluted

       
Continuing operations $ 1.05 $ 0.25 $ 1.54 $ 0.66
Discontinued operations     0.06     0.06     0.11     0.09
    $ 1.11   $ 0.31   $ 1.65   $ 0.75

RECONCILATION TO FUNDS FROM OPERATIONS

(US Millions, except per share amounts)   Three months ended   Six months ended
    6/30/11   6/30/10   6/30/11   6/30/10
Net income (loss) attributable to common shareholders   $ 631   $ 172   $ 937   $ 422
Add (deduct) non-cash and certain other items:
Fair value and other (gains) losses (320 ) 43 (450 ) (23 )

Fair value adjustments in earnings from equity accountedinvestments

(287 ) (85 ) (341 ) (178 )
Non-controlling interests in above items 77 9 86 20
Income taxes 96 13 129 42
Discontinued operations (1) (29 ) 7 (37 ) 12
Cash payments under interest rate swap contracts     (2 )     (3 )     (3 )     (6 )
Funds from operations before gains 166 156 321 289
Realized gain on investment           53             53  
Funds from operations $ 166 $ 209 $ 321 $ 342
Preferred share dividends     (14 )     (8 )     (28 )     (17 )
FFO attributable to common shareholders   $ 152     $ 201     $ 293     $ 325  
Weighted average common shares outstanding 508.8 506.6 508.5 506.0
FFO before gains per common share $ 0.30 $ 0.30 $ 0.58 $ 0.55
FFO per common share   $ 0.30     $ 0.40     $ 0.58     $ 0.65  

(1) Reflects fair value and other gains net of income taxes

COMMERCIAL PROPERTY NET OPERATING INCOME

(US Millions)  

Three months ended

 

Six months ended

    6/30/11   6/30/10   6/30/11   6/30/10
Revenue from continuing operations   $ 353   $ 296   $ 706   $ 587
Operating expenses     (136 )     (116 )     (273 )     (236 )
Net operating income   $ 217     $ 180     $ 433     $ 351  

DISCONTINUED OPERATIONS

(US Millions)   Three months ended   Six months ended
    6/30/11   6/30/10   6/30/11   6/30/10
Commercial revenue from discontinued operations   $ 14   $ 14   $ 27   $ 28
Operating expenses     (6 )     (7 )     (13 )     (14 )
Commercial net operating income from discontinued operations 8 7 14 14
Residential development revenue 136 83 226
Operating expenses           (103 )     (70 )     (178 )
Residential development net operating income 33 13 48
Interest and other income 3 1 6
Interest expense     (2 )     (3 )     (4 )     (6 )
Funds from discontinued operations 6 40 24 62
Fair value and other gains (losses) 31 2 43 2
Income taxes related to discontinued operations and other     (2 )     (9 )     (6 )     (14 )
Discontinued operations   $ 35     $ 33     $ 61     $ 50  




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