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New Lease Agreements for Brookfield

Zacks Equity Research

Brookfield Office Properties Inc. (BPO) recently signed agreements with two renowned energy companies, Rosetta Resources Operating LP and Chevron U.S.A. Inc., to lease properties totaling 272,000 square feet of space in downtown Houston.

Brookfield leased 108,565 square feet of space at Heritage Plaza to Rosetta Resources Operating LP. The property is located at 1111 Bagby St. spanning a total of 1.2 million square feet of office space. In addition, Brookfield extended its lease agreement with Chevron U.S.A. Inc by leasing 163,950 square feet at 1600 Smith Street (formerly known as Continental Center I). The property encompasses 1.1 million square feet of office space.

Rosetta Resources Operating LP., a subsidiary of Rosetta Resources Inc., (ROSE), provides oil and gas exploration services in U.S. Founded in 2002, the company is based in Houston, Texas.

Chevron U.S.A. Inc., a subsidiary of Chevron Corp. (CVX), explores, extracts and produces crude oil, natural gas, and natural gas liquids in U.S. Founded in 1977; the company is based in San Ramon, California.

We believe Brookfield will benefit from both the agreements as it will drive the company’s rental revenues in the coming quarters. Moreover, as energy sector companies are very active in the Houston office market, we are hopeful on the long-term prospects of the agreements.

Based in New York, Brookfield is a publicly owned real estate investment firm (:REIT). The company owns, develops and manages premier office properties in the United States, Canada and Australia. It also provides ancillary real estate business services, such as tenant service and amenities. The company mainly invests in high growth and high-barrier-to-entry markets with sustainable cash flows.

Brookfield’s portfolio consists of 108 properties spanning more than 78 million square feet in the downtown cores of New York, Washington, D.C., Houston, Los Angeles, Denver, Toronto, Calgary, Ottawa, Sydney, Melbourne and Perth, making it the global leader in the management of office assets.

The Zacks Consensus Estimate (FFO per share) for Brookfield for 2012 and 2013 currently stands at $1.11 and $1.15, respectively. This represents year-over-year decline of 60.72% for 2012 and growth of 3.45% for 2013.

Brookfield currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.

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