BPO Properties Reports Third Quarter 2009 Results

TORONTO--(BUSINESS WIRE)--BPO Properties Ltd. (TSX: BPP) today announced financial results for the quarter ended September 30, 2009.

“We feel a sense of optimism that the economy may be in the early stages of a recovery”

BPO Properties’ net income for the three months ended September 30, 2009 was $13.4 million ($0.43 per share), compared to $15.4 million ($0.43 per share) during the same period in 2008. Net operating income from commercial properties totaled $49.6 million, compared to $49.2 million during the same period in 2008.

Funds from operations was $26.4 million ($0.89 per share) for the three months ended September 30, 2009, compared to $38.6 million ($1.24 per share) during the same period in 2008.

HIGHLIGHTS OF THE THIRD QUARTER

Opened Bay Adelaide Centre, Toronto, the first development built to achieve a Leadership in Energy and Environmental Design (LEED) Gold Standard and the first major development in Toronto’s financial district in 17 years. Standing 51 stories tall, the 1.2-million-square-foot office tower adheres to strict building efficiency guidelines, including optimization of energy, light and water, and the use of local and recycled building materials. The tower is 73 percent leased.

Commenced the recladding of First Canadian Place, Toronto. Along with ownership partners, the company will thoroughly renovate Canada’s tallest office tower including a total recladding of the building’s exterior with laminated glass spandrel panels replacing the existing white marble. The project is seeking LEED – EB:OM (Leadership in Energy and Environmental Design for Existing Buildings: Operations and Maintenance) certification and is expected to be complete by the end of 2011.

Renewed normal course issuer bid. BPO Properties may, during the twelve month period commencing September 22, 2009 and ending September 21, 2010, purchase on the Toronto Stock Exchange up to 332,410 common shares, representing approximately 5% of its issued and outstanding common shares.

STOCK SPLIT

On November 3, 2009, the Board of Directors approved a three-for-one stock split in the form of a stock dividend. Subject to regulatory approval, shareholders will receive two additional BPP common shares for each common share held. Fractional shares will be paid in cash at the prevailing market price. The stock dividend will be payable on December 31, 2009 to shareholders of record at the close of business on December 8, 2009.

BPO Properties is undertaking the stock split to ensure its shares remain accessible to individual shareholders, and to further enhance the liquidity of the company's shares. The dividend will have no unfavorable tax consequences, and will not dilute shareholders' equity. The number of shares subject to the company’s current normal course issuer bid will be adjusted upwards to reflect the stock split.

OPERATIONS REVIEW

BPO Properties continued its pro-active leasing strategy in the third quarter of 2009, with the portfolio 98.2% leased at the end of the quarter, compared to a Canadian national average of 92.0%. During the quarter, BPO Properties leased 327,000 square feet of space.

Transactional highlights from the third quarter include:

191,000 square feet in Toronto

• A one-year lease renewal with the Department of Justice at Exchange Tower for 144,000 square feet
• A new three-year lease with Lombard Canada Ltd. at 105 Adelaide St. West for 10,000 square feet

102,000 square feet at Canadian Western Bank Place in Edmonton

• A five-year lease renewal with CGI Information Systems for 57,000 square feet
• A 10-year lease renewal and expansion with Witten Management Ltd. for 39,000 square feet

34,000 in other markets

OUTLOOK

“We feel a sense of optimism that the economy may be in the early stages of a recovery,” said Tom Farley, CEO of BPO Properties Ltd. “Our strong leasing activity and high occupancy across the portfolio keeps us well-positioned for continued success.”

Net Operating Income and FFO

This press release and accompanying financial information make reference to net operating income and funds from operations ("FFO") on a total and per share basis. Net operating income is defined as income from property operations after operating expenses have been deducted, but prior to deducting financing, administration, depreciation, amortization and income tax expenses. FFO is defined as net income prior to extraordinary items, one-time transaction costs, future income taxes, certain other non-cash items and depreciation and amortization. The company uses net operating income and FFO to assess its operating results. Net operating income is important in assessing operating performance and FFO is a relevant measure to analyze real estate, as commercial properties generally appreciate rather than depreciate. The company provides the components of net operating income and a full reconciliation from net income to FFO with the financial statements accompanying this press release. The company reconciles FFO to net income as opposed to cash flow from operating activities as it believes net income is the most comparable measure. Net operating income and FFO are both non-GAAP measures which do not have any standard meaning prescribed by GAAP and therefore may not be comparable to similar measures presented by other companies.

Forward-Looking Statements

This press release, particularly the “Outlook” section, contains forward-looking statements and information within the meaning of applicable securities legislation. Although BPO Properties believes that the anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forward-looking statements and information because they involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements and information. Accordingly, the company cannot give any assurance that its expectations will in fact occur and cautions that actual results may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those set forth in the forward-looking statements and information include general economic conditions; local real estate conditions, including the development of properties in close proximity to the company’s properties; timely leasing of newly-developed properties and re-leasing of occupied square footage upon expiration; dependence on tenants' financial condition; the uncertainties of real estate development and acquisition activity; the ability to effectively integrate acquisitions; interest rates; availability of equity and debt financing; the impact of newly-adopted accounting principles on the company's accounting policies and on period-to-period comparisons of financial results; and other risks and factors described from time to time in the documents filed by the company with the securities regulators in Canada, including in the Annual Information Form under the heading “Business of BPO Properties – Company and Real Estate Industry Risks” and in the company’s annual report under the heading “Management’s Discussion and Analysis.” The company undertakes no obligation to publicly update or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, except as required by law.

Dividend Declaration

The Board of Directors of BPO Properties declared a quarterly common share dividend of $0.30 per share (on a pre-split basis), payable on December 30, 2009 to shareholders of record at the close of business on December 1, 2009. This dividend payment will be made one day prior to the stock split, which will be payable on December 31, 2009 to shareholders of record at the close of business on December 8, 2009. Subsequent dividend payments will be adjusted to reflect the impact of the stock split.

The Board of Directors also declared dividends on series G, J and M preferred shares, payable February 14, 2010 to shareholders of record at the close of business on January 29, 2010, for the period November 14, 2009 to February 13, 2010. The dividend per preferred share is to be computed in accordance with the terms of the shares.

Conference Call

BPO Properties’ third quarter 2009 conference call can be accessed by teleconference on Wednesday, November 4 at 9:00am E.T. at 866.551.1530, pass code: 7184947#. The call will be archived through December 4, 2009 and can be accessed by dialing 800.551.4520, pass code: 255716#. The conference call can also be accessed by webcast on the BPO Properties website at www.bpoproperties.com.

Supplemental Information

Investors, analysts and other interested parties can access BPO Properties' Supplemental Information Package on BPO Properties' Web site under the Investor Relations/Financial Reports section. This additional financial information should be read in conjunction with this press release.

BPO Properties Profile

BPO Properties Ltd., 90% owned by Brookfield Properties Corporation, is a Canadian company that invests in real estate, focusing on the ownership and value enhancement of premier office properties. The current property portfolio is comprised of interests in 28 commercial properties totaling 18.3 million square feet and five development sites totaling 5.4 million square feet. Landmark properties include First Canadian Place in Toronto and Bankers Hall in Calgary. BPO Properties’ common shares trade on the TSX under the symbol BPP. For more information, visit www.bpoproperties.com.

Contact

Investor relations and media inquiries should be directed to Melissa Coley, Vice President, Investor Relations and Communications at [phone]. Inquiries regarding financial results should be directed to Bryan Davis, Senior Vice President and Chief Financial Officer, at [phone].

CONSOLIDATED BALANCE SHEET
(Millions)	September 30, 2009		December 31, 2008
Assets
Commercial properties	$	1,379.9	$	1,338.0
Commercial developments		733.3		689.1
Loans receivable		—		150.6
Tenant receivables and other assets		80.2		82.3
Cash and cash equivalents		150.7		61.5
Intangible assets		25.4		30.3
	$	2,369.5	$	2,351.8
Liabilities and shareholders’ equity
Commercial and development property debt	$	1,417.3	$	1,255.3
Accounts payable and other liabilities		112.9		135.6
Intangible liabilities		64.5		71.9
Future income tax liabilities		32.0		28.6
Shareholders’ equity		742.8		860.4
	$	2,369.5	$	2,351.8

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
	Three months ended Sept. 30				Nine months ended Sept. 30
(Millions, except per share amounts)		2009		2008		2009		2008
Commercial Properties
Revenue	$	85.4	$	84.6	$	257.5	$	254.7
Expenses		35.8		35.4		107.8		109.0
Net operating income		49.6		49.2		149.7		145.7
Loans and investment income		0.2		4.0		3.1		12.4
		49.8		53.2		152.8		158.1
Expenses
Interest expense		10.6		9.5		29.7		28.1
General and administrative expenses		5.8		5.1		16.1		15.4
		33.4		38.6		107.0		114.6
Depreciation and amortization		13.0		13.3		39.1		38.8
Income taxes		7.0		9.9		23.2		25.2
Net income and comprehensive income		13.4		15.4		44.7		50.6
Net income per common share	$	0.43	$	0.43	$	1.42	$	1.38

RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS (“FFO”)
	Three months ended Sept. 30				Nine months ended Sept. 30
(Millions)		2009		2008		2009		2008
Net income	$	13.4	$	15.4	$	44.7	$	50.6
Add:
Depreciation and amortization		13.0		13.3		39.1		38.8
Future income taxes^1		—		9.9		5.1		25.2
FFO	$	26.4	$	38.6	$	88.9	$	114.6

¹Funds from operations was redefined in the first quarter as net income prior to extraordinary items, one-time transaction costs, depreciation and amortization, future income taxes, and certain non-cash items.

FFO PER COMMON SHARE
	Three months ended Sept. 30						Nine months ended Sept. 30
(Millions, except per share amounts)		2009			2008			2009			2008
FFO	$	26.4		$	38.6		$	88.9		$	114.6
Preferred share dividends		(1.1	)		(3.3	)		(4.5	)		(11.3	)
Funds available to common shareholders		25.3			35.3			84.4			103.3
Weighted average shares outstanding		28.3			28.4			28.3			28.5
FFO per common share		0.89			1.24			2.98			3.62