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We are pleased to report that 2005 was another year of solid financial performance for Brookfield Properties. Consistent with past years, we saw our revenue and commercial properties net operating income grow, and our funds from operations excluding lease termination income and gains increase by 9%. The contribution coming from our residential land development business rose to $106 million in 2005.
2005 was also another year of strong operational performance for Brookfield Properties. We made progress in achieving our goals for the year, increasing our overall occupancy rate to 94.6%, strengthening our balance sheet and positioning the company for further growth going forward.
Last year in our letter to shareholders, we outlined our strategic plan for 2005, focusing on four principle objectives: lowering vacancies and near term rollover exposure; investing our liquidity with joint venture partners who are looking to team up with experienced operating partners in order to enhance our returns on new acquisitions; acquiring our common shares for value; and capitalizing on our development inventory and expanding our development platform. During 2005 we made meaningful progress in all four areas.
Leasing
With an improving economy where demand for office space is increasing in virtually all of our markets, we are enjoying higher occupancies and rising rents. In Midtown Manhattan, we are seeing rental rates back to where they were in 2000. With single digit vacancy and very few blocks of available space, Midtown Manhattan is tightening noticibly. As Lower Manhattan has historically risen and fallen with the Midtown market, we are beginning to see an increase in tenant activity downtown with the substantial improvement in the Midtown Manhattan office market. Washington, D.C. remains steady with an ever-expanding government tenant base. Boston is still suffering the aftershocks of corporate consolidations and is seeing modest improvements only in narrow segments of the market. |
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Our Canadian markets have been our strongest recently owing to general economic improvement, steady job growth and modest new office development during the last cycle. With single digit vacancy, we believe these markets are poised for a near-term run of healthy growth.
We were successful with our three biggest leasing challenges during 2005: Three World Financial Center in Lower Manhattan; 1625 Eye Street, N.W. in Washington, D.C.; and 33 South Sixth Street in Minneapolis, all of which began the year with substantial vacancy. We improved the occupancy at Three World Financial Center to 82% from 35% at the beginning of the year; 1625 Eye Street improved to 96% from 83%; and thanks to the expansion of Target Corporation, 33 South Sixth Street ended the year at 86% leased.
Overall, we leased 3.8 million square feet of space portfolio-wide, approximately three times the amount contractually expiring. In the process, we increased our overall occupancy by 190 basis points to 94.6% and reduced 2006 rollover exposure by 90 basis points to 3.6%.
Investing
To stay competitive, last year we set out to invest side by side with joint venture partners, enhancing our returns through fees earned operating the venture. We successfully accomplished this through our Canadian office fund which was established and fully invested in one transaction. With the acquisition of the O&Y portfolio, our fifth major portfolio acquisition in 15 years, we expanded our platform in Toronto and Calgary and entered Ottawa, a new market for us. This acquisition, completed with institutional partners, increased our operating properties in Canada by 27 and added another key development site in Ottawa.
We are working to accomplish similar results with our U.S. office fund. With approximately $4 billion of capacity, we will have significant buying power for office properties and portfolios in the United States. We are contributing approximately 30% of the equity to this fund. |
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