http://www.nydailynews.com/2002-02-07/News_and_Views/Media_and_Business/a-140532.asp?last6days=1
From: News and Views | BizNews | Thursday, February 07, 2002
Tenants Gone, Rents Remain
Lower Manhattan landlord profits from long-term leases
By ERIC HERMAN Daily News Business Writer
ower Manhattan's biggest commercial landlord is raking in big profits, even though tenants are vacating its buildings and fleeing downtown in a post-Sept. 11 exodus. Brookfield Properties, owner of One Liberty Plaza and most of the World Financial Center, reported yesterday its profits increased 9.5% from a year ago — $54 million, or 30 cents a share, up from $46 million, or 25 cents a share. They're making these kinds of numbers by holding tenants to leases even if they didn't return to their downtown space after Sept. 11. The results from publicly traded Brookfield drew kudos from analysts, who pointed out that the company had achieved them in an environment of recession, lay-offs, and increasing office vacancies. "In general, the fundamentals of real estate are really weak. But they're not going to show up in these guys' numbers," said Michael O'Rourke of Scotia Capital. The Sept. 11 attacks struck at the heart of Brookfield's downtown office portfolio. One Liberty Plaza, a 2.2 million-square-foot tower, stands across the street from Ground Zero. Immediately after the attack, some news organizations mistakenly reported it to be collapsing. In the months following its reopening, tenants have been slow to return to One Liberty. Tenants like Gruntal and Goldman Sachs are said to be considering subleasing their offices in the building. Yesterday, Brookfield chief executive Ric Clark said it was just 50% occupied, though fully leased. And all these tenants are still paying rent.
http://www.nydailynews.com/2002-02-07/News_and_...ews/Media_and_Business/a-140532.asp?last6days=1 (1 of 3) [2/10/2002 2:49:24 AM]
http://www.nydailynews.com/2002-02-07/News_and_Views/Media_and_Business/a-140532.asp?last6days=1
Tenants at One and Two World Financial Center are reluctant to return but remain on the hook for longterm leases to Brookfield.
The attacks also damaged the World Financial Center, where Brookfield owns buildings 1, 2 and 4. Lehman Brothers and Dow Jones have both announced plans to give up office space in the complex. And though Brookfield's buildings there have reopened, they are just 25% occupied.
Under normal circumstances, mostly empty office buildings cause landlords to worry. But Brookfield had protected itself by signing long-term leases with its tenants during the height of the recent real estate boom, analysts said. As a result, tenants are on the hook for years to come, unless they can find firms to sublease the space. "They were proactive in going to tenants and taking care of expirations 18 to 20 months out," said Steve Sakwa, a real estate analyst at Merrill Lynch. "They didn't just wait for a tenant to come due." Toronto-based Brookfield owns five buildings in Manhattan, including one in midtown, totaling 10.1 million square feet. Brookfield's Clark said that "no significant lease" in the company's New York buildings would expire until 2005. "We remain fully leased in this market," Clark said. Clark added the company is in a strong legal position to enforce the downtown leases, even if a tenant doesn't want to return. "While some companies may not be able to avoid the temptation to take advantage of these events ... our leases are in full force and effect," Clark said. The real challenge for Brookfield could come in the future, analysts said, if Sept. 11 proves to be a lasting drag on downtown office rents. Also, newly built office space combined with generous tax incentives could offer cheaper alternatives to Brookfield's premium buildings.
What do you think? Post your comments on our Forums.
Quick Reference Menu
http://www.nydailynews.com/2002-02-07/News_and_...ews/Media_and_Business/a-140532.asp?last6days=1 (2 of 3) [2/10/2002 2:49:24 AM]
http://www.nydailynews.com/2002-02-07/News_and_Views/Media_and_Business/a-140532.asp?last6days=1
Daily News Services
Click on any service and enjoy shopping online!
http://www.nydailynews.com/2002-02-07/News_and_...ews/Media_and_Business/a-140532.asp?last6days=1 (3 of 3) [2/10/2002 2:49:24 AM]