J.P. Morgan Reiterates Neutral Rating on Brookfield Office Properties (BPO)

J.P. Morgan is out with a research report this afternoon, where it reiterates its neutral rating on Brookfield Office Properties BPO; it has a $17.00 price target on the stock. The JPM analysts cited the company's recent earnings release, noting that BPO reported 4Q FFO that was in line with Bloomberg consensus, but $0.04 below the JPM estimate. The analysts noted that the good news is that the core business performed better than expected in 4Q, and leasing volume was particularly strong, but this was more than offset by higher interest expense/G&A, and lower fee and other income. The other key news item coming out of the quarter was that BPO's 2011 guidance ex. Lease term income and other fees was $1.05-1.10 – well below the JPM $1.27 estimate and also below the Bloomberg consensus estimate of $1.13. As for valuation, the analysts remarked, “We calculate that BPO trades at 13.8x our 2011 FFO estimate. This represents a 10% discount to the office group. On an AFFO basis, we calculate that BPO trades at 16.5x our 2011 AFFO estimate – a 29% discount to the office group. On an unlevered basis, BPO trades at 17.0x EV/EBITDA.”