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Brookfield Canada Office Properties Reports Second Quarter 2014 Results

All Dollar References Are in Canadian Dollars Unless Noted Otherwise

TORONTO, ON -- (Marketwired) -- 07/21/14 -- Brookfield Canada Office Properties (TSX: BOX.UN) (NYSE: BOXC), a Canadian REIT (Real Estate Investment Trust), today announced that net income for the three months ended June 30, 2014 was $39.2 million or $0.42 per unit, compared to $35.2 million or $0.38 per unit during the same period in 2013. Included in net income for the three months ended June 30, 2014 was a fair value gain of $1.0 million, compared to $0.3 million during the same period in 2013. The current IFRS value increased to $33.42 per unit from $33.18 per unit at the end of 2013.

Funds from operations ("FFO") for the three months ended June 30, 2014 was $38.6 million or $0.41 per unit, compared with $35.4 million or $0.38 per unit during the same period in 2013. Adjusted funds from operations ("AFFO") was $30.8 million or $0.33 per unit for the three months ended June 30, 2014, compared with $27.7 million or $0.30 per unit during the same period in 2013.

Commercial property net operating income for the three months ended June 30, 2014 was $66.4 million, compared with $68.4 million during the same period in 2013.

SECOND QUARTER HIGHLIGHTS
Brookfield Canada Office Properties leased 156,000 square feet of space during the second quarter of 2014. The Trust's occupancy rate finished the quarter at 94.5%. This rate compares favourably with the Canadian national average of 91.2%.

Leasing highlights include:

  • An average nine-year, 26,000-square-foot renewal and expansion with Bain and Company at Hudson's Bay Centre
  • A five-year, 26,000-square-foot new lease with Brookfield Corporate Operations at Brookfield Place Toronto
  • A five-year, 14,000-square-foot new lease with Prinova Inc. at Queen's Quay Terminal
  • A 10-year, 10,000-square-foot renewal with General Reinsurance Corporation at First Canadian Place

Construction continues on schedule at Bay Adelaide East development project in Toronto. The project has reached a tower core level of 35 and structural steel is complete to level 26. The podium core has been completed and structural steel installation on the podium is nearing completion. Bay Adelaide East is currently 60% pre-leased and is on target to be completed in late 2015.

Received BOMA 360 designations for six of the Trust's properties. The new BOMA 360 properties are 105 Adelaide St. West, HSBC Building, Brookfield Place Toronto, Hudson's Bay Centre, and Queen's Quay Terminal in Toronto, and Bankers Court in Calgary. The Trust anticipates achieving the BOMA 360 International designation for the remaining properties by the end of 2014.

OUTLOOK
"While leasing velocity has slowed somewhat in recent quarters, we continue to deliver strong financial results due in large part to our proactive, long-term leasing and financing strategies," said Jan Sucharda, president and chief executive officer. "Our Bay Adelaide East development project continues to progress as we position to add this asset to our already market-leading office portfolio in Toronto."

Net Operating Income, FFO and AFFO
This press release and accompanying financial information make reference to net operating income, FFO and AFFO on a total and per unit basis. Net operating income is defined by the Trust as income from commercial property operations after direct property operating expenses, including property administration costs have been deducted, but prior to deducting interest expense, general and administrative expenses and fair value gains (losses). The Trust's definition of FFO includes all of the adjustments that are outlined in the National Association of Real Estate Investment Trusts ("NAREIT") definition of FFO including the exclusion of gains (or losses) from the sale of real estate property and the add back of any depreciation and amortization related to real estate assets. In addition to the adjustments prescribed by NAREIT, the Trust also makes adjustments to exclude any unrealized fair value gains (or losses) that arise as a result of reporting under IFRS. These additional adjustments result in an FFO measure that would be similar to that which would result if the Trust determined net income in accordance with U.S. GAAP and is also consistent with the Real Property Association of Canada ("REALPAC") white paper on funds from operations for IFRS issued November 2012. AFFO is defined by the Trust as FFO net of normalized second-generation leasing commissions and tenant improvements, normalized maintaining value capital expenditures and straight-line rental income. The Trust uses net operating income, FFO and AFFO to assess its operating results. Net operating income is important in assessing operating performance and FFO is a widely used measure to analyze real estate. AFFO is typically a measure used to asses an entity's ability to pay distributions. The components of net operating income, FFO and AFFO are outlined in the financial information accompanying this press release. Net operating income, FFO and AFFO do not have any standard meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other companies.

Monthly Distribution Declaration
The Board of Trustees of Brookfield Canada Office Properties announced the following distributions:

  • $0.1033 per Trust unit payable on August 15, 2014 to holders of Trust Units of record at the close of business on July 31, 2014, and
  • $0.1033 per Trust unit payable on September 15, 2014 to holders of Trust Units of record at the close of business on August 29, 2014.

Unitholders resident in Canada will receive payment in Canadian dollars and unitholders resident in the United States will receive their distributions in U.S. dollars at the exchange rate on the record date, unless they elect otherwise.

Forward-Looking Statements
This press release contains "forward-looking information" within the meaning of Canadian provincial securities laws and applicable regulations and "forward-looking statements" within the meaning of "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, include statements regarding the Trust's operations, business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies and outlook, as well as the outlook for the Canadian economy for the current fiscal year and subsequent periods, and include words such as "expects," "anticipates," "plans," "believes," "estimates," "seeks," "intends," "targets," "projects," "forecasts," "likely," or negative versions thereof and other similar expressions, or future or conditional verbs such as "may," "will," "should," "would" and "could."

Although the Trust believes that our 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, many of which are beyond the control of the Trust, which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements and information.

Factors that could cause actual results to differ materially from those contemplated or implied by forward-looking statements include, but are not limited to: risks incidental to the ownership and operation of real estate properties including local real estate conditions; the impact or unanticipated impact of general economic, political and market factors in Canada; the ability to enter into new leases or renew leases on favourable terms; business competition; dependence on tenants' financial condition; the use of debt to finance the Trust's business; the behavior of financial markets, including fluctuations in interest rates; equity and capital markets and the availability of equity and debt financing and refinancing within these markets; risks relating to the Trust's insurance coverage; the possible impact of international conflicts and other developments including terrorist acts; potential environmental liabilities; changes in tax laws and other tax related risks; dependence on management personnel; illiquidity of investments; the ability to complete and effectively integrate acquisitions into existing operations and the ability to attain expected benefits therefrom; operational and reputational risks; catastrophic events, such as earthquakes and hurricanes; and other risks and factors detailed from time to time in our documents filed with the securities regulators in Canada and the United States.

Caution should be taken that the foregoing list of important factors that may affect future results is not exhaustive. When relying on the Trust's forward-looking statements or information, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Except as required by law, the Trust undertakes no obligation to publicly update or revise any forward-looking statements or information, whether written or oral, that may be as a result of new information, future events or otherwise.

Supplemental Information
Investors, analysts and other interested parties can access the Trust's Supplemental Information Package at www.brookfieldcanadareit.com under the Investor Relations/Financial Reports section. This additional financial information should be read in conjunction with this press release.

About Brookfield Canada Office Properties
Brookfield Canada Office Properties is Canada's preeminent Real Estate Investment Trust (REIT). Its portfolio is comprised of interests in 28 premier office properties totaling 20.8 million square feet in the downtown cores of Toronto, Calgary, Ottawa and Vancouver and a development site of 980,000 square feet in Toronto. Landmark assets include Brookfield Place and First Canadian Place in Toronto and Bankers Hall in Calgary. For more information, visit www.brookfieldcanadareit.com.

CONSOLIDATED BALANCE SHEET


                                                  ------------  ------------
                                                    June 30,    December 31,
(Cdn $ Millions)                                      2014          2013
                                                  ------------  ------------

Assets
Investment properties
  Commercial properties                           $    5,174.4  $    5,158.2
  Commercial developments                                311.8         232.0
                                                  ------------  ------------
                                                       5,486.2       5,390.2

Tenant and other receivables                              33.9          17.5
Other assets                                               7.6           6.3
Cash and cash equivalents                                 98.5         194.8
                                                  ------------  ------------
                                                  $    5,626.2  $    5,608.8
                                                  ------------  ------------

Liabilities
Investment property and corporate debt            $    2,331.2  $    2,354.9
Accounts payable and other liabilities                   176.5         161.6

Equity
Unitholders' equity                                      862.4         854.7
Non-controlling interest(1)                            2,256.1       2,237.6
                                                  ------------  ------------
                                                  $    5,626.2  $    5,608.8
                                                  ------------  ------------

(1)  Non-controlling interest represents Class B LP units that are
     economically equivalent to Trust units and are required to be presented
     separately under IFRS.


CONSOLIDATED STATEMENT OF INCOME


(Cdn Millions, except per unit        Three months ended   Six months ended
 amounts)                                  Jun. 30             Jun. 30
                                     ------------------- -------------------
                                        2014      2013      2014      2013
                                     --------- --------- --------- ---------
Commercial property revenue          $   124.9 $   130.9 $   250.5 $   259.2
Direct commercial property expense        58.5      62.5     115.5     122.0
Investment and other income                0.2       0.4       1.0       0.6
Interest expense                          23.3      25.5      46.4      51.4
General and administrative expense         5.1       8.4      12.2      14.0
                                     --------- --------- --------- ---------
Income before fair value gains            38.2      34.9      77.4      72.4
Fair value gains                           1.0       0.3       3.9       9.3
                                     --------- --------- --------- ---------
Net income and comprehensive income  $    39.2 $    35.2 $    81.3 $    81.7
                                     --------- --------- --------- ---------

Net income and comprehensive income
 attributable to:
Unitholders                          $    11.0 $     9.9 $    22.8 $    22.9
Non-controlling interest                  28.2      25.3      58.5      58.8
                                     --------- --------- --------- ---------
                                     $    39.2 $    35.2 $    81.3 $    81.7
                                     --------- --------- --------- ---------
Weighted average Trust units
 outstanding                              26.2      26.1      26.2      26.1
Net income per Trust unit            $    0.42 $    0.38 $    0.87 $    0.88
                                     --------- --------- --------- ---------


RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS


(Cdn Millions, except per unit    Three months ended     Six months ended
 amounts)                               Jun. 30               Jun. 30
                                 --------------------  --------------------
                                    2014       2013       2014       2013
                                 ---------  ---------  ---------  ---------
Net income                       $    39.2  $    35.2  $    81.3  $    81.7
Add (deduct):
Fair value gains                      (1.0)      (0.3)      (3.9)      (9.3)
Amortization of lease incentives       0.6        0.5        1.0        1.2
Foreign exchange (gain) loss          (0.2)       3/4        1.1        3/4
                                 ---------  ---------  ---------  ---------
Funds from operations            $    38.6  $    35.4  $    79.5  $    73.6
                                 ---------  ---------  ---------  ---------
Funds from operations -
 unitholders                          10.8        9.9       22.3       20.6
Funds from operations - non-
 controlling interest                 27.8       25.5       57.2       53.0
                                 ---------  ---------  ---------  ---------
                                 $    38.6  $    35.4  $    79.5  $    73.6
                                 ---------  ---------  ---------  ---------
Weighted average Trust units
 outstanding                          26.2       26.1       26.2       26.1
Funds from operations per Trust
 unit                            $    0.41  $    0.38  $    0.85  $    0.79
                                 ---------  ---------  ---------  ---------


RECONCILIATION OF FUNDS FROM OPERATIONS TO ADJUSTED FUNDS FROM OPERATIONS


(Cdn Millions, except per unit    Three months ended     Six months ended
 amounts)                               Jun. 30               Jun. 30
                                 --------------------  --------------------
                                    2014       2013       2014       2013
                                 ---------  ---------  ---------  ---------
Funds from operations            $    38.6  $    35.4  $    79.5  $    73.6
Add (deduct):
  Straight-line rental income         (0.8)      (1.3)       1.8       (2.8)
  Normalized 2nd generation
   leasing commissions and
   tenant improvements(1)             (5.3)      (5.1)     (10.6)     (10.2)
  Normalized sustaining capital
   expenditures(1)                    (1.7)      (1.3)      (3.4)      (2.6)
                                 ---------  ---------  ---------  ---------
Adjusted funds from
 operations(2)                   $    30.8  $    27.7  $    67.3  $    58.0
                                 ---------  ---------  ---------  ---------
Adjusted funds from operations -
 unitholders                           8.6        7.7       18.8       16.2
Adjusted funds from operations -
 non-controlling interest             22.2       20.0       48.5       41.8
                                 ---------  ---------  ---------  ---------
                                 $    30.8  $    27.7  $    67.3  $    58.0
                                 ---------  ---------  ---------  ---------
Weighted average Trust units
 outstanding                          26.2       26.1       26.2       26.1
Adjusted funds from operations
 per Trust unit                  $    0.33  $    0.30  $    0.72  $    0.62
                                 ---------  ---------  ---------  ---------

(1)  As the components used in calculating AFFO vary quarter over quarter, a
     normalized level of activity is estimated based on historical spend
     levels as well as anticipated spend levels over the next few years.
     Maintaining value capital expenditures relate to capital items that are
     required to maintain the properties in their current operating state
     and exclude projects that are considered to add productive capacity.

(2)  AFFO calculated using actual leasing commissions, tenant improvements
     and maintaining value capital expenditures would result in AFFO of
     $31.5 million and $71.2 million for the three and six months ended June
     30, 2014, respectively.

Contact:
Matthew Cherry
Vice President, Investor Relations and Communications
Tel: 416.359.8593
Email: Email Contact

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