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Brookfield profit surges on property values

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Brookfield Asset Management (BAM.A-T) booked a big gain from the annual revaluation of its property portfolio, with its office and retail holdings providing a one-time boost of almost $1.8 billion US to the company’s earnings.

The company said its profit hit $2.07 billion, or $1.80 a share, compared to $709 million, or 35 cents, a year ago. The one-time gain came from lower interest rates and lower capitalization rates boosting the fair value of its portfolio, which led to higher property valuations.

Full year cash flow from operations in 2010 was $1.4 billion or $2.37 a share versus $1.4 billion or $2.34.

“The operating results benefited from continued strong performance by the company’s commercial office businesses reflecting high occupancy levels and improved leasing markets,” Brookfield said in a statement.

“Operating returns from infrastructure operations increased due to improving economic conditions and investment of additional capital at favourable returns, while lower water levels more than offset the impact of higher realized prices within the company’s power generating operations.”

Royal Bank of Canada analyst Neil Downey said the results appear to be weaker than expected, with gains in the property business offset by weakness in other areas.

“The shortfall appears to primarily stem from weaker than expected operating results from renewable power [due to] low water levels; low spot prices as well as a lower than expected contribution from the notably volatile investment and other income line,” he said.

“At first glance, it appears that Q4/10 upward valuation in the property business was almost equally offset by downward valuation adjustment in the renewable power business.”

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