By Michael Fickes

At age 45, Ric Clark is the president and chief executive officer of Brookfield Properties Corporation (NYSE: BPO), one of the world's premier commercial office owners. With a 2003 equity market capitalization of $4.9 billion, up from $3.1 billion the year before, Brookfield owns 47 Class AA and A properties spanning 46 million square feet.

Brookfield was originally incorporated in 1924 as the Canadian Arena Corporation, which built the Montreal Forum. Still operating as a corporation domiciled in Canada, Brookfield today makes its headquarters in lower Manhattan's One Liberty Plaza.

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AGE: 45 EDUCATION: Business degree from Indiana University of Pennsylvania, CPA. “I grew up with the real estate business. My grandfather and father were in the home building business. At some point, my father became a commercial broker.” HOBBIES: Golf, tennis, running. “My favorite spectator sport is watching my daughters play soccer.” Favorite music: Blues. “My daughters want to quit playing the piano and take up the guitar. I've told them that if they do that, I'll take lessons with them.” BOOKS: “I deal with non-fiction every day of my life, so I read fiction. Lately, I've been reading classics. I just finished ‘Of Mice and Men.'” COMMUNITY ACTIVITIES: Board of directors of The Mental Health Association of New York City. VACATION: “In February, I spent spring break with my kids in Puerto Rico. We alternate between there and skiing in Colorado.”

Clark joined Brookfield in 1996 as part of the team that came with the U.S. assets of the bankrupt Olympia & York. That portfolio included three of the four World Financial Center towers in lower Manhattan, directly across the West Side Highway from the site of the World Trade Center. In those years, Brookfield's business was split almost evenly between home building and commercial property ownership. Since 1996, Brookfield has quit the homebuilding business and sunk its teeth into the commercial office sector, expanding its portfolio to $11.3 billion in total assets by the end of 2003, up from $9 billion in 2002. Recently, Clark shared his thoughts on Brookfield's status as a real estate operating company (REOC) and its property strategy with Real Estate Portfolio.

Portfolio: Why has Brookfield chosen to operate as a REOC instead of a REIT?
Clark: In the early 1990s, the company decided to re-deploy money from its residential business into high growth commercial markets with significant barriers to entry. In executing that strategy, Brookfield acquired three real estate operating companies: Olympia & York, BCE Inc. and BPO properties. These acquisitions included net operating or tax losses in excess of $1 billion. As a corporation instead of a REIT, the company could use those losses as a tax shelter, while retaining earnings and continuing to invest in the business.

Portfolio: How long will you be able to rely on those tax benefits?
Clark: At some point during the next four years or so, the tax losses will go away. Quite likely our next corporate form will be that of a REIT.

Portfolio: If and when that happens, will you become a Canadian REIT?
Clark: There are three possibilities that we are sorting through right now. First, we could set up both as a Canadian and U.S. REIT. Second, we could become a U.S. REIT. Third, we could form a Canadian REIT. I think this is the least likely plan since 80 percent of our income comes from U.S. properties.

Portfolio: Where are your portfolio investments centered?
Clark: Our primary markets are in New York City, Boston, Toronto, Calgary and Washington, D.C. We also own property in Minneapolis, Denver and Chicago, which we view as secondary markets.

Portfolio: You own one property in Washington, D.C.—1625 Eye Street. Why do you consider D.C. among your primary markets?
Clark: We just entered the Washington market; it's new for us. But it fits the profile of the markets we look for. It is a high-growth market that produces new jobs over time. It has high-cost barriers to entry and significant hurdles for new developments, which means that the supply side of the equation doesn't get out of balance.

Portfolio: How has this high-growth, high-barrier market strategy performed during the recession?
Clark: Great. In our primary markets, which provide 85 percent of our NOI (net operating income), our vacancy rate today is 3.3 percent. That's up from 2.7 percent a year ago, primarily because of our new Washington, D.C. acquisition, which is only 50 percent leased. These vacancy rates compare to the U.S. national average of about 15 percent.

Factoring in our secondary markets of Minneapolis, Denver and Chicago, our total vacancy rate rises to 6.9 percent. Within these markets, our vacancy rates track right with the national average. The point is that the different vacancy rates validate our strategy and illustrate that constrained markets protect you during a downturn.

Portfolio: We've discussed your acquisition strategy, but what about your approach to selling properties?
Clark: We like to buy properties with hidden value— properties that need some work—and hold them. For example, we bought Lehman Brothers' interest in Three World Financial Center in New York last year. It was a totally empty 1.2 million square foot building that Lehman owned with an institutional investor. We paid $150 million, about $128 per square foot, which was an amazing price. So far, we've leased about 18 percent, and we think it will take another two years to finish. When the building is leased up, we may sell a half interest to another investor and recycle the capital. But we probably won't sell 100 percent interest. That's our pattern.

Portfolio: Brookfield is the largest property owner in lower Manhattan. From that vantage point, would you comment on recovery efforts in the area since Sept. 11?
Clark: There were seven first-class office buildings around the World Trade Center. We own five of them. The other two were destroyed by the Sept. 11 attack. So we were fortunate.

In terms of the recovery, we think the plan developed by the Lower Manhattan Development Corporation and the Port Authority is right on the money. It restores the street grid and provides significant transit improvements. There will be $4.5 billion spent in the Trade Center area on transit initiatives and upgrades, including an intermodal fully connected transit hub that lower Manhattan never had. The plan will place West Street, a major eight-lane highway between the WTC and World Financial Center, underground and add a local connecting boulevard. Not included in the $4.5 billion is another $2 billion to $6 billion to bring the Long Island Rail Road directly into lower Manhattan. The transportation improvements will open up the market to a whole new labor force. Overall, we think the recovery will be very exciting.