The company reported fourth-quarter funds from operations of $0.75 per share, up 10.3% from the fourth quarter of 1999. Meanwhile, funds from operations for the year were $2.86 per share, an 11.3% increase from 1999.

"I feel EOP is very well positioned because of the long-term strategy we've stayed focused on," Callahan said. "2000 was certainly an unbelievable year and we couldn't expect that velocity to continue, although fundamentals for the year were as good as we've ever seen."

Equity Office Properties saw the vacancy rate for its portfolio of 380 buildings with 99 million sf rise a half-point to 5.4% by the end of 2000, said Richard D. Kincaid, executive vice president and chief financial officer. Equity Office Properties' vacancy rates typically are 2 to 3 percentage points below the average in its markets, Callahan said. Nationally, the office vacancy rate is 8.2%, down from 9.5% a year ago, Callahan said. In the 10 markets, vacancy rates have dropped from 6.4% to an "unbelievably low" 5.1%.

Although its exposure is low, the REIT has not been immune to the dotcom shakeouts, especially in San Francisco and Seattle. However, vacancy rates there were 4% and 4.3% respectively, Callahan said. Although dotcoms are retrenching, Callahan said there still is job growth for knowledge workers, who are tending to move to traditional "credit-worthy" companies.

"Hopefully the return to a focus on value will translate to the REIT industry. Unfortunately, many seem entirely focused on what the real estate industry will do to mess it up this time," Callahan said. "This is probably the only time real estate has gone into a recession where supply and demand is in the balance that we currently have."

Equity Office Products holds $42 million in security deposits and $203 million in letters of credit, Kincaid said, adding the company continues to budget 0.11% of revenue for write-offs. "We've had a strong credit culture," Kincaid said. "We haven't seen any change in that. We haven't seen any increase in delinquencies yet."

Taking advantage of tight rental markets, Equity Office Properties has leased 50% of the 10.7 million sf of space scheduled to roll over in 2001, Callahan said, while another 20% is the subject of negotiations. "We think this a good head start considering it's only February," he added.