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CHICAGO-With investors' appetite for class A office assets remaining insatiable, Equity Office Properties Trust expects to hit the $3-billion mark in property sales this year. The largest US office REIT has sold 16.3 million sf of office space for nearly $2.7 billion in 2005, with "a number of sales in the pipeline," reports chief financial officer Marsha C. Williams.
Meanwhile, the company has added 3.3 million sf to its 113-million-sf portfolio, paying $1.3 billion. "We continue to be very selective in our purchases," Williams adds.
The sales involved properties with 78% occupancy, generating 5% cash-on-cash returns and 7% returns based on net operating incomes, Williams says. "Clearly, the buyers have their own assumptions that differ from ours," she notes. Equity Office Properties Trust has recorded $182 million in gains on its sales through the first nine months of the year, including $78.5 million in the third quarter. No sales have yet to fall out of contract this year, says president and chief executive officer Richard D. Kincaid. "We've sold everything we've wanted to sell," he claims.
In addition to selling buildings, Equity Office Properties Trust is looking at its land bank with eyes to either develop sites or sell them, Kincaid says. "We have an opportunity to monetize some assets," he says. The company is carrying land worth $234 million, according to its balance sheet. Equity Office Properties Trust already is involved in four developments totaling 1.4 million sf and worth $773 million, the bulk of it being the $693-million redevelopment of the one-million-sf 1095 Avenue of the Americas in New York City.
The REIT has used most of the proceeds from its property sales to pay down debt. Williams reports the company repaid $876 million in debt that had an average interest rate of 7.8%, and another $675 million at an average rate of 6.9%.
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