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CHICAGO-Equity Office Properties Trust may put more assets on the table to help feed a voracious investor appetite for class A office properties. The largest US office REIT already has $1.2 billion worth of properties on the market now, but the company may add to that as investors remain aggressive despite rising interest rates.

"There's still very significant demand for office properties in virtually all of our markets," says president and chief executive officer Richard D. Kincaid during his company's earnings conference call Tuesday. "It's just too attractive to ignore, so we're evaluating our entire portfolio to put more assets into this market now. We're constantly looking at our portfolio with an eye on what people would pay in the market and what we would pay for it."

Equity Office Properties Trust is a net seller this year at an accelerating pace, as it disposed of 914,281 sf in April for nearly $160 million after first-quarter sales of 783,629 sf for $117 million. Meanwhile, Equity Office Properties has acquired 374,763 sf for $99.8 million, the majority of that for the 262,991-sf Pointe O'Hare property in northwest suburban Rosemont. "We're still looking to find acquisitions, but it's difficult," Kincaid says.

In addition to paying down debt, Equity Office Properties will likely spend sales proceeds on its own common stock, Kincaid says. So far this year, the Equity Office Properties has bought 17.5 million shares of its own stock, paying $557.8 million. The board of directors approved buying back another $500 million worth of company stock in the next 12 months, increasing its authorization to $2.6 billion. There is a positive spread of at least one full percentage point in internal rates of return, Kincaid says, between office assets it could buy versus company stock. "It's positive arbitrage, definitely," he says.

Kincaid also says the company plans to stay busy building, with $1.3 billion of projects under development now plus land that could accommodate nine million sf. The company sees returns of 9% to 9.5% on its development costs, he adds.

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