Moody's Investors Service says that although it maintains agenerally negative outlook for the office property sector isnegative, its outlook for office REIT ratings remains stable. "Asoffice market fundamentals continue to weaken, we expect officeREITs to experience earnings pressure," Moody's says in a recentreport. The firm also expects development pipelines to slowconsiderably in light of the current economic climate. FitchRatings sees the office REIT sector as stable and "unchanged sincethe beginning of the year."

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Among the REITs delivering steady profits lately is Pasadena,CA-based Alexandria Real Estate Equities Inc., which last weekreported that funds from operations rose 6% per share for the thirdquarter ended Sept. 30, compared with the third quarter of lastyear on revenue that climbed 13% and total FFO that was up 14%. TheFFO total was nearly $49 million or $1.53 per share.

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Alexandria, which specializes in life sciences space, alsoreported leasing of 618,000 sf at 26 different properties duringthe quarter, of which 211,000 sf related to new or renewal leasesof previously leased space and approximately 407,000 rentablesquare feet related to developed, redeveloped or previously vacantspace. The company is even seeing rent growth in this uncertaineconomy, with rental rates for these new or renewal leases were onaverage approximately 8.2% higher than rental rates for expiringleases.

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Among the leases that Alexandria has signed this year are anagreement with Pfizer Inc. for approximately 100,000 sf with anoption for an additional 50,000 sf at The Alexandria Center forScience and Technology at Mission Bay, San Francisco. Pfizer willlocate its Biotherapeutics and Bioinnovation Center at theproperty. In another of its deals, Gilead Sciences Inc. has signeda long-term lease for approximately 106,000 sf in Seattle.

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Alexandria's results reflect how demand continues to climb andconstruction continues to grow in the life sciences realm, asillustrated by plans for a 60,000-sf Biomedical ResearchLaboratories and Community Sciences complex at the University ofTexas at Brownsville. The $33-million project UT Brownsvilleproject will be the launching point for the university's lifescience and research zone, just one of a host of life sciencesprojects under way or planned around the country despite theoverall slowing of construction nationwide of general officespace.

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Another REIT reporting increased FFO recently was LosAngeles-based Kilroy Realty Corp., which said that FFO for thethird quarter ended Sept. 30 totaled $34.5 million and $1 per sharecompared to $28.2 million and 81 cents per share in the thirdquarter last year. Net income of $13.2 million and 40 cents pershare, compared to $9 million and28 cents per share in the thirdquarter of 2007, with revenue growing to $77.1 million from $65.1million.

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Kilroy "reported solid financial results for the third quarter,despite the uncertainty about the direction of the economy and theturmoil in global credit markets," company president and CEO JohnB. Kilroy Jr. commented in the company's earnings conference call.During the third quarter, Kilroy added two properties, which are100% leased, to its stabilized portfolio, a newly developed146,000-sf office building located along the I-15 corridor in SanDiego County and a newly redeveloped 107,000-sf office building inEl Segundo, CA. The two properties represent a total estimated newinvestment of approximately $66 million.

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Kilroy has three additional properties currently underdevelopment, all located in submarkets of San Diego County. Thethree properties total approximately 254,000 sf and represent atotal estimated investment of approximately $111 million. They are58% leased.

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On the down side of the REIT ledger, Los Angeles-based MaguireProperties continued to struggle in the third quarter. The REITreported a net loss of $72.5 million and $1.52 per share for thethird quarter ended Sept. 30, compared with net income of $81.7million and $1.74 per share for the comparable period last year.Maguire reported a deficit of $20.2 million and 42 cents per shareof funds from operations for the third quarter, compared with adeficit of $2.7 million and six cents per share in the thirdquarter last year.

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Maguire has been attempting to turn the company around under newpresident and CEO Nelson Rising, who said that the company is intalks with a "very qualified" buyer for its 105-acre Park Placemixed-use office campus in Irvine. The sale of Park Place, and itsother Orange County assets, is part of Maguire's plan to improveits balance sheet and its financial performance.

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