Equity Office Sees Limited Acquisition Activity

CHICAGO-Reflecting strong performance throughout its huge 99 million-sf national office portfolio, Equity Office Properties Trust, based here, reported strong increases in lease rates on both a gross and net basis for the third quarter. In a conference call with analysts this morning, management said it is looking at joint venture opportunities within the existing Equity Office portfolio, but investors can expect to see limited acquisitions in coming months as the trust focuses on paring down debt.

“We expect continued strong fundamentals,” Equity Office president Tim Callahan told analysts. “But we will see some weakening in demand.” Management said it expects rental rates in the trust’s portfolio to increase on average by 3% next year, with markets like Dallas and San Francisco showing no growth in rental rates. The trust said absorption continued extremely strong this year and the prelease rate in the trust’s development pipeline was 40% in the third quarter.

Following the acquisition of Cornerstone Properties this summer, management said that the credit rating agencies are very focused on the trust paring down its large debt load. Financing activity resulted in a significant decrease in floating rate debt in the quarter to 12%, with fixed rate debt being 88%.