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LOS ANGELES-Pacific Office Properties Trust Inc. reported an increase of slightly more than 1% in the overall occupancy of the REIT’s portfolio for the fourth quarter of 2008, a small improvement that might have gone unnoticed at the top of the maket but notable in today’s uncertain economic environment. Pacific Office, which has recently filed a registration statement with the SEC for a stock offering of up to $350 million, said that its portfolio of approximately 4.3 million square feet of office space was 85.2% leased, up from 84% at the end of the third quarter of 2008.

Pacific Office has eked out the increase in overall occupancy at a time when some office landlords are reporting lower overall occupancy in their portfolios because of the economic downturn. Pacific Office points out that one reason for its steady performance during the downturn is that 81.8% of its revenues derived from some of the healthiest office markets in the US.

Pacific Office leased 156,125 square feet of new and renewal leases during the fourth quarter ended Dec. 31, 2008, compared to 117,000 square feet duringthe three months ended Sept. 30, 2008. The REIT reported that it has no debt maturities in 2009 and only $66 million of mortgage debt, nearly all of it at fixed rates.

As Pacific Office pointed out in reporting its latest quarterly results, one reason for its leasing performance is that approximately 60% of the company’s portfolio consists of properties located in Honolulu, with approximately 70% of the its net operating income for the fourth quarter derived from the Honolulu market. It notes that Honolulu was recently ranked the second healthiest office market in the US by Merrill Lynch Research, and has a current vacancy rate of only 8.6% and virtually no new office development under construction, according to a published report by Colliers Monroe Friedlander.

Since its inception, Pacific Office Property Trust’s strategy has been to acquire value-added office buildings with the potential of upside through improvements, repositioning and improved management. According to its recent registration statement with the SEC to sell up to $350 million in nontraded stock, the proceeds of the offering will be used primarily to buy office buildings in the Western US.

Company officials declined to discuss the filing because of SEC regulations regarding comment on pending offerings, but the REIT’s prospectus says that it believes that “existing adverse conditions in the global financial markets, coupled with a slowing economy,” will ultimately create “exceptional investing opportunities,” beginning this year as owners of highly leveraged office properties face difficulties when their loans come due over the next two to three years.

Although Pacific Properties is a publicly held REIT whose shares trade on the New York Stock Exchange, the new shares will be similar to those of nontraded REITs. The shares of a nontraded REIT are offered publicly, but the stock is not listed or traded on an exchange.

Nontraded REITS typically establish a date by which they will either list their stock on an exchange or liquidate their assets, but in the case of Pacific Office there is no need for a “list or liquidate” date because the REIT will allow owners of the nontraded stock to exchange it for the company’s common stock after seven years.

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