Equity Office Posts Higher Fourth Quarter Results

Equity Office Properties, the subject of a buyout by a private equity firm, posted higher funds from operations, a key measure of operating performance of real estate investment trusts, on strength in the U.S. office market.

The top U.S. office landlord posted fourth-quarter funds from operations, also known as FFO, of $215.2 million, or 54 cents a share, compared with $181.1 million, or 41 cents a share, a year earlier.

Analysts polled by Thomson Financial expected FFO of 56 cents per share.

FFO adds depreciation and amortization expenses, as well as other non-operating items, back to net income.

Equity Office this week advised its shareholders to back a proposed buyout from private equity firm Blackstone Group that values the company at $38.3 billion including debt. The deal,
trumping an offer by Vornado Realty Trust, is expected
to close on or about Feb. 8.

FFO, a widely accepted measure of REIT performance, removes the profit-reducing effect of depreciation -- a noncash accounting item -- has on earnings.

Net income available to common shareholders in the fourth quarter rose to $313.1 million, or 87 cents a share, compared with $19 million, or 5 cents a share, in the year earlier quarter.

Same-store operating revenue, or the increase in operating earnings from existing properties as opposed to acquired properties, grew 2.9%, helped by occupancy gains, higher tenant reimbursement and market rent growth.

Total revenue rose 21% to $872.8 million from $718.9 million last year.

The Chicago-based company, founded more than 30 years ago by real estate magnate Sam Zell, said so far this year through Jan. 29 it sold 545,784 square feet of assets for $176.7
million and acquired 246,771 square feet for $114.3 million.

In the fourth quarter, Equity Office leased 5.2 million square feet, compared to 4.5 million square feet a year earlier. Tenant improvements and leasing costs for leases that began during the fourth quarter were $28.48 per square foot on a weighted average basis, compared to $22.45 a year earlier.