Archive | Equity Office

90% debt ratio secures Equity Office privatisation

Published 11 February 2007

Equity Office Properties Trust got a last-minute challenge to its privatisation proposal on Tuesday, took the Blackstone privatisation scheme to shareholders on Wednesday anyway and got 92% approval, and on Friday said the $US39 billion merger of the trust & its operating partnership with affiliates of Blackstone Real Estate Partners had been completed.

Also on Friday, $US7 billion of the portfolio – 8 Manhattan commercial buildings containing 600,000m² – was sold to Macklowe Properties.

Vornado Realty Trust had upped its bid to $US60/share, but with more hooks and a longer timeframe than the immediate Blackstone deal, which had been raised to $US55.50 cash/share. Blackstone had begun the formal merger process at $US48.50/share. Earlier negotiations which didn’t evolve into formal proposals were at much lower figures.

Vornado wasn’t prepared to raise again or change the cash-&-scrip form of its bid or other conditions, and withdrew its offer shortly before Wednesday’s meeting.

Blackstone’s successful bid was based on paying $US23 billion for Equity Office’s equity plus $US16 billion for the assumption of debt. To do this, Blackstone’s investors will stump up about $US4 billion in equity, leaving about $US35 billion to be met from a number of debt providers – a 90% debt ratio.

New York newspaper reports indicate the selldown will be in a range of retail debt structures, including bonds & mezzanine loans, and that Blackstone habitually turns over its portfolios faster than Equity Office did.

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Attribution: Company releases, SEC filings, NY Sun, story written by Bob Dey for this website.

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Equity Office repositions in tougher times, isn’t forecasting

Published 5 November 2005

Equity Office Properties Trust turned round from a $US129 million net loss for the September quarter last year to a $US93.7 million profit this time, on revenue up 2.3% ($US16.7) million to $US738.6 million, but it’s not all go-forward for the biggest listed office building owner & manager in the US, which has a $US22.8 billion portfolio.

The loss a year ago was on a $US229.2 million non-cash impairment charge. This year the trust has worked on reshaping its portfolio and it’s been prepared to sell below book, but it’s also faced much higher operating costs. The trust has sold $US2.5 billion of assets this year – $US829 million in the third quarter, $US128 million so far in the fourth quarter. It’s also bought $US1.3 billion of assets this year – $US711.6 million in the third quarter, $US214.3 million this quarter.

After 3 quarters, its total available to common shareholders for 2005 is a $US10.8 million loss, compared to a positive $US36.9 million last year. Equity Office said the results for both years reflected non-cash impairment charges, a mix of gains & losses from property sales and provisions for $US201.7 million (last year $US222 million) of losses on assets held for sale.

US real estate investment trusts are inclined to pay less income to these overall balance-sheet pictures and focus on funds from operations, but that’s not so pretty either. Third-quarter funds from operations were $US227.7 million ($US49.4 million after the impairment charge last year), but for 9 months the FFO return was down 34.6%, from $US652.9 million to $US427.2 million after heavy sale & impairment loses in both years – $US384.1 million (last year $US229.2 million).

Same-store property net operating income for the September quarter (excluding lease terminations) fell 3.6%, $US12.5 million of it from damage to 3 New Orleans buildings, but the balance attributed to “significantly higher utility costs and payroll increases due to wage inflation”. Excluding hurricane-related charges, same-store net operating income would still have been down, by 0.7% for the quarter, 1% for 3 quarters.

Occupancy has risen from 86.5% a year ago to 88.4% in June, 89.3% in September – 2 parts of the gain compared to a year ago from disposal, one part from leasing. That’s turned round this year, with more than half the gain from June to September quarter ends arising from leasing.

Equity Office president & chief executive Richard Kincaid managed some optimism, along with caution over costs: “We are encouraged by the improvement in office fundamentals in the third quarter. At the same time, however, we are concerned about the impact of rising utility expenses, construction costs & interest rates and their impact upon Equity Office & the broader economy.”

As a result of those factors, as well as the company’s continuing disposal programme, Equity Office hasn’t provided earnings guidance into 2006.

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Equity Office goes shopping

Published: 10 July 2005

The biggest listed real estate investment trust in the US, Equity Office Properties, worked the reshaping of its portfolio hard in the2nd quarter, buying 80% of one new York building plus 15 others for a total $US791.7 million.

The reit has a goal of selling $US2-3 billion of properties this year, redeploying the returns in 17 targeted growth markets which meet its criteria for location, market characteristics & yields.

In the June quarter it bought 80% of 1095 Avenue of the Americas (96,000m²) for $US505 million and 121,000m² in the other 15 buildings for $US286.7 million.

9 of the acquisitions are in San Francisco’s North Bay submarket, where Equity Office expects to complete purchase of a 36-property portfolio by the end of the year.

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Equity Office shuffles portfolio

Published: 7 June 2005

The biggest US reit, Equity Office Properties Trust, is working the changing property market by selling blocks of noncore property to concentrate its investment in its top 17 markets.

President & chief executive Richard Kincaid announced 9 sales & 2 acquisitions achieved in May. 6 of the buildings sold were owned in joint-venture partnerships. The return to Equity Office from them was $US211.7 million and the total return from the total 158,000m² sold was $US314.3 million, taking its total disposals this year to $US861.5 million, from which it’s received $US746.7 million.

In the other direction, it bought 2 buildings containing 28,780m² (one building at shell completion stage, 22% pre-leased) for $US69.4 million, taking the year’s acquisitions to $US642.6 million, including $US505 million for 1095 Avenue of the Americas in New York, scheduled to settle at the end of the year.

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Equity Office has $US3 billion of property on market, looking to upgrade portfolio

Published: 1 May 2005

The biggest real estate investment trust in the US market, Equity Office Properties Trust, got a better-looking earnings/share after a change in accounting principle, but said first-quarter same-store sales actually fell 1.5%.

Net income was down $US2.1 million until the accounting principle kicked in, cutting the 2004 result by $US33.7 million and lopping US8c off earnings/share for the first quarter last year. The subsequent comparison was net income up from $US65.3 million to $US100.9 million, earnings/share up from US16c to US25c.

Funds from operations fell by $US300,000 to $US302.1 million, steady at US66c/share on a diluted basis.

Equity Office president & chief executive Richard Kincaid said US office markets were improving: “We expect limited construction of new space through 2006 and see positive trends in occupancy, job growth & office space absorption. With these positive signs, we anticipate steady improvement and an increase in leasing activity in many of our markets.”

The trust’s effective office portfolio occupancy rose 170 basis points to 87.5%.

Equity Office indicated last September it had 1.8 million m² of holdings in non-core markets that it might sell over the next 5 years, and non-strategic assets in core markets, and it could sell $US2-3 billion of property this year. In 7 months, from 1 October to 26 April, it’s sold $US727 million of property in both non-core & non-strategic core categories.

“In view of favourable market conditions, the company is now testing the market to determine its ability to sell the remainder of the identified $US2-3 billion of assets at targeted returns.

“We have sold buildings with low cash yields, in the 3.5% range, and with average occupancy in the mid-70% range. As we complete dispositions (disposals) and buy attractive assets, we expect to finish with a much stronger portfolio, comprised of highly occupied, class A buildings in a diverse mixture of targeted growth markets,” Mr Kincaid said.

It’s not all one way though. On 5 April Equity Office signed up to buy 121,000m² of the office tower at 1095 Avenue of the Americas in New York for $US505 million.

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