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 mÂ² 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 121,000mÂ² of the office tower at 1095 Avenue of the Americas in New York for $US505 million.