Equity Office Properties Trust

Specialty: A real estate investment trust that owns and manages office buildings
Principals: Chairman and CEO Sam Zell, President and Trustee Richard Kinkaid, and Senior Vice President — Seattle Region Patrick Callahan
Year founded: The company’s origins date back to 1976 when Zell founded an integrated management and acquisition organization; Equity’s initial public offering was in 1997
Local office: Seattle
Largest deal in 2002: Execution of long-term renewable lease agreements with Washington Mutual totaling about 800,000 square feet in various buildings — deal includes expansion rights that could grow the total to 1 million square feet

Bank of America Tower
Equity Office Properties Trust is Seattle’s largest landlord. Its holdings include the Bank of America Tower.
Photo courtesy of EOP

The 2003 goal of Equity Office Properties Trust is to build on its position as the largest office landlord not only in the nation but in the Seattle and Portland metropolitan markets as well.

“Being large is not enough,” says Patrick Callahan, Equity’s senior vice president for the Seattle region. “You have to translate that into a benefit for your customer.”

That means outperforming competitors by being more nimble and more focused on customers. “That will be one of our mantras all year and in the long term,” Callahan says.

In the Seattle market, Equity owns and manages 10 million square feet, or about 12 percent of the total office market. In Portland, it owns 3.8 million square feet and has one development in progress: the 180,000-square-foot Kruse Woods V, which is to be finished this year. So far, 10,000 square feet have been leased, according to Callahan.

Despite the Northwest’s recession, Equity is looking for a productive 2003. Last year was rough all around, and Equity was no exception.

While Callahan said most of its buildings in Seattle are basically full, its largest building and the Northwest’s tallest — the Bank of America Tower — has 300,000 vacant square feet. But, says Callahan, “We anticipate being 90 percent occupied by the end of this year.”

Downtown Bellevue, with a vacancy rate of 25 percent, is another challenge. That’s a big number, he concedes, but adds that it’s a relatively small market that seems to be picking up steam.

“I think we are seeing right now an in-migration into downtown Bellevue because rates are attractive and it’s a great place to have an office,” he says. “I am very optimistic about the future of downtown Bellevue. That space will re-lease and it won’t take a long time.”

The reason for all this optimism is Equity’s expectation that vacancy rates nationally will peak in 2003 and in Seattle they’ll peak late in the year. “We think we are kind of near the bottom in the real estate cycle.”

Callahan says it’s a matter of supply. All the new supply has been delivered to the market, he said. As for tenant demand, he adds that Equity saw an increase in January and in the fourth quarter of last year.

“I think we’re probably more optimistic than others in the real estate industry,” Callahan says.

He doubts that Equity will buy or sell any major properties, but he said that always remains to be seen. “If some assets don’t fit our platform, we could sell. Or if something came on the market that does fit, we would certainly take a look at it.”

However, “I think that in terms of sales or purchases that’s probably unlikely. In terms of (big) leases, we certainly hope so.”

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