Equity Office Predicts
Staffing Reductions in 2003
WASHINGTON -- Equity Office Properties Trust said it expects to have 16% fewer employees by the end of 2003 compared with the end of 2001 as a result of staff reductions and attrition, according to its annual report filed Monday with the Securities and Exchange Commission.
The company said the reductions are part of a re-engineering effort, begun in 2001, to significantly reduce operating expenses, improve customer service, reduce lease-cycle time, increase occupancy and retain tenants.
Equity Office, a Chicago-based office real estate investment trust, said it expects the related severance expenses to be immaterial.
Under the re-engineering, Equity Office said, the REIT expects to make 130,000 to 160,000 square feet of office space available for leasing by consolidating property management offices.
The company said it also expects annual cost savings of $75 million to $100 million beginning in 2004 from the creation of a central purchasing function to review and analyze spending on goods and services.
Equity Office said a significant portion of the savings will be passed on to its tenants by allowing them a lower cost of occupancy than the REIT's competition.
Equity Office said it recorded $15.7 million of professional and consulting fees related to the restructuring effort in 2002 and severance expense of $7.3 million during the year.
Also in the filing, Equity Office said that in February it amended its third-party insurance coverage for acts of terrorism as a result of the Terrorism Risk Insurance Act of 2002, signed into law in November.
Equity Office said it canceled its terrorism insurance program that provided a limit of $270 million per year and replaced it with a limit of $825 million in its property insurance program, which now provides coverage for chemical and biological exposure.
Under the 2002 legislation, Equity Office said it has a deductible of $750,000 per occurrence and absorbs 10% of each loss up to $33.25 million, including the deductible.
The federal government is obligated to cover the remaining 90% of the loss above the deductible up to $100 billion annually, Equity Office said.
Equity Office also disclosed $63.2 million of property sales in the filing.
In February, it sold its 136,176 square-foot U.S. West Dex Center office building in Salt Lake City to an unaffiliated party for $11.6 million and sold its 94,367 square-foot Commerce Park office building in Santa Monica, Calif., to an unaffiliated party for $16.1 million.
In March, the REIT sold its 92,403 square-foot Janss Court office building in Santa Monica, Calif., to an unaffiliated party for $35.5 million.
Equity Office also said its $1 billion revolving credit line is to mature May 12. The line had $206 million outstanding as of Dec. 31, 2002. In its third-quarter report filed in November with the SEC, Equity Office said the line would mature June 19.
A company spokeswoman wasn't immediately available to comment.
Email your comments to rjeditor@dowjones.com.