Equity Office Announces Fourth Quarter and Full Year 2006 Results

Equity Office Properties Trust (NYSE: EOP) today reported results for the fourth quarter and full year 2006. For the fourth quarter 2006, Equity Office reported net income available to common shareholders of $313.1 million and diluted earnings per share of $0.87, compared to net income of $19.0 million and diluted earnings per share of $0.05 in the fourth quarter 2005. For the full year ended December 31, 2006, the company reported net income of $307.2 million and diluted earnings per share of $0.86, compared to net income of $8.1 million and diluted earnings per share of $0.02 in 2005. Funds From Operations For the fourth quarter 2006, Funds From Operations (FFO) available to common shareholders was $215.2 million and diluted FFO per share was $0.54. FFO for the fourth quarter 2005 was $181.1 million and diluted FFO per share was $0.41. For 2006, FFO totaled $663.9 million and diluted FFO per share was $1.64. FFO for 2005 was $608.3 million and diluted FFO per share was $1.35. The attachment to this press release reconciles FFO to net income, the most directly comparable GAAP measure. Financial Results Summary The following table includes significant financial statement items that affect the comparability of GAAP net income between periods. For the three months ended December 31, For the years ended December 31, 2006  2005  2006  2005  (Dollars in thousands, except per share amounts) Amount Per Share – Diluted Amount Per Share – Diluted Amount Per Share – Diluted Amount Per Share – Diluted Impairments and loss on sales of real estate and assets held for sale (a) $(4,509) $(0.01) $(41,882) $(0.10) $(194,640) $(0.49) $(426,001) $(0.94) Gain on sales of real estate, net of minority interest in partially-owned properties (a) 362,100  0.91  45,596  0.10  539,182  1.35  228,024  0.50  Hurricane-related charges --  --  (23,307) (0.05) 2,000  0.01  (35,812) (0.08) Severance charges (a) (4,839) (0.01) (3,991) (0.01) (29,686) (0.07) (11,104) (0.02) Merger-related costs (2,823) (0.01) --  --  (2,823) (0.01) --  ---  Income from early lease terminations (a) 6,555  0.02  13,210  0.03  18,886  0.05  80,028  0.18    Total (b) $356,484  $0.90  $(10,374) $(0.02) $332,919  $0.84  $(164,865) $(0.36) (a) Includes amounts from continuing operations, discontinued operations and our share of unconsolidated joint ventures. (b) The total per share amounts may not total the sum of the individual per share amounts due to rounding. 2006 Guidance Compared to 2006 Actual Results Equity Office provided updated guidance for 2006 on October 31, 2006, in connection with the third quarter 2006 earnings release. Listed below is a comparison of previously issued guidance to actual results. 2006 Guidance Actual 2006 Results Diluted EPS $(0.07) to $0.08 $0.86  Less: Gain on Sales of Real Estate (a) (0.44) (1.35) Plus: Real Estate Depreciation and Amortization 2.10  2.17  Other --  (0.04) Diluted FFO per share $1.59 to $1.74 $1.64  (a) The gain on sales of real estate was $0.44 through September 30, 2006, and $1.35 for the full year 2006. The primary assumptions used in calculating the 2006 guidance ranges included:   2006 Guidance Actual 2006 Results Year-End Effective Office Portfolio Occupancy 91% to 92% 92.2% Income from Early Lease Terminations $15 million to $20 million $18.9 million Deferred Rental Revenue $35 million to $40 million $38.5 million G&A Expense (a) $160 million to $170 million $169.4 million Same Store Property NOI Growth (a) 0% to 1% 1.4% Tenant Improvements andLeasing Costs $20.00 to $21.50 persquare foot $21.10 persquare foot (a) G&A expense excludes severance and merger-related costs. Same Store Property Net Operating Income (NOI) excludes income from early lease terminations and hurricane-related charges. Same Store Property Operating Revenues and Net Operating Income Fourth quarter 2006 same store property operating revenues increased 2.9% as compared to fourth quarter 2005 as a result of occupancy gains, higher tenant reimbursements, and market rent growth. Same store property operating revenues for the full year increased 1.2% as compared to 2005. Fourth quarter 2006 same store property net operating income (NOI), excluding income from early lease terminations and the effects of Hurricane Katrina, increased 4.0% as compared to fourth quarter 2005. Same store NOI for the full year, excluding income from early lease terminations and the effects of Hurricane Katrina, increased 1.4% as compared to 2005. Leasing Results The same store portfolio occupancy increased to 92.9% at quarter-end from 90.1% at the end of the third quarter 2005. EOP’s effective office portfolio occupancy was 92.2% at December 31, 2006, compared to 90.4% at December 31, 2005. The effective office portfolio represents the company’s economic interest in the properties, which is used to derive GAAP net income. In the fourth quarter 2006, the company leased 5.2 million square feet, compared to 4.5 million square feet in the fourth quarter 2005. For 2006, the company leased 17.9 million square feet, compared to 20.1 million square feet in 2005. Tenant improvements and leasing costs for leases that commenced during the fourth quarter 2006 were $28.48 per square foot on a weighted average basis, compared to $22.45 per square foot in the fourth quarter 2005. Tenant improvements and leasing costs for leases that commenced during 2006 were $21.10 per square foot on a weighted average basis, compared to $20.23 per square foot during 2005. Investment Activity In the fourth quarter 2006, Equity Office sold 6.5 million square feet of assets for $1.4 billion and acquired 1.3 million square feet for $479.6 million. For the full year, Equity Office sold 11.7 million square feet of assets for $2.2 billion and acquired 3.6 million square feet for $1.4 billion. In 2007 through January 29, Equity Office sold 545,784 square feet of assets for $176.7 million and acquired 246,771 square feet for $114.3 million. Conference Call Information Equity Office will not be holding a conference call related to the release of the fourth quarter and full year earnings results. Forward-Looking Statements This release includes certain "forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s present expectations and beliefs about future events. As with any projection or forecast, these statements are inherently susceptible to uncertainty and changes in circumstances. Important factors that could cause actual results to differ materially from those reflected in such forward-looking statements and that should be considered in evaluating this release and the outlook of Equity Office include, but are not limited to, changes in economic, business and competitive conditions, and other factors affecting the operation of the business of Equity Office. These and other risks and uncertainties are detailed from time to time in Equity Office’s filings with the SEC, including its Form 10-K filed on March 15, 2006, as amended by Part II – Item 1A of our Form 10-Q filed on August 8, 2006. Equity Office is under no obligation, and expressly disclaims any obligation, to update or alter its forward-looking statements, whether as a result of changes, new information, subsequent events or otherwise. Equity Office Properties Trust, operating through its various subsidiaries and affiliates, is the nation's largest publicly held office building owner and manager with a total office portfolio consisting of whole or partial interests in 543 buildings comprising 103.1 million square feet in 16 states and the District of Columbia, as of December 31, 2006. Equity Office has an ownership presence in 24 Metropolitan Statistical Areas (MSAs) and in 98 submarkets, enabling it to provide a wide range of office solutions for local, regional and national customers. For more company information visit the Equity Office website at http://www.equityoffice.com. Equity Office Properties Trust Impact of EITF 04-5   In accordance with Emerging Issues Task Force 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights ("EITF 04-5"), effective January 1, 2006 Equity Office consolidated the assets, liabilities and results of operations of 18 joint ventures that it previously accounted for under the equity method. Prior periods have not been restated for this change. The table below summarizes the effect on Equity Office's assets and liabilities as a result of the consolidation of these joint ventures. As of January 1, 2006 (Dollars in thousands) Increase in investments in real estate, net of accumulated depreciation $ 2,556,549  Decrease in investments in unconsolidated joint ventures $ 844,591  Increase in mortgage debt, net of discounts $ 681,986  Increase in minority interests - partially owned properties $ 1,205,236  Increase in net other assets and liabilities $ 175,264  Change in total shareholders' equity $ -    Prior to January 1, 2006, Equity Office's share of the net income from these joint ventures was included in "Income from investments in unconsolidated joint ventures" on the consolidated statements of operations. Upon consolidation, Equity Office’s results of operations include the revenues and expenses of these joint ventures and an allocation to the minority interest partners for their share of the net income. The consolidation of the joint ventures did not impact net income available to common shareholders or funds from operations available to common shareholders. The table below summarizes the effect on Equity Office's results of operations for the three months and year ended December 31, 2006 as a result of the consolidation of these joint ventures.     For the three months endedDecember 31, 2006   For the year endedDecember 31, 2006 (Dollars in thousands) Increase in total revenues $ 106,547  $ 411,709  Increase in total operating expenses $ 82,259  $ 299,186  Increase in other expense (primarily interest expense) $ 6,844  $ 34,425  Decrease in income from investments in unconsolidated joint ventures $ 11,546  $ 42,024  Increase in minority interests - partially owned properties $ 5,898  $ 36,074  Change in income from continuing operations $ -  $ -  Equity Office Properties Trust Consolidated Statements of Operations (Unaudited)     For the three months ended December 31, For the years ended December 31, 2006  2005  2006  2005  (Dollars in thousands, except per share amounts) Revenues: Rental $651,502  $554,105  $2,542,593  $2,153,395  Tenant reimbursements 156,948  116,456  520,127  371,106  Parking 39,065  26,615  144,384  105,818  Other 19,842  17,754  68,749  100,181  Fee income 5,458  3,952  9,254  17,740  Total revenues 872,815  718,882  3,285,107  2,748,240  Expenses: Depreciation 201,622  156,716  747,165  597,813  Amortization 45,883  24,637  142,655  88,383  Real estate taxes 100,743  77,678  397,971  308,574  Insurance 9,948  28,682  31,689  54,976  Repairs and maintenance 115,388  99,081  390,443  306,492  Property operating 106,985  83,468  412,481  304,652  Ground rent 6,184  5,014  24,302  20,489  General and administrative 56,789  48,443  201,318  169,697  Impairment -  8,294  10,117  30,441  Total expenses 643,542  532,013  2,358,141  1,881,517  Operating income 229,273  186,869  926,966  866,723    Other income (expense): Interest and dividend income 8,520  5,357  24,331  15,761  Realized gain on settlement of derivatives and sale of marketable securities -  -  256  157  Interest: Expense incurred (235,690) (202,601) (914,083) (817,677) Amortization of deferred financing costs and prepayment expenses (3,861) (3,132) (13,755) (11,961) Total other income (expense) (231,031) (200,376) (903,251) (813,720)   (Loss) income before income taxes, allocation to minority interests, income from investments in unconsolidated joint ventures and gain (loss) on sales of real estate (1,758) (13,507) 23,715  53,003  Income taxes (1,020) 1,621  (3,397) 296  Minority Interests: EOP Partnership (34,747) (2,119) (34,082) (907) Partially owned properties (7,671) (1,856) (46,511) (9,825) Income from investments in unconsolidated joint ventures (including gain (loss) on sales of real estate of $0, $9,093, $(91) and $26,499, respectively) 1,039  20,114  1,444  68,996  Gain (loss) on sales of real estate 56,538  (1,098) 56,852  46,308  Income (loss) from continuing operations 12,381  3,155  (1,979) 157,871  Discontinued operations (including net gain on sales of real estate and provision for (loss) on properties held for sale of $301,053, $33,866, $476,709 and $(22,082), respectively) 308,454  24,508  342,946  (114,932) Net income 320,835  27,663  340,967  42,939  Preferred distributions (7,705) (8,701) (33,807) (34,803) Net income available to common shareholders $313,130  $18,962  $307,160  $8,136      Earnings per share - basic: Income (loss) from continuing operations available to common shareholders per share $0.10  ($0.01) $0.00  $0.28    Net income available to common shareholders per share $0.89  $0.05  $0.86  $0.02    Weighted average Common Shares outstanding 350,843,878  395,008,978  357,997,357  403,147,751    Earnings per share - diluted: Income (loss) from continuing operations available to common shareholders per share $0.10  ($0.01) $0.00  $0.27    Net income available to common shareholders per share $0.87  $0.05  $0.86  $0.02    Weighted average Common Shares outstanding and dilutive potential common shares 397,945,609  438,774,607  397,947,822  452,046,455    Distributions declared per Common Share outstanding $0.33  $0.50  $1.32  $2.00  Equity Office Properties Trust Consolidated Balance Sheets   December 31, 2006 (Unaudited)  December 31, 2005 (Dollars in thousands, except per share amounts) Assets: Investments in real estate $25,467,496  $22,914,757  Developments in process 726,116  567,129  Land available for development 167,171  176,868  Investments in real estate held for sale, net of accumulated depreciation 28,757  104,132  Accumulated depreciation (4,010,988) (3,330,744) Investments in real estate, net of accumulated depreciation 22,378,552  20,432,142  Cash and cash equivalents 153,870  78,164  Tenant and other receivables (net of allowance for doubtful accounts of $13,316 and $8,853, respectively) 124,464  94,858  Deferred rent receivable 564,095  496,826  Escrow deposits and restricted cash 313,626  38,658  Investments in unconsolidated joint ventures 108,679  947,989  Deferred financing costs (net of accumulated amortization of $52,232 and $45,920, respectively) 89,982  58,809  Deferred leasing costs and other related intangibles (net of accumulated amortization of $358,916 and $232,024, respectively) 725,800  522,926  Prepaid expenses and other assets 313,892  303,181  Total Assets $24,772,960  $22,973,553    Liabilities, Minority Interests, Mandatorily Redeemable Preferred Shares and Shareholders’ Equity: Liabilities: Mortgage debt (net of (discounts) of $(3,139) and $(5,185), respectively) $3,477,012  $2,164,198  Unsecured notes (net of (discounts) of $(23,992) and $(23,936), respectively) 9,879,457  9,032,620  Lines of credit 1,040,000  1,631,000  Accounts payable and accrued expenses 725,807  574,225  Distribution payable 2,496  3,736  Other liabilities (net of (discounts) of $(22,658) and $(25,597), respectively) 671,514  483,468  Commitments and contingencies -  -  Total Liabilities 15,796,286  13,889,247    Minority Interests: EOP Partnership 701,493  863,923  Partially owned properties 1,396,059  172,278  Total Minority Interests 2,097,552  1,036,201    Mandatorily Redeemable Preferred Shares: 5.25% Series B Convertible, Cumulative Redeemable Preferred Shares, liquidation preference $50.00 per share, 2,953,057 and 5,989,930 issued and outstanding, respectively 147,653  299,497    Shareholders' Equity: Preferred Shares, 100,000,000 authorized: 7.75% Series G Cumulative Redeemable Preferred Shares, liquidation preference $25.00 per share, 8,500,000 issued and outstanding 212,500  212,500  Common Shares, $0.01 par value; 750,000,000 shares authorized, 356,529,391 and 380,674,998 issued and outstanding, respectively 3,565  3,807  Other Shareholders' Equity: Additional paid in capital 8,881,555  9,745,819  Deferred compensation -  (533) Dividends in excess of accumulated earnings (2,318,406) (2,156,627) Accumulated other comprehensive loss (net of accumulated amortization of $18,763 and $11,948, respectively) (47,745) (56,358) Total Shareholders' Equity 6,731,469  7,748,608  Total Liabilities, Minority Interests, Mandatorily Redeemable Preferred Shares and Shareholders’ Equity $24,772,960  $22,973,553    Equity Office Properties Trust Reconciliation of Net Income to Funds From Operations ("FFO")     For the three months ended December 31, 2006  2005  (Dollars in thousands, except per share amounts) Reconciliation of net income to FFO (a): Net income $320,835  $27,663  Adjustments: Plus depreciation and amortization: Included in income from continuing operations and discontinued operations 253,907  198,869  Included in income from investments in unconsolidated joint ventures 3,054  13,408  Allocated to minority interests in partially owned properties (23,978) (1,488) Non-real estate related depreciation and amortization (3,594) (5,178) Less net gain on sales of real estate: Included in income from continuing operations and discontinued operations (362,100) (36,503) Included in income from investments in unconsolidated joint ventures -  (9,093) Less minority interests in EOP Partnership share of the above adjustments 13,391  (15,882) FFO 201,515  171,796  Preferred distributions (7,705) (8,701) FFO available to common shareholders - basic $193,810  $163,095  Net income available to common shareholders per share - basic $0.89  $0.05  FFO available to common shareholders per share - basic $0.55  $0.41      Adjustments to arrive at net income and FFO available to common shareholders: Net Income  FFO (b) Net Income  FFO (b) Net income and FFO $320,835  $201,515  $27,663  $171,796  Preferred distributions (7,705) (7,705) (8,701) (8,701) Net income and FFO available to common shareholders 313,130  193,810  18,962  163,095  Net income allocated to minority interests in EOP Partnership 34,747  34,747  2,119  2,119  Minority interests in EOP Partnership share of the above adjustments -  (13,391) -  15,882  Net income and FFO available to common shareholders - diluted $347,877  $215,166  $21,081  $181,096    Weighted average Common Shares and dilutive potential common shares outstanding 397,945,609  397,945,609  438,774,607  441,667,793    Net income and FFO available to common shareholders per share - diluted $0.87  $0.54  $0.05  $0.41      Common Shares and common share equivalents Weighted average Common Shares outstanding (used for both net income and FFO basic per share calculation) 350,843,878  395,008,978  Effect of dilutive potential common shares: Units 38,739,326  43,765,629  $1.5 billion exchangeable notes which are dilutive to both net income and FFO 1,381,116  -  Share options and restricted shares which are dilutive to both net income and FFO 6,981,289  -  Weighted average Common Shares and dilutive potential common shares used for net income available to common shareholders 397,945,609  438,774,607  Impact of share options and restricted shares which are dilutive to FFO but not dilutive to net income -  2,893,186  Weighted average Common Shares and dilutive potential common shares used for the calculation of FFO available to common shareholders 397,945,609  441,667,793    (a) FFO is a non-GAAP financial measure. The most directly comparable GAAP measure is net income, to which it is reconciled. See definition below.   (b) FFO for the three months ended December 31, 2006 and 2005 includes $4.5 million and $41.9 million, respectively, of non-cash impairment charges and losses on properties sold and properties held for sale, which is equivalent to $0.01 and $0.09 per share on a diluted basis, respectively. These charges are not added back to net income when calculating FFO.     FFO Definition: FFO is defined as net income, computed in accordance with accounting principles generally accepted in the United States ("GAAP"), excluding gains from sales of properties (but including losses from sales of properties, impairments and provisions for losses on properties held for sale), plus real estate related depreciation and amortization. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. Equity Office believes that FFO is helpful to investors as one of several measures of the performance of an equity REIT. Equity Office further believes that by excluding the effect of depreciation, amortization and gains from sales of real estate, all of which are based on historical costs and which may be of limited relevance in evaluating current performance, FFO can facilitate comparisons of operating performance between periods and between other equity REITs. Investors should review FFO, along with GAAP net income when trying to understand an equity REIT’s operating performance. Equity Office computes FFO in accordance with its interpretation of the standards established by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"), which may not be comparable to FFO reported by other equity REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than Equity Office does. FFO does not represent cash generated from operating activities in accordance with GAAP, nor does it represent cash available to pay distributions and should not be considered as an alternative to net income, determined in accordance with GAAP, as an indication of Equity Office's financial performance, or to cash flow from operating activities, determined in accordance with GAAP, as a measure of its liquidity, nor is it indicative of funds available to fund its cash needs, including its ability to make cash distributions. Equity Office Properties Trust Reconciliation of Net Income to Funds From Operations ("FFO") (continued)     For the years ended December 31, 2006  2005  (Dollars in thousands, except per share amounts) Reconciliation of net income to FFO (a): Net income $340,967  $42,939  Adjustments: Plus depreciation and amortization: Included in income from continuing operations and discontinued operations 942,913  797,441  Included in income from investments in unconsolidated joint ventures 11,667  51,382  Allocated to minority interests in partially owned properties (75,749) (5,907) Non-real estate related depreciation and amortization (17,005) (15,606) Less net gain on sales of real estate: Included in income from continuing operations and discontinued operations (539,273) (231,223) Included in income from investments in unconsolidated joint ventures (b) 91  (26,499) Allocated to minority interests in partially owned properties -  29,699  Less minority interests in EOP Partnership share of the above adjustments (32,224) (60,127) FFO 631,387  582,099  Preferred distributions (33,807) (34,803) FFO available to common shareholders - basic $597,580  $547,296  Net income available to common shareholders per share - basic $0.86  $0.02  FFO available to common shareholders per share - basic $1.67  $1.36      Adjustments to arrive at net income and FFO available to common shareholders: Net Income  FFO (c) Net Income  FFO (c) Net income and FFO $340,967  $631,387  $42,939  $582,099  Preferred distributions (33,807) (33,807) (34,803) (34,803) Net income and FFO available to common shareholders 307,160  597,580  8,136  547,296  Net income allocated to minority interests in EOP Partnership 34,082  34,082  907  907  Minority interests in EOP Partnership share of the above adjustments -  32,224  -  60,127  Net income and FFO available to common shareholders - diluted $341,242  $663,886  $9,043  $608,330    Weighted average Common Shares and dilutive potential common shares outstanding 397,947,822  403,784,706  452,046,455  452,046,455    Net income and FFO available to common shareholders per share - diluted $0.86  $1.64  $0.02  $1.35      Common Shares and common share equivalents Weighted average Common Shares outstanding (used for both net income and FFO basic per share calculation) 357,997,357  403,147,751  Effect of dilutive potential common shares: Units 39,950,465  45,199,136  Share options and restricted shares which are dilutive to both net income and FFO -  3,699,568  Weighted average Common Shares and dilutive potential common shares used for net income available to common shareholders 397,947,822  452,046,455  Impact of share options and restricted shares which are dilutive to FFO but not dilutive to net income 5,836,884  -  Weighted average Common Shares and dilutive potential common shares used for the calculation of FFO available to common shareholders 403,784,706  452,046,455    (a) FFO is a non-GAAP financial measure. The most directly comparable GAAP measure is net income, to which it is reconciled. See definition below.   (b) The loss for the year ended December 31, 2006 represents an adjustment to the gain previously recorded on properties sold in prior periods.   (c) FFO for the years ended December 31, 2006 and 2005 includes $194.6 million and $426.0 million, respectively, of non-cash impairment charges and losses on properties sold and properties held for sale, which is equivalent to $0.48 and $0.94 per share on a diluted basis, respectively. These charges are not added back to net income when calculating FFO.     FFO Definition: FFO is defined as net income, computed in accordance with accounting principles generally accepted in the United States ("GAAP"), excluding gains from sales of properties (but including losses from sales of properties, impairments and provisions for losses on properties held for sale), plus real estate related depreciation and amortization. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. Equity Office believes that FFO is helpful to investors as one of several measures of the performance of an equity REIT. Equity Office further believes that by excluding the effect of depreciation, amortization and gains from sales of real estate, all of which are based on historical costs and which may be of limited relevance in evaluating current performance, FFO can facilitate comparisons of operating performance between periods and between other equity REITs. Investors should review FFO, along with GAAP net income when trying to understand an equity REIT’s operating performance. Equity Office computes FFO in accordance with its interpretation of the standards established by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"), which may not be comparable to FFO reported by other equity REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than Equity Office does. FFO does not represent cash generated from operating activities in accordance with GAAP, nor does it represent cash available to pay distributions and should not be considered as an alternative to net income, determined in accordance with GAAP, as an indication of Equity Office's financial performance, or to cash flow from operating activities, determined in accordance with GAAP, as a measure of its liquidity, nor is it indicative of funds available to fund its cash needs, including its ability to make cash distributions. Equity Office Properties Trust Consolidated Statements of Cash Flows     For the three months ended December 31, For the years ended December 31, 2006  2005  2006  2005  (Dollars in thousands, unaudited) Operating Activities: Net income $ 320,835  $ 27,663  $ 340,967  $ 42,939  Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 258,524  204,024  967,591  818,172  Compensation expense related to restricted shares and stock options 5,183  3,937  23,682  23,887  Income from investments in unconsolidated joint ventures (1,039) (20,114) (1,444) (68,996) Net (contributions to) distributions from unconsolidated joint ventures (2,279) 9,246  (4,366) 52,690  Net (gain) on sales of real estate and provision for loss on properties held for sale (357,591) (32,768) (533,561) (24,226) Impairment -  38,147  188,928  219,003  Provision for doubtful accounts 1,636  1,052  6,079  6,428  Income allocated to minority interests 42,418  3,900  80,593  41,097  Other -  -  -  448  Changes in assets and liabilities: (Increase) in rent receivable (35,932) (36,863) (19,961) (21,933) (Increase) in deferred rent receivable (15,537) (12,012) (52,248) (63,455) (Increase) in prepaid expenses and other assets (47,743) (48,470) (2,955) (34,580) Increase in accounts payable and accrued expenses 47,426  54,540  23,406  2,222  (Decrease) increase in other liabilities (2,308) 10,135  (20,821) (5,706) Net cash provided by operating activities 213,593  202,417  995,890  987,990  Investing Activities: Property acquisitions (including deposits made for property acquisitions) (268,601) (246,370) (1,204,288) (1,266,584) Property dispositions (including deposits received for property dispositions) 660,613  208,099  1,169,455  1,828,954  Increase in cash upon consolidation of certain joint ventures -  -  51,357  -  Distributions from (investments in) unconsolidated joint ventures -  51,543  (11,040) 238,239  Capital and tenant improvements (including development costs) (180,121) (128,687) (519,682) (370,595) Lease commissions and other costs (49,443) (29,251) (140,576) (122,724) Decrease in escrow deposits and restricted cash 709,692  76,634  827,640  664,123  Investments in notes receivable -  (50,000) -  (50,000) Net cash provided by (used for) investing activities 872,140  (118,032) 172,866  921,413  Financing Activities: Proceeds from mortgage debt 101,683  518,705  685,790  518,855  Principal payments on mortgage debt (7,787) (187,445) (235,678) (1,077,322) Proceeds from unsecured notes -  1,791  1,470,000  40,549  Repayment of unsecured notes (103,044) -  (653,107) (675,000) Proceeds from lines of credit 2,867,460  5,760,370  21,997,859  13,867,270  Repayment of lines of credit (3,713,460) (4,940,370) (22,588,859) (12,784,270) Payments of loan costs and offering costs (480) (1,559) (11,547) (8,920) Settlement of interest rate swap agreements -  -  -  (8,677) Contributions from minority interests in partially owned properties related to repayment of mortgage debt -  -  48,705  -  Distributions to minority interests in partially owned properties (10,983) (1,891) (68,480) (11,208) Proceeds from exercise of stock options 19,332  3,608  148,200  141,982  Distributions to common shareholders and unitholders (258,588) (439,639) (522,983) (893,779) Repurchase of Common Shares (142) (851,807) (1,217,791) (959,129) Redemption of Units (14,177) (5,849) (112,968) (56,525) Payment of preferred distributions (8,048) (8,048) (32,191) (32,191) Net cash (used for) financing activities (1,128,234) (152,134) (1,093,050) (1,938,365) Net (decrease) increase in cash and cash equivalents (42,501) (67,749) 75,706  (28,962) Cash and cash equivalents at the beginning of the period 196,371  145,913  78,164  107,126  Cash and cash equivalents at the end of the period $ 153,870  $ 78,164  $ 153,870  $ 78,164  Equity Office Properties Trust Consolidated Statements of Cash Flows (continued)       For the three months ended December 31, For the years ended December 31, 2006  2005  2006  2005  (Dollars in thousands, unaudited) Supplemental Information: Interest paid during the period (including capitalized interest of $10,107, $390, $26,286 and $441, respectively) $ 186,819  $ 153,857  $ 898,732  $ 829,209  Non-Cash Investing and Financing Activities: Investing Activities: Escrow deposits related to property dispositions $ (703,922) $ -  $ (1,096,641) $ (639,439) Mortgage loan repayment as a result of a property disposition $ -  $ -  $ -  $ (13,386) Mortgage loan assumed upon acquisition of a property $ 178,476  $ 73,512  $ 193,676  $ 118,487  Loan issued in connection with a property disposition $ -  $ (66,300) $ -  $ (66,300) Units issued in connection with a property acquisition $ -  $ -  $ -  $ 3,339  Changes in accounts due to consolidation of certain joint ventures upon adoption of a new accounting standard and upon acquisition:   Decrease in investments in unconsolidated joint ventures $ -  $ -  $ (844,591) $ -  Increase in investments in real estate $ 135,891  $ -  $ 3,032,691  $ -  Increase in accumulated depreciation $ (21,111) $ -  $ (307,680) $ -  Increase in mortgage debt, net of discounts $ (81,171) $ -  $ (763,157) $ -  Increase in minority interests - partially owned properties $ (41,775) $ -  $ (1,299,848) $ -  Increase in other assets and liabilities $ 4,516  $ -  $ 127,578  $ -  Changes in accounts due to partial sale of real estate: Increase in investment in unconsolidated joint ventures $ -  $ -  $ -  $ 36,349  Decrease in investments in real estate $ -  $ -  $ -  $ (43,931) Decrease in accumulated depreciation $ -  $ -  $ -  $ 8,403  Decrease in other assets and liabilities $ -  $ -  $ -  $ (940) Financing Activities: Mortgage loan repayment as a result of a property disposition $ -  $ -  $ -  $ 13,386  Mortgage loan assumed upon acquisition of a property $ (178,476) $ (73,512) $ (193,676) $ (118,487) Loan issued in connection with a property disposition $ -  $ 66,300  $ -  $ 66,300  Units issued in connection with a property acquisition $ -  $ -  $ -  $ (3,339)