DATE: Wednesday, July 9, 1997               TAG: 9707090396

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 

SOURCE: BY TOM SHEAN, STAFF WRITER 

DATELINE: NORFOLK                           LENGTH:   62 lines

DOMINION TOWER IS PART OF NEW STOCK OFFER EQUITY OFFICE PROPERTIES, OWNERS OF 90 BUILDINGS, RAISED ALMOST $500 MILLION

Dominion Tower, the tallest office building in Hampton Roads, became part of a giant real estate investment trust Tuesday with an initial public offering of 25 million shares by its owner.

Equity Office Properties Trust, which owns 90 office buildings with combined space of 32 million square feet, raised almost $500 million from the offering.

The Chicago-based trust said it planned to use the money to help repay $552.8 million of debt on 23 buildings it owns, including $23.36 million owed on Dominion Tower.

Known by the acronym REIT, a real estate investment trust like Equity Office Properties assembles a large portfolio of real estate and allows investors to participate in its earnings by offering them stock. Some REITs specialize in office buildings, while others concentrate on apartment complexes or shopping centers.

Sam Zell, chairman of Equity Office Properties, also is chairman of the largest REIT in the country specializing in apartments, Equity Residential Properties Trust.

Equity Office Properties' portfolio includes major office buildings in Los Angeles, San Francisco, Atlanta, Charlotte, Nashville, New York City, Boston and Philadelphia.

After several delays, Dominion Tower opened in early 1988 at a cost of more than $50 million. However, the 26-story building came onto the market in the midst of a glut in office space and was hobbled by low rental income.

By mid-1989, developers Harvey L. Lindsay Jr. of Norfolk and Alan Gregory of Dallas faced foreclosure on Dominion Tower. At the last minute, they agreed to sell the building to an investment fund that had purchased Dominion Tower's mortgage from one of the developers' lenders, First Bank System in Minneapolis.

The fund, which specialized in buying troubled buildings, had been organized in 1987 by Zell, a Chicago investor with a reputation for finding bargain investments, and by the brokerage firm Merrill Lynch & Co. Lindsay and Gregory were given a minority stake in Dominion Tower's new owner, Dominion Tower Limited Partnership.

Leasing of space in Dominion Tower has improved in recent years, and its occupancy rate has climbed to 98 percent, according to information prepared for prospective investors in Equity Office Properties Trust. The stone-and-glass building on the Elizabeth River waterfront has a tenant mix that includes law firms, accounting firms, brokerage firms and banking offices.

With an average rent of $16.20 per square foot on occupied space, the building generates annual rents of $6.4 million, the document prepared for investors said. It said the average gross rent per square foot for comparable buildings was $16.40.

After coming to market at $21 each, shares of Equity Office Properties jumped 28 percent during their first day on the New York Stock Exchange to $26.88.

Real estate investment trusts have attracted investor attention in recent years because of the income they can provide. By law, REITs must distribute 95 percent of their earnings to investors.

The combination of stable interest rates, rising rents on offices and other buildings and strong investor demand for income has spurred several initial public offerings of real estate investment trusts during the past two years.

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