NEW YORK CITY-If you thought privatization was a regional strategy, think again. The board of trustees of Chicago-based Equity Office Properties Trust has agreed to a buyout by the aggressive Blackstone Group in a deal that is being valued at $36 billion. That includes some $16 billion in debt, according to reports.
EOP owns 580 buildings--some 108.6 million sf--in 16 states. The deal is considered to be the largest single real estate transaction in history.
The deal is a continuation of a Blackstone buying spree, which in recent months has included Trizec and CarrAmerica. This latest deal calls for the Manhattan based-investment and advisory firm to acquire all of EOP's outstanding common stock for $48.50 per share. That represents an 8.5% premium over Friday's closing price and a 20.5% premium over the REIT's three month average.
The board gave the deal a unanimous thumbs-up and is urging shareholders to follow suit. A special meeting of shareholders to vote on the deal is in the works, but the date is yet to be determined. None of EOP's current management--including founder Sam Zell and president and CEO Richard Kincaid--are part of the buyout group.
While avoiding forward-looking statements, in a recent exclusive interview with GlobeSt.com, Kincaid left the door open to a possible buyout. "We would do whatever is in the best interest of our shareholders," he said. "Right now the arbitrage is more public to private. You've got total returns that are below the cost of capital for anyone in the public market. That will stop only when there's no more arbitrage. So I expect privatization will continue."
But, when questioned about the firm's recent spate of overhead-clearing, which included the sale of hefty properties in a variety of markets and the release of some 360 employees, Kincaid said, "We're positioning the company to be successful long-term as a stand-alone public company."
Merrill Lynch & Co. served as exclusive financial advisor to EOP. Goldman, Sachs & Co.; Bank of America; Bear Stearns; Blackstone Corporate Advisory; and Morgan Stanley did the same for Blackstone. Acquisition financing will be led by Goldman, Sachs & Co., Bank of America, and Bear Stearns. Sidley Austin LLP was legal advisor to Equity Office; Simpson Thacher & Bartlett LLP provided legal advice to Blackstone.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
John Salustri
John Salustri has covered the commercial real estate industry for nearly 25 years. He was the founding editor of GlobeSt.com, and is a four-time recipient of the Excellence in Journalism award from the National Association of Real Estate Editors.
