Blackstone deal 'heralds open season' on listed property funds

The Blackstone Group's acquisition of the Equity Office Properties Trust (EOP) for a record-breaking $36 bn (EUR 28 bn) in the US means that no listed real estate fund is safe from takeover, market watchers have predicted.

The takeover is the largest real estate transaction in history and potentially the largest-ever private equity takeover. Blackstone is to pay $48.50 a share for the Chicago-based real estate investment trust, representing an 8.5% premium on EOP's closing price on Friday. This comes to roughly $20 bn, and is coupled with the assumption of $16 bn in debt. 'It's a phenomenal sign of confidence in the real estate space,' one market source told the online publication TheStreet.com.

Blackstone, one of the world's largest private equity funds, has been involved with several REIT buyouts this year, including those of office owners Trizec Properties and CarrAmerica, and hotel landlord Meristar.

EOP, founded by famed real estate investor Samuel Zell, has been the subject of privatization rumours throughout much of this year. At the same time, bankers and other industry sources said such a privatization was unlikely since it would require an enormous amount of debt.

News of the Blackstone deal sent shockwaves through markets around the world, with many professionals regarding it as a foretaste of mega mergers or takeovers to come. 'We think this deal makes every other office REIT, and perhaps every REIT, a 'buy' today, as speculation will likely run rampant - if EOP is a seller, everyone is a takeout candidate,' analysts at Stifel Nicolaus investment bank said in a report on Monday.

And Dutch real estate publication Vastgoedmarkt quoted JP Morgan analyst Harm Meijer as saying the Blackstone deal will have a major impact globally in the coming months. 'No listed real estate fund is safe now. This is the beginning of a new wave of mergers and takeovers in the real estate sector, also in Europe.'