Private equity group Blackstone has reportedly agreed to sell $7 bn (EUR 5.3 bn) worth of offices in New York to privately-owned Macklowe Properties. The move is designed to help pay down the increased debt Blackstone incurred to win control of Equity Office Properties (EOP) on Wednesday.
Private equity group Blackstone has reportedly agreed to sell $7 bn (EUR 5.3 bn) worth of offices in New York to privately-owned Macklowe Properties. The move is designed to help pay down the increased debt Blackstone incurred to win control of Equity Office Properties (EOP) on Wednesday.
Blackstone is expected to sell more EOP assets shortly to help finance the largest leveraged buy-out in the history of real estate. One potential buyer of EOP buildings could be Vornado Realty Trust - the second biggest US real estate investment trust (REIT) after EOP. On Wednesday, EOP's shareholders voted to accept Blackstone's bid, valued at $38.5 bn, after Vornado dropped out of a high-stakes bidding war for EOP.
Blackstone's original offer of $38 bn in November 2006 was backed by EOP’s board but Vornado led a cash-and-stock counter bid. The issue was settled early on Wednesday when Blackstone raised its offer for billionaire property tycoon Sam Zell's EOP to $55.50 (EUR 42.72) per share, or $38.9bn. Last week Vornado offered $56 per share in a cash-and-stock offer. Although higher than Blackstone's bid, Vornado's offer was rejected by EOP's board on the basis it was too risky and would take longer to close than Blackstone's bid.
The challenge from Vornado means Blackstone is paying nearly $3bn more for EOP than it had planned to in the original deal made in November. The final offer is 33.8 times EOP's funds from operation and double the average for shares of companies in the Bloomberg REIT index. Blackstone appears to be betting that it can sell EOP properties at a premium in today's highly liquid market in order to address the imbalance.
March's edition of PropertyEU Magazine includes an interview with Sam Zell. Click on the link below to subscribe.