Blackstone buys Equity Office for $36 billion

Daily Journal of Commerce (Portland, OR), Nov 21, 2006 by Kennedy Smith

Equity Office Properties Trust, headquartered in Chicago, signed a definitive agreement Monday to be bought out by Blackstone Real Estate Partners of Chicago in a transaction valued at approximately $36 billion.

Equity Office Properties Trust is the largest private owner of office properties in the United States.

The transaction represents the largest acquisition among U.S. real estate investment trusts, according to Blackstone.

Equity Office Properties Trust has a portfolio comprising whole or partial interests in 580 buildings - about 108.6 million square feet - in 16 states, including Oregon.

Equity Office had been planning to build a Class A, 15-story headquarters-style building in downtown Portland, on a site it owns at First Avenue and Main Street, with about 325,000 square feet of space and 19,000 square feet of ground-floor retail.

The site has been coveted by Multnomah County as a prime spot to build a new courthouse. However, Doug Butler, director of facilities and property management for Multnomah County, said Equity Office would probably conduct "business as usual" and go ahead with its original plans for the site.

"We've met and discussed (the site) with them in the past, and their preference was to move ahead for an office tower," said Butler, who had not heard about the sale of Equity Office prior to being asked Monday morning about its impact on the First and Main site. "With a company the size of Equity, they have dozens of transactions in the works going on at any one time, and Blackstone will have to take those into account. My guess is that it will take some time."

In Portland, Equity Office's portfolio includes Umpqua Bank Plaza, Congress Center, 100 S.W. Main St., River Forum I and II, 5550 Macadam, RiverSide Centre, Nimbus Corporate Center, Lincoln Center, and Kruse Way.

David Squire of the Portland office of Grubb & Ellis, a commercial real estate firm, said the announcement probably doesn't mean much for the Portland area.

"It's way too early to tell what this means for Portland," he said. "Blackstone is a colossal group; they're very big, very smart. There are economies of scale in some places, but not here in Portland. For Chicago or New York, this is huge, but (Equity Office has) a relatively lean staff here, and their real estate here is frankly some of the best product in the market."

Under the terms of the agreement, Blackstone will acquire all of the outstanding common stock of Equity Office for $48.50 per share in cash. The board of trustees at Equity Office unanimously approved the merger agreement, which is expected to close in the first quarter of 2007.