Blackstone Group Acquires Equity Office Properties Trust for $36 Billion

Strategic Insights -

The Blackstone Group has agreed to acquire Equity Office Properties Trust, the largest office-building owner and manager in the United States, for approximately $36 billion. This deal marks the largest leveraged buyout in history, outpacing the $33 billion paid for HCA, a major hospital chain, earlier this year. The acquisition highlights the growing influence of private equity firms in the corporate world, with Blackstone moving to become one of the nation's largest owners of real estate.

Key Takeaways:

  • The proposed deal is a "ground-breaking transaction" for the real estate world, according to Matthew Ostrower, an analyst at Morgan Stanley.
  • The acquisition would make Blackstone one of the largest owners of real estate in the country, with a portfolio valued at over $32 billion.
  • Equity Office has approximately 590 buildings and over 105 million square feet of office space in major metropolitan markets.
  • The company was founded by Sam Zell in 1976 and has undergone significant changes in recent years, reducing holdings in weaker markets and increasing its presence in stronger markets.
  • The sale by Zell may signal that he believes the real estate market has peaked, as REITs have outperformed the broader market in each of the past seven years.
  • Private equity firms are competing to lead the largest buyout in history, with this deal potentially moving Blackstone ahead of Kohlberg Kravis Roberts.

Statistics:

  • The proposed deal is valued at approximately $36 billion, making it the largest leveraged buyout in history.
  • Equity Office has approximately 590 buildings and over 105 million square feet of office space in major metropolitan markets.
  • The company was founded by Sam Zell in 1976 and has undergone significant changes in recent years.
  • REITs have outperformed the broader market in each of the past seven years, according to a note by Ross Smotrich at Bear Stearns.
  • Office rents have increased 8 percent over the past year, according to Green Street Advisors.

Sources:

  • Bloomberg, "Blackstone to Acquire Equity Office for $36 Billion"
  • New York Times, "Private Equity Firm to Buy Equity Office for $36 Billion"
  • Morgan Stanley, "Proposed Deal for Equity Office is a 'Ground-Breaking Transaction'"