And The Winner Is…

NEW YORK – REIT Review.com –  February 2, 2007  –  It looks like a long running bidding war over Equity Office Properties Trust (NYSE: EOP)  between private equity firm Blackstone Group and Vornado Realty Trust (NYSE: VNO) is finally drawing to a close, with Vornado’s last minute $56 a share cash and equity bid failing to win the support of Equity Office Properties’ board over Blackstone’s $54 all cash offer. The $54 a share price, not including assumed debt, values the deal at $22.3 billion; well up from the $20 billion price tag we reported when we wrote about the deal back in November.

With widespread concern over a residential real estate “bubble” notwithstanding, it seems that the office market remains an attractive proposition for owners, investors and operators.  Vornado’s intent was clearly to add EOP'S properties to their portfolio with the goal of increasing returns and maximizing value.  With private equity firm Blackstone taking control, it isn’t immediately clear to what extent they intend to hold, repackage, or flip the properties they will be acquiring.  In both cases, it is clear that the bidders felt that the properties are undervalued in EOP.

That is a very positive sign for US real estate in general as two of the leading investment companies in the world controlled by sophisticated investors were willing to bid up the price of Equity Office Products by fifty percent in only four months since rumors of the deal began to surface back in September.  

Despite talk of unattractive CAP rates in the commercial real estate markets it seems that the bidders saw considerable unrealized value in Equity Office Properties; that bodes well for the commercial market in general and for office and commercial REITS like SL Green (NYSE: SLG), Corporate Office Properties Trust (NYSE: OFC),  Mack-Cali Realty Corp (NYSE: CLI) and  Boston Properties (NYSE: BXP) in particular.