For some time now, commercial real estate observers have speculated about the endgame for Equity Office Properties in the Bay Area.
EOP's owner, Blackstone Group LP, was selling off assets in chunks — a building here, an office campus there. And while rumors swirled of more, and larger, sale offerings, news that Hudson Pacific Properties had agreed to buy the entire South Bay and Peninsula portfolio still came as stunning news.
That's partly because the $3.5 billion transaction was off market, executives said on a Monday morning conference call, keeping the deal very much below the radar.
The direct deal suited both the buyer and seller's goals: Blackstone wanted a counterpart that would let it maintain some exposure in a top office market. And Hudson Pacific, which long coveted a position in the Bay Area, would partially finance the deal by issuing Blackstone shares — making the giant private equity firm a 48 percent owner.
"When we sat around and said, 'We want to continue to play in Northern California, how do we do this,' what we did is pick up the phone and call Victor (Coleman, Hudson's CEO) and say, 'How can we work out a transaction?'" Jonathan D. Gray, head of global real estate for Blackstone, said on the call.
"We did not market these assets," he had said a few beats earlier. "There's plenty of liquidity in the market for high-quality office in Northern California."
The transaction is likely the largest office sale in the country since 2007, said Ben Thypin, director of market analysis for Real Capital Analytics, a research firm. It comes as the region's office market drives forward as one of the hottest in the U.S., drawing investors from around the world. Blackstone didn't want to cut its upside potential in that environment, apparently.
Ben Carlos Thypin
I am currently the co-founder of Quantierra, the world's first data driven real estate brokerage and investment manager. In my former life as Director of Market Analysis at Real Capital Analytics, I worked with press outlets large and small to provide them with great data and insightful commentary. Here are some of the results of this collaboration. For the rest, please check out the News Archive.
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