Monday, November 20, 2006

REITS going GAGA ..../ Blackstone to Buy Equity Office for 36 billion$ (incl. debt)

every week a new rekord on the lbo front...... 36 b$ including debt! to buy peak price assets like real estate looks crazy bargain for sure.... but with high leverage everything seem possible..... who will buys those bonds?!,

es scheint fast so als wenn jeder woche neue rekorde bei lbo gebrochen werden. für 36 mrd $ auf absoluten spitzenpreislevel immobililien in den usa zu erwerben kann man als tollkühn bezeichnen. mit nem genügend großen finanzierunglevel scheint aber alles zu gehen..... bin gespannt wer diese bonds kaufen wird.....

here is the script from the last conference call from eop
with this quote from the ceo
" it´s a little crazy out there" deals are in the making that makes no sense. (he was right!)

more on reits (businessweek)
Litt notes, though, that Zell isn't the only veteran real-estate magnate selling out these days, suggesting that insiders believe today's valuations cannot last. REIT stocks are trading at a multiple of future earnings two percentage points higher than the Standard & Poor's 500-stock index today. Historically, they've traded at a seven-point discount. Why quibble with a sure thing? Litt says: "Take the money and run."

commercial real estate
Nov. 20 (Bloomberg) -- Blackstone Group LP, manager of the world's largest buyout fund, agreed to acquire billionaire Sam Zell's Equity Office Properties Trust, owner of 580 office buildings, for about $20 billion in the biggest takeover of a real estate company.

Equity Office shareholders will receive $48.50 a share, 8.5 percent more than Friday's closing price, the companies said in a statement yesterday. Including debt, the transaction is worth $36 billion, exceeding this year's $33 billion purchase of hospital chain HCA Inc. to become the biggest leveraged buyout in history.

The acquisition will give Blackstone office space stretching from New York and Washington to Los Angeles as U.S. vacancy rates drop and rents climb to a record. Takeovers of property companies have doubled this year to $189 billion as investors including shareholder activist Carl Icahn and real estate developer Larry Silverstein pursue deals,

``Demand for office space and commercial property in the U.S. has been firm,'' said Hans Kunnen, who helps oversee $70 billion at Colonial First State in Sydney, including property stocks. ``With office properties, you get the rental income and that generates a nice stable yield.'' (really...?)

read this story from mike larson about the reits and the yields.

Blackstone has acquired 10 publicly traded real estate companies in the past two years, including CarrAmerica Realty Corp. and MeriStar Hospitality Corp. The New York-based company, founded by Stephen Schwarzman and Pete Peterson, raised a $5.25 billion fund to make property acquisitions in June.

U.S. office vacancy rates fell in the third quarter to 12.96 percent from 14.13 percent a year earlier, and rents for so- called Class A space in Manhattan rose last month to a record $63.26 per square foot, according to Colliers International. New construction has lagged behind an increase in demand as the economy adds jobs, pushing up rents. .....

Buyout firms more than doubled their acquisitions of property companies to $16.5 billion this year before the Blackstone announcement, Bloomberg data show.

Share Performance
Shares of Equity Office gained 47 percent this year, almost double the advance of the Bloomberg REIT Index.....

.....Equity Office in August said it planned to sell as much as $3.5 billion of real estate by the end of next year to reduce debt. Company spokeswoman Terry Holt said the decision wasn't intended to be part of a broader effort to sell the entire company.

Biggest LBOs
LBO firms including Blackstone, which finance the bulk of their takeovers using the target company's cash flow, have announced $600 billion of acquisitions so far this year, up from $241 billion in 2005, according to Bloomberg data. Total mergers and acquisitions have reached $3.1 trillion this year, surpassing 2000 as the busiest ever.

The biggest LBO to date was the purchase announced in July of HCA, the largest U.S. hospital chain, by Bain Capital LLC, Kohlberg Kravis Roberts & Co., Merrill Lynch & Co. and HCA co- founder Thomas F. Frist Jr. That topped the $31.3 billion that KKR paid in 1989 for RJR Nabisco Inc.

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