DEALS of the YEAR
M Aceqrugeisristi&ons
Blackstone Strikes Again
…And Again for $64B
Blackstone Group, which made headlines
in 2006 for its acquisitions of real estate
companies, was again the talk of the
industry last year, thanks to two major
purchases. The firm picked up Equity
Office Properties for $39 billion, at the
time representing the largest private
equity buyout in history. Some months
later, the firm paid $26 billion for Hilton
Hotels Corp.
The EOP transaction closed in
February after a months-long bidding war
with an investment group led by Vornado
Realty Trust. The price factors out to
$55.50 per share. According to a
GlobeSt.com report, the purchase price
includes some $16 billion in debt, and the
per-share figure represents an 8.5% premium over EOP’s closing price on Nov.
17, 2006, the day before the merger was
made public. It’s also 20.5% more than
the REIT’s three-month average.
Blackstone gained a portfolio of 543
office buildings comprising 103 million sf
in 16 states and the District of Columbia,
along with some 2,100 employees. Soon
after the transaction closed, the firm
entered into deals to shed several EOP
properties, earning a few billion dollars in
the process.
Meanwhile, in October, Blackstone
closed on its purchase of Hilton for $47.50
The
DEALMAKERS
Buyer: Blackstone Group
Acquired Firm: Equity Office Properties
Buyer’s Advisors: Goldman, Sachs &
Co., Bank of America, Bear Stearns,
Citigroup, Deutsche Bank, Eastdil
Secured, Morgan Stanley, Blackstone
Corporate Advisory and Simpson
Thacher & Bartlett LLP
Acquired Firm’s Advisors: Merrill Lynch,
Pierce, Fenner & Smith and Sidley Austin
Lenders: Goldman Sachs & Co., Bank of
America, Bear Stearns, Citigroup, Credit
Suisse, Deutsche Bank, Morgan Stanley
and Wachovia
per share, 40% higher than what the stock
was trading for on July 2, the day before the
deal was publicly announced. The acquisition of one of the world’s largest hotel
chains gave Blackstone 2,896 lodging properties with about 490,000 rooms in 76 countries and territories. Hilton
owns, manages
or franchises a
portfolio of
brands including
Hilton, Conrad
Hotels & Resorts,
Doubletree,
Embassy Suites
Hotels, Hampton
Inn, Hampton
Inn & Suites,
Hilton Garden Jonathan Gray, Blackstone
Inn, Hilton
Grand Vacations, Homewood Suites by
Hilton and the Waldorf-Astoria Collection.
Blackstone financed the purchase with
$20.6 billion of mortgage and mezzanine
secured debt incurred by subsidiaries of
Hilton and approximately $5.7 billion of
equity invested by funds affiliated with
the Blackstone Group.
Unlike the EOP deal, however,
Blackstone indicated that it doesn’t
intend to sell off many properties.
Rather, it will hold the company as an
important strategic investment that it
wants to build upon.
The
DEALMAKERS
Buyer: Blackstone Group
Acquired Firm: Hilton Hotels Corp.
Buyer’s Advisors: Bear Stearns, Bank
of America, Deutsche Bank, Goldman
Sachs, Lehman Brothers, Merrill Lynch,
Morgan Stanley and Simpson Thacher
& Bartlett LLP
Acquired Firm’s Advisors: UBS
Investment Bank, Moelis Advisors and
Sullivan & Cromwell LLP
Lenders: Bear Stearns, Bank of
America, Deutsche Bank, Goldman
Sachs, Lehman Brothers, Merrill Lynch
and Morgan Stanley
Also of Note
The Lightstone Group entered the hotel sector in a big way last June with the $8-billion
acquisition of Extended Stay Hotels. Arbor
Realty Trust Inc. joined Lightstone in the deal as
an equity investor. The portfolio included 687
hotels totaling 76,000 rooms in 44 states and
Canada. The company operates five flags in
the mid-priced extended-stay segment.
Blackstone Group sold the assets, which it
acquired in 2004 for $3.1 billion. Lightstone’s
financial advisor was Citi, and financing for the
acquisition came from Wachovia Bank, Bear,
Stearns & Co., Merrill Lynch Mortgage Lending
Inc. and Bank of America. Herrick, Feinstein,
Proskauer Rose and Dechert LLP provided
legal advice to Lightstone and Arbor.
Blackstone’s financial advisors were Bear,
Stearns, Banc of America Securities, Merrill
Lynch and Blackstone Corporate Advisory.
Simpson Thacher & Bartlett was the legal advisor for Blackstone and ESA.
Simon Property Group and Farallon Capital
Management won a bidding war in February
for Chevy Chase, MD-based Mills Corp. SPG
and Farallon paid $7.9 billion for Mills, which
terminated its original $7.5-billion buyout
agreement with Brookfield Asset Management
of Toronto. SPG offered $1.5 billion in debt
financing to Mills to repay the firm’s senior term
loan and revolving credit line with Brookfield.
Merrill Lynch & Co. served as financial advisor
and Fried, Frank, Harris, Shriver & Jacobson
LLP acted as legal advisor to SPG. Paul,
Weiss, Rifkind, Wharton & Garrison LLP and
Richards Kibbe & Orbe LLP were the legal
counsel to Farallon. JP Morgan Securities Inc.
and Goldman, Sachs & Co. were financial advisors to Mills while Wachtell, Lipton, Rosen &
Katz, Hogan & Hartson LLP and Willkie Farr &
Gallagher LLP served as legal counsel.
Morgan Stanley made a couple of notable
buys last year, first acquiring CNL Hotels and
Resorts Inc. in April, then taking Crescent
Real Estate Equities Co. private in August.
For $6.6 billion, the firm gained CNL’s business and eight luxury properties located
throughout the US. Banc of America
Securities, UBS Investment Bank and
Houlihan Lokey acted as financial advisors to
CNL. Sidley Austin LLP and Venable LLP
served as legal counsel. Morgan Stanley was
represented in-house, while Goodwin Procter
MARCH 2008 REALESTATEFORUM 45
