Big change is in the works for Equity Office Properties Trust, the country’s biggest office landlord and one of the largest owners of office buildings in Orange County.
Blackstone Group, the New York-based private equity firm that seems to be buying everything these days, is paying about $36 billion for Sam Zell’s Equity Office. It’s the largest real estate deal yet. If completed, it also would rank as the largest private equity takeover.
Blackstone is paying $48.50 a share for the Chicago-based real estate investment trust, or about $20 billion. The deal also includes the assumption of about $16 billion in debt. The offer is about 9% higher than what Equity Office was trading at before the deal was announced.
Equity Office owns and manages 29 office buildings totaling about 5.7 million square feet in OC.
Nationally, it owns about 581 buildings totaling 109 million square feet.
Change already has been taking place locally for Equity Office.
A switch in strategy has seen the company look to consolidate its holdings on both coasts, while exiting about 10 markets elsewhere in the past few years.
As part of its restructuring, six regional senior vice president recently left the company. Among them was Bert Dezzutti, the company’s top Southern California executive.
To partly fill Dezzutti’s role, the company this month named Charles Hobey as vice president of operations. He’ll head up property management for Equity Office’s OC, Los Angeles and San Diego operations.
Equity Office has been courting smaller tenants to its OC buildings as of late.
The company this month started a leasing program called BusinessReady Office. It’s aimed at smaller tenants, which the company categorizes as those needing less than 5,000 square feet.
The program offers businesses office space that is ready within weeks. Suites include tenant lobbies, conference rooms, private offices and upgraded kitchens, among other features.
The suites give “customers the flexibility they need in a tight market,” Campbell said.
Close to 40% of the company’s leases in 2006 have been for 5,000 square feet or less, he said.
The BusinnessReady suites are offered at City Plaza and 500 Orange Tower, both in Orange, as well as 1920 Main Plaza in Irvine.
Master Inks GE Venture
Newport Beach-based Master Development Corp. has found a financial partner for local industrial deals.
The developer, which has acquired more than $80 million in real estate since 2004, formed a $50 million venture with GE Asset Management, manager of General Electric Co.’s U.S. pension plan.
The venture’s goal is to acquire and develop industrial buildings in Southern California in the next several years. Master Development plans to focus on sites larger than 7 acres and existing properties valued at more than $10 million, according to Bryan Bentrott, the company’s executive vice president.
“We hope to find mid-tier office and industrial properties from $10 million to $30 million” that need renovation or can be converted into condominiums, Bentrott said.
Potential deals could be similar to a big one Master Development recently did in Santa Ana. The developer and Newport Beach-based real estate investment firm Buchanan Street Partners paid $30 million for a 230,000-square-foot, 11-building industrial park on McFadden Avenue in Santa Ana.
The property, known previously as Electric Farms for its proximity to a power station, will be turned into as many as 50 industrial condominiums for sale.
Record Pipeline for Donahue
Costa Mesa-based shopping center developer Donahue Schriber said this month the company’s development pipeline now exceeds $500 million. It’s the privately held real estate investment trust’s highest level of development activity in its 37-year history.
Donahue Schriber plans to add 22 centers to its core markets of California, Nevada and Arizona in the next three years.
To handle the growth, Mark Whitfield, a 16-year company veteran and six-year executive committee member, will take on a new role as executive vice president development services, starting next year.
Whitfield plans to focus on the zoning, design and construction of the 4 million square feet of retail space the company is looking to build. He also will work on acquisitions and development opportunities.
Argus Enters Midwest
San Clemente’s Argus Realty Investors LP has made its first big office buy in the Midwest.
The company, which pools together investors for office buys, acquired Meridian Plaza, a complex of three office buildings in the north Indianapolis suburb of Carmel. The sales price was $37.6 million, or $123 per square foot.
Talcott Realty Investors of Hartford, Conn., was the property’s seller. La Salle Bank of Chicago provided a $27.6 million, 10-year loan.
