The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.
BANKING

The downside of public ownership

Comment

Investors and financiers in the real estate world will be wondering for some time yet just who got the best deal out of the largest ever LBO, the purchase by Blackstone of Equity Office Properties Trust, the largest owner and manager of commercial office space in the US, in a deal valued at $39 billion.

Did Samuel Zell, the self-made billionaire who started in the real estate investment business 40 years ago, out-negotiate Blackstone – which twice raised its offer to beat out competition from another listed Reit, Vornado?

Perhaps, not. Zell himself tells us that, had he owned 100% of EOP as a private company, he would not have been a seller. Clearly, he still sees value in the sector, though it’s noticeable that his recent purchases in real estate have been in emerging markets.

The deal shows that, during a bull market for real estate, private equity groups have useful advantages over publicly-quoted Reits. The ratings agencies act as a quasi regulator of Reits and get nervous when leverage exceeds 50% of asset values. Private equity groups are able to deploy much more leverage to capture value from rising asset prices. And for as long as the property markets are liquid – and they are very liquid right now – private firms can also move with great speed to turn their portfolios over without all the cumbersome governance procedures and checks required by public ownership.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree