Brookfield, Blackstone Close $7.2B Trizec Acquisition

Buyout of Chicago Office REIT Seen as Largest Real Estate Transaction with Private Equity Funding

A venture between Brookfield Properties Corp. (NYSE: BPO) and The Blackstone Group closed on its $7.2 billion acquisition of Trizec Properties Inc. (NYSE: TRZ). The deal, first announced in June, is considered the largest real estate transaction with private equity funding to date.

After approving the sale last month, Trizec stockholders pocketed $29.02 in cash per share of common stock. Brookfield also closed on its acquisition of Trizec Canada for about US $30.98 per share.

The Trizec acquisition shifts control of 48 office properties totaling about 26 million square feet in key markets such as New York, Washington, D.C., Los Angeles, Houston and San Diego.

In a separate but related deal earlier this week, Trizec sold a portfolio of 13 office properties to affiliates of Blackstone for about $1.8 billion. Blackstone stands to make a windfall from the subsequent sale of those properties (see related article).

The Trizec acquisition also was windfall for some of the biggest firms on Wall Street, who sourced or provided the acquisition financing. Among those with a piece of the deal were Merrill Lynch, Bear Stearns, Deutsche Bank, Morgan Stanley and the Royal Bank of Canada.

Brookfield’s equity portion, which will total about $420 million, will be co-invested in a fund format with institutional clients. The rest of the equity will be provided by institutional partners and Blackstone.

Following the acquisition, Brookfield and Blackstone will enter or boost their presence in many markets. For example, the deal gives the new venture eight downtown Houston assets totaling 7.4 million square feet, making it the city's largest office owner, in one fell swoop.

As part of the deal, Brookfield will oversee a portfolio of properties totaling 18.5 million square feet in New York, Washington, D.C., downtown Los Angeles and Houston, according to regulatory filings. Blackstone will take over management of a portfolio totaling about 5.4 million square feet. That breaks out to Brookfield managing about 72% of the assets with Blackstone overseeing 28%.

Brookfield will adopt Trizec’s operating platforms in Washington, D.C., Houston and Los Angeles. It will integrate Trizec’s New York operations with its own headquarters operations in Manhattan. Dennis Friedrich, president and chief operating officer of U.S. Commercial Operations for Brookfield Properties, will oversee the newly acquired assets.

Bear Stearns & Co. Inc., Merrill Lynch, Deutsche Bank, Goodwin Procter LLP, Goodman and Carr LLP, Simpson Thatcher & Bartlett LLP and Blake Cassels & Graydon LLP served as financial or legal advisors to Brookfield and Blackstone.