Trizec sold for $4.8b; buyers assume $4.1b debt.

In the surprise sale of the season, Brookfield Properties in partnership with the mighty Blackstone Group, will buy Chicago-based REIT, Trizec Properties, for $4.8 billion. The partnership will also assume $4.1 billion of Trizec's debts.

The offer was described by some real estate experts as simply too good for Trizec to refuse, its shareholders being paid $29 per share for stock that, on average over the past 30 days, traded at just $24.

Tim Callahan, Trizec Properties' president and chief executive officer, said, "Even though Trizec has made great strides and has delivered one of the best total returns to stockholders for office REITs during the past three years, the company continues to be undervalued in the public markets.

"In recognizing the underlying value of the company's office portfolio, and especially, its operating platform, the transaction announced today accomplishes Trizec's ultimate objective as a public company, which is to maximize stockholder value."

Since launching as a public REIT, Trizec Properties has created one of the premier national office companies in the country with 40 million s/f of high-quality office space in key markets both across the US and in Canada.

Last year, it completed one of its biggest-ever deals when it purchased a $1.63 billion slice of Southern California's biggest landlord, Arden Realty, in a deal in which it partnered with GE Real Estate. Ironically, it may have been that deal which some sources say could have prompted the REIT to engage in an under-the-radar search for a buyer who would pay a healthy premium over the company's stock price. According to written reports, 14 REITs have been sold to private investors in the last year, almost always at hefty premiums for their stock value. Blackstone was involved in one of the most recent and notable examples when, in March, it purchased CARR America Realty Corporation for $5.6 billion, an 18% premium over the REIT's stock value. Last year, Brookfield led a consortium that bought Canadian REIT, O&Y, for $1.63 billion.

According to the New York Times, Trizec chairman Peter Munk held discussions with several potential buyers but chose the Brookfield/Blackstone partnership because they made an all cash offer of $4.8 billion for the company and agreed to assume its hefty debt.

Under the deal, Blackstone will pay the lion's share of the buying price and will manage and operate 5.8 million square feet of Trizec properties on the west coast and in New York City.

Trizec's New York portfolio includes the World Apparel Center at 1411 Broadway, One New York Plaza and the Grace Building at 1114 Avenue of the Americas, which it owns in partnership with the Swig Company.

Jonathan Gray, Blackstone's senior managing director, commented, "Trizec represents a tremendous opportunity to further our investment in the US office market recovery."

Before the deal closes, Blackstone is also expected to buy 12.1 million square feet of properties in Atlanta, Dallas, West LA, San Diego, Chicago, Charlotte and Minneapolis from Trizec.

Brookfield, meanwhile, will manage and operate 8.5 million square feet of properties located in New York, Washington DC, downtown Los Angeles and Houston, boosting it holdings in both the DC and LA markets, and consistent with its financial services, government and energy market strategy elsewhere in the country.

Ric Clark, president and CEO of Brookfield Properties, commented, "We are pleased to be acquiring this outstanding portfolio of premier office properties. With the majority of value in gateway cities complementary to our portfolio, this acquisition provides Brookfield Properties with a unique investment opportunity."

In a prepared statement, Trizec's chairman commented, "Since the acquisition of Trizec in 1994, our management team has created one of the leading property companies in North America. In the last three years, Trizec Properties stockholders have enjoyed an extraordinary return of 185 percent. Last year alone, Trizec Properties delivered a total return of 26 percent to stockholders, more than double the industry average."

Munk added, "This transaction delivers to all Trizec Properties and Trizec Canada stockholders the full value created over this period."