Insiders Make Sense of Trizec Sale

The sale consisted of 61 office properties totaling 36 million sf in nine US markets. Jason Mattox, executive vice president with real estate investment firm Behringer Harvard, says that Trizec clearly recognized the value of its portfolio. "With the capital appreciation in the near term, the new ownership structure may provide greater leverage," Mattox tells GlobeSt.com. "This is the kind of thing where Trizec's focus in great metro cities and its many assets had upside potential."

In a move that will fit strategically in its geographic niche, Brookfield Properties will manage and operate 18.5 million sf in New York, Washington, DC, Downtown Los Angeles and Houston. Blackstone in turn will manage and operate 5.4 million sf in West Los Angeles, San Diego and some of the New York City properties. Prior to the closing of the acquisition, which is expected in the fourth quarter 2006, Blackstone will acquire 12.1 million sf in Atlanta, Dallas, West Los Angeles, San Diego, Chicago, Charlotte and Minneapolis from Trizec.

Mattox admits that if the acquisition meant that assets were going pubic to private, it would change his perspective. Ron DeVries, vice president of Chicago-based Appraisal Research Counselors, agrees. "It was different than other sales that we've seen that were public going private; this is public to public. So why Trizec got out I don't know."

DeVries goes on to say that because Trizec was not on the market, "I'm guessing someone came in with an unsolicited offer, and it was in the best interest to all of stockholders to take it," he tells GlobeSt.com. "Investors are looking for large pools of assets because we're in an economy where the sum of the parts can be greater than each individual asset."

According to Peter Munk, chairman of both Trizec Properties and Trizec Canada, stockholders have had a return of 185%. "Last year alone, Trizec Properties delivered a total return of 26% to stockholders, more than double the industry average," Munk says. "This transaction delivers to all Trizec Properties and Trizec Canada stockholders the full value created over this period."

With so many mergers and acquisitions going on in the marketplace today, Transwestern Commercial Services president Robert Bagguley wasn't surprised. "Nothing surprises me at the moment with the amount of consolidation in our industry," Bagguley says. "This is just another strategic way to acquire more real estate in one transaction; it takes just as long to buy an individual transaction."