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SAN FRANCISCO-Locally headquartered Shorenstein Properties is acquiring Equity Office Properties’ 4.2-million-sf portfolio in and around Portland, OR. The acquisition would be the largest in the history of the company, which sponsors a series of closed-end investment funds.

Shorenstein declined comment for this story, but industry sources locally and nationally tell GlobeSt.com that the company has the portfolio under contract for a price in the mid-$200s per sf, which would put it on the plus side of $1 billion.

The package includes a dominant position in the best suburban submarket there, two Downtown office towers and a Downtown development site on which EOP has been preparing to build.

The Blackstone Group closed on its $39-billion purchase of Equity Office Properties last week and quickly began selling it off in smaller pieces. The company borrowed nearly $32 billion for the deal, including a $3.5-billion bridge loan necessary to outbid Vornado Realty Trust.

In addition to the Shorenstein deal, industry sources are confirming for GlobeSt.com published reports that have listed Beacon Capital Partners of Boston as the buyer of EOP’s Seattle and Washington, DC portfolios (53 buildings; $6.3 billion) and Tishman Speyer as a bidder for some of EOP’s holdings in California.

In Portland, EOP’s portfolio includes a huge concentration in the Kruse Way submarket, which is approximately 10 miles south of Downtown Portland in Lake Oswego. The submarket is the tightest in the region and also boasts the highest rental rates. EOP’s 17-building, one-million-sf portfolio there gives it at least a 75% share of the submarket, local sources tell GlobeSt.com. Across Interstate 5 from Kruse Way, near Washington Square Mall, EOP also owns Lincoln Center, a seven-building, 735,000-sf class A office park, and Nimbus Corporate Center, a 17-building, 690,000-sf office campus.

In Downtown Portland, EOP owns Congress Center (23 stories, 363,000 sf), Umpqua Bank Plaza (19 stories, 270,000 sf), and a development site at First and Main that it had been planning to develop with a 15-story, 325,000-sf office building starting later this year. Shorenstein has not yet said whether it will pick up where EOP left off.

With such a large concentration of properties, local brokers say it’s possible Shorenstein would sell off some of the assets. It’s also possible Shorenstein may split the portfolio between two funds. In August 2006, Shorenstein closed on its eighth fund with total committed equity of $1.1 billion, including $100 million invested by Shorenstein. The company is presently investing its seventh fund, which has committed capital of $775 million.

In the long run, it’s likely that Shorenstein will provide leasing and management services in-house. The company bills itself as an “owner-operator” with leasing and property management capabilities. In the short term, the company might look to partner with a local service provider in order to gain a better understanding of the market before trying to take everything in-house.

“There may be more opportunities for the third-party business but we won’t know until we see what their plan is,” David Hill, an office specialist with the Portland office of Grubb & Ellis, tells GlobeSt.com. At least for now, Shorenstein will enjoy the same dominant market share that EOP did along Kruse Way, which should allow them to push rents.

As for potential resales, Hill says the portfolio is pretty well concentrated and of similar quality. “There are no laggards,” he says. Even if there are still some slightly less desirable buildings in the portfolio, “they are located in the submarket they are focused on,” he says.

As of the end of the year, EOP’s Portland portfolio was 93.6% leased and the average annualized rent per sf was $22.39. Individual building occupancies ranged from 73.5% (Kruse Oaks I) to 100% (4004 Kruse Way Place, Kruse Woods V, 5550 Macadam). The average rental rate range was $15.79 (Nimbus Corporate Center) to $30.23(Kruse Woods V).

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