Portfolio Repositioning
Lakeshore principals have completed two multibillion-dollar portfolio repositionings: EOP from 2003 - 2007 and AREIT from 2012 - 2017. Lakeshore identified all assets as strategic or non-strategic. Then they bought, sold, financed, partnered, and developed assets based on the strategic criteria of each asset and the difference between current value versus price.
Transaction Summary
Jeff Johnson returned to Equity Office and significantly repositioned the REIT to focus on premier office buildings
The Investment team sold 66 Northern California Industrial buildings totaling 4.8 million square feet for $407.3 million ($85psf) then acquired through trade two office assets totaling 677,607 square feet for $137 million
Investment Rational
Identified the need to exit non-strategic industrial assets
Market pricing of industrial assets warranted sale given new investment opportunities available to Equity Office. In 2004, there were a number of investors with an industrial focus, and pricing on the sale was above Equity Office’s opinion of intrinsic value
Some of the industrial assets required an exchange into other assets for tax purposes
Results
Strong cash buyer interest led to asking for highly sought-after office assets in lieu of cash
The projected unlevered IRR on assets sold to the buyer was 7.1%
The projected unlevered IRR on assets bought by Equity Office was 8.6%
Equity Office received two high-quality office assets valued at $137 million plus $270 million in cash
Allocated value at sale to Blackstone was $185.3 million (35% increase)