$39B EOP Deal Should Have Killed Blackstone: Instead It Reaped A $7B Profit

The timing of Blackstone’s purchase of Equity Office Properties could hardly have been worse. On 9 February, 2017, it paid $39B for the listed company, using $35.5B of debt. Two days earlier, HSBC reported losses on a fund it managed that invested in subprime mortgages, and the phrase "credit crunch" started to enter the public consciousness.

Blackstone’s purchase of EOP remains the biggest deal in real estate history, and the debt it raised is the biggest financing in history. Many deals struck with 91% leverage at the top of the market saw buyers lose control of their assets.

Deals of that magnitude have the potential to bring down a whole franchise, or see managers spend years recovering the trust of investors. Just ask Morgan Stanley or Goldman Sachs.

But last week, Blackstone completed a deal to sell the last of the 580 office buildings it acquired when it bought EOP. Rockpoint bought 100 Summer St. in Boston for about $800M. More than 12 years on, what could have been a poisoned chalice has instead seen Blackstone sell the portfolio for a combine $46B, according to The Wall Street Journal, a $7B profit, and triple the $3.5B equity the company originally put into the deal.

Alongside its investment in Hilton Hotels, also made with a ton of debt at the top of the market, that means Blackstone made a $21B profit on deals that could easily have caused it to make huge losses in its funds. Bisnow took a…

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