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Deals & Dealmakers

Hudson makes play for West Coast EOP portfolio

Hudson Pacific Properties announced it will acquire Equity Office Properties’ San Francisco Peninsula and Silicon Valley portfolio from Blackstone Real Estate Partners V and VI in a stock and cash transaction valued at $3.5 billion.

Upon closing of the transaction, Hudson is expected to have an equity market capitalization of $3.7 billion and total enterprise value of approximately $6.5 billion.

“The acquisition of the EOP Northern California Portfolio perfectly aligns with our strategy to acquire high-quality office properties in West Coast markets poised for continued growth through off-market transactions,ˮ said Victor J. Coleman, Hudson’s chairman and CEO.

Victor Coleman
Victor Coleman

“Hudson has long targeted these two Northern California regions for expansion, and while we expect the transaction to be immediately accretive to FFO, we also intend to move quickly to employ our leasing, repositioning and development expertise to extract additional value for our stockholders.”

The transaction brings together two complementary office portfolios with a combined asset base of 53 properties totaling approximately 14.6 million square feet across Northern and Southern California and the Pacific Northwest.

Under the terms of the agreement,Hudson will fund the acquisition with $1.75 billion in cash and approximately 63.5 million Hudson common shares and operating partnership units issued to Blackstone.

“We chose to take a major stake in Hudson given its high-quality portfolio, outstanding management team and attractive prospects for growth. We believe strongly in the upside potential of the EOP Northern California Portfolio and this combination creates a market-leading West Coast office REIT,” said Jonathan D. Gray, Blackstone’s Global Head of Real Estate.

Hudson has obtained $1.75 billion of committed bridge financing, but is exploring alternatives to fund the transaction’s cash needs, including existing asset sales and joint ventures and new secured or unsecured financing potentially coinciding with pursuit of an investment grade credit rating.

Affiliates of Farallon Capital Management, L.L.C., which own approximately 15 percent of the company’s outstanding common equity on a fully diluted basis, have entered into a voting agreement supporting the transaction.

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