It took time for us to react to Blackstone's $48.50 deal, perhaps too much time. Mike and I originally thought we needed a partner to do a $40 billion deal and we needed a partner to commit in advance to taking most, if not all, of the $20 billion plus of mid-country assets we did not want. That search took time and after working with Starwood Capital and Walton Street, in the end, with the help of our bankers and advisors, we competed for EOP on our own.⁽⁸⁾

Mike and I would not have fired the first shot unless we were certain that bidding would benefit our business franchise, whether we won or lost. In the end we were always a stock-based buyer and Sam was always a cash seller. Next deal.⁽⁹⁾

We are in the income property business, and our strategy is to hold assets for income and long-term capital appreciation for the benefit of our shareholders. Blackstone's model is to buy wholesale and sell retail, holding for so long as to time markets, build platforms, etc., to create best returns for their investors, and they do it brilliantly. In this case, it seems they bought high and sold even higher, disposing of over half the EOP portfolio for what we make to be about a 10% profit on assets, a huge return on their




(8) Just hours before we launched, I got an email from Sam in the form of a verse:
Dear Stevie,
Roses are red
Violets are blue
I heard a rumor
Is it true
Love, Sam
We replied in kind.

(9) We will write off $8.8 million for pursuit costs in the EOP matter in 1Q 07.

equity, within days. By and large, they sold what would have been our keepers. Interestingly, all their sales have been to highly leveraged players, funds or other intermediaries who intend, after a hold period of their own, to re-sell (except for Harry in New York) for a profit. In fact, some of these assets have now been sold two or even three times in weeks. Except for Harry in New York, none of these assets has yet found a long-term permanent owner, if such exists any more.

If all this doesn't convince market participants that these office properties are scarce and cheap, nothing will. And all this should also convince market participants that private market values are well higher than public trading prices, and that private market players can be and are much more aggressive.

Corporate warfare requires logistics and an army of, in this case, banking and legal advisors to augment our internal acquisitions, operations and financial staffs. We benefited enormously from the efforts of dozens of these very talented, hardworking individuals, many of whom bivouacked on our 46th and 45th floors. Mike and I thank them all, with special thanks to our Board and to Joe Shenker, our lifelong counsel.