Equity Office Taken Out

Updated from 11:02 a.m. EST

The Blackstone Group agreed to buy Equity Office Properties Trust(EOP Quote) in a deal valued at $36 billion, marking the largest real estate transaction in history and potentially the largest-ever private equity takeover.

Blackstone will pay $48.50 a share for the Chicago-based real estate investment trust, representing an 8.5% premium to Equity Office's closing price on Friday. The payment works out to roughly $20 billion.

Including the assumption of $16 billion in debt, the deal, if completed, would surpass the recent $33 billion purchase of hospital operator HCA as history's biggest private equity buyout.

The takeover once again highlights the enormous, practically unlimited, amount of capital available to buy public companies, especially those with a focus on real estate.

"It's a phenomenal sign of confidence in the real estate space," says one buyside source. "You've got the smartest guys in the world doing this."

Blackstone, one of the world's largest private equity funds, has been involved with several REIT buyouts this year, including those of office owners Trizec Properties and CarrAmerica, and hotel landlord Meristar.

In mid-July, Blackstone said it had raised $30 billion of new funds over the past year, including $7.2 billion earmarked for real estate investments.

Equity Office, founded by famed real estate investor Samuel Zell, has been the subject of privatization rumors throughout much of this year. In the spring, the country's largest pension fund, CalPERS, was said to be interested in buying the company, which owns whole or partial interest in 580 office buildings across the country.