Updated from 1:06 p.m. EST

It's not easy to beat out private equity giant Blackstone Group on a buyout deal. But Cerberus Capital, a major competitor of Blackstone, provides just the amount of muscle needed on the debt side to provide a higher bid for Equity Office Properties Trust ( EOP).

Press reports say that a consortium of private equity firm Cerberus Capital, billionaire real estate investor Neil Bluhm with Walton Street Capital, and Barry Sternlicht with Starwood Capital are eyeing a competing bid to top the $48.50-per-share offer that Equity Office accepted from Blackstone Group in November.

Sources say Vornado Realty Trust ( VNO) could be eyeing a piece of the deal as well, perhaps through a mezzanine debt investment or the purchase of some of Equity Office's properties.

The $36 billion Blackstone/Equity Office deal is the most expensive real estate transaction ever.

Any competing offer faces two major issues: Will the new bidders have a fundamental strategy for Equity Office's assets that differs from Blackstone's, and can they find a cheaper cost of capital?

The first question is more difficult to answer. But Cerberus plays a vital role in raising the more than $30 million of low-cost debt needed to buy Equity Office.

In an interview with The Wall Street Journal, a Cerberus executive said the firm had no intention of submitting a bid, but would be willing to provide the debt financing.

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