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If You Want It This Bad You Can Have It


...people are buying into the concept that, if it's a $20 billion deal, + or - $1billion is not really going to make much difference.


And so the frenzy continues. Freeport McMoran (FCX) swallows Phelps Dodge (PD) for a cool $27 billion. This makes FCX a copper company rather than a gold company with copper interests. The potential buy-out of PD had been kicked around for a number of months and even the premium is in the speculated range. Time will tell if this one works out, suffice to say this is a large bet that copper has not yet seen peak prices, or else FCX will find itself in a world of pain.

Let's move on to Blackstone for Equity Office Property (EOP) (assuming that the WSJ speculation is correct) because when thrown in with CB Richard Ellis (CBG) buying Trammell Crow (TCC), and the Reckson Assoc. (RA) / SL Green Realty (SLG) merger, it is bringing the action in commercial real estate to a fever pitch.

I was chatting with a friend of mine in the business a couple of days ago and he was suggesting that deals for entire portfolios / companies are picking up speed because it allows more wiggle room in the due diligence. When I gave him a perplexed look, he explained that it is easier for buyers to buy properties with pro-forma assumptions of $200/sq.ft. rents for trophy space as part of a basket, than it is to rationalize them on an individual basis. In other words, (writer embellishment) people are buying into the concept that, if it's a $20 billion deal, + or - $1billion is not really going to make much difference.

What cannot be embellished is the fact that one of the shrewdest commercial players ever, EOP's founder Sam Zell is bailing out; and perhaps the quintessential blue blood, old fashioned real estate outfit - Trammell - has unloaded itself to the CBG's "cowboys." If this is not the second coming of Julian Robertson folding Tiger Management right at the 2000 market peak, then this time it must be different.

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Position in PD
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