Zuckerman Loss of $165 Million Makes Zell Master of Real Estate

Zell exited the office property market in February 2007, selling Equity Office Properties Trust and its more than 500 buildings to Blackstone Group LP for $39 billion in debt and equity, the largest leveraged buyout at the time. It was the peak of the market.

“After that, the world changed,” said Dan Fasulo, managing director at real estate data provider Real Capital Analytics.

Boston Properties disclosed the writedowns as it reported its first quarterly net loss in at least eight years. Zuckerman bought the three office towers from developer Harry Macklowe, who was forced to sell because he had to repay short-term loans he used to buy eight buildings from Zell in February 2007.

Financial companies, battered by more than $1 trillion of writedowns and credit-market losses since 2007, have tightened commercial real estate lending. U.S. sales of office buildings plunged 88 percent since the second quarter of 2007, according to New York-based Real Capital Analytics. In midtown Manhattan, the location of the three buildings, 6.7 percent of commercial space was vacant in February 2007, according to data from Colliers ABR. In December, vacancies climbed to 10.2 percent.