Now that The Blackstone Group has won the high-stakes bidding war for Equity Office Properties Trust in the largest leveraged buyout in U.S. history, market observers are anxiously awaiting the answer to a number of questions. First and foremost, what will Blackstone do with the former EOP and its assets?

“I would be surprised if [EOP] stays independent,” according to Jay Hartzell, an associate professor and associate director of the Real Estate Finance & Investment Center at the University of Texas. “As a portfolio manager, it wouldn’t make much sense to leave this as a stand-alone. You would want to integrate all you could with whatever other assets you were considering holding.”

Blackstone beat out a group led by Vornado Realty Trust that also included Starwood Capital and Walton Street Capital. The bidding war ended Feb. 7 at $55.50 cash per share, or $23.2 billion, and roughly $16 billion in debt that brought the total deal value to more than $39 billion. The privatization was so huge, in fact, that it reduced the total capitalization of office REITs covered by the FTSE NAREIT index by 27%, from $75.8 billion to $55.2 billion.

At the end of 2006, EOP’s portfolio included ownership or interest in 103.1 million sq. ft. of space comprising 543 office buildings in 16 states and the District of Columbia. However, just days before closing the deal with Blackstone, EOP sold its Central Perimeter properties in Atlanta to an affiliate of Rubenstein Properties Fund LP and Barry Real Estate Cos. The new owners in turn sold 500,000 sq. ft. of the office buildings in separate deals to Novare Development Group and a joint venture of Ackerman & Co. and AEW Capital Management LP.

Subtracting that 3.5 millions sq. ft. in Atlanta means Blackstone’s purchased ownership or interest is slightly less than 100 million sq. ft. total — still a massive acquisition.

Blackstone declined to comment on its plans for the portfolio. However, selling is at least part of the plan, as evidenced by the quick flip of 6.5 million sq. ft. of former EOP assets in Manhattan to Harry Macklowe for $7.5 billion. That deal closed on Feb. 9, just two days after Blackstone’s behemoth acquisition.

Experts predict more sales will occur in the coming weeks. Investor demand currently favors large portfolios over piecemeal acquisitions, so those transactions are likely to be portfolio deals like the recent sale to Macklowe. Brokers say a potential buyer is negotiating to purchase former EOP properties in Washington, D.C. and Seattle. The portfolio’s Chicago properties are said to be on the offering block, and investors are eagerly inquiring after Blackstone’s new holdings in other markets.

Blackstone is probably weighing several factors in its plans for the portfolio, according to the University of Texas’ Hartzell. Those considerations include:

• Identifying markets where the new owner has a critical mass of properties
• Deciding where the company wants to be strategically
• Identifying opportunities to improve economies of scale
• Evaluating the portfolio’s diversification level

That kind of analysis will help Blackstone decide what to keep and what to sell, a process that clearly had already begun by Feb. 9, the date of the sale to Macklowe.

Portions of the portfolio, such as the Manhattan properties, may have been undervalued prior to the acquisition, Hartzell says, which would explain why Blackstone was ready to sell just two days after closing on EOP.

“You would expect to see them sell off stuff they thought was especially miss-priced, and hold on to ones they thought had long-term growth potential that the market might not yet appreciate,” Hartzell says.

Even if additional properties are sold, the question remains whether the former EOP will continue to own, develop and acquire office space as a freestanding firm, which CarrAmerica Realty Corp. has done since its merger with Blackstone affiliates last July. In September, CarrAmerica even kicked off a new, 400,000 sq. ft. office development in Dallas.

Alternatively, EOP could wind up much like Trizec Properties, which was acquired by Blackstone and Brookfield Properties in October. Brookfield absorbed former Trizec assets and employees in some of its markets but many other properties were sold. Trizec offices that complemented Blackstone’s platform in Los Angeles and San Diego were rolled into CarrAmerica.

If Blackstone takes a similar approach to the former EOP, then the company’s management structure is unlikely to remain an independent operating unit. Employees associated with buildings that aren’t sold will likely be absorbed into CarrAmerica or other Blackstone businesses.