CALLAHAN'S KITTY
DOW JONES

Published March 27, 2007

Only two months after Trizec Properties Inc. was taken private in October, Chief Executive Timothy Callahan, who had been left without a job, announced he was back in the real-estate investment business. But because he didn't raise money for a fund, the question whispered at the winter holiday parties -- where Mr. Callahan wore a Callahan Capital Partners LLC name tag -- was who was backing him financially?
Now, we know. Morgan Stanley is partnering with Callahan Capital as it closes Thursday on five buildings (2.8 million square feet) in Denver for $770 million. The buildings are part of the portfolio the Blackstone Group acquired in its acquisition of Equity Office Properties Trust, where Mr. Callahan was CEO before taking the Trizec job.

Bill Tresham, Callahan Capital's chief operating officer and another former Trizec exec, says the backing of Morgan Stanley Real Estate Special Situations Fund III -- a global fund which makes noncontrolling investments in real-estate companies -- gave the new firm credibility with Blackstone. (Two other Morgan Stanley investment funds are in the process of buying EOP's portfolio in San Francisco from Blackstone for $2.5 billion.) The Callahan acquisition also will include the development site to build a second office tower at the Tabor Center on 17th Street -- the first speculative office high-rise to be announced in Denver in recent years. Mr. Tresham says construction costs will be lower for Callahan than for competing developers because the foundation, mechanical infrastructure and underground parking already are in place.