May 21 is the new deadline for Equity Residential to make a bid on a 26.5 percent interest in former REIT Archstone. Yesterday, majority stakeholders Barclays and Bank of America (BAC) agreed to extend EQR’s deadline by a little more than one month in hopes that it will buy half of their stake in the Denver-based company. The deal, which would give Equity CEO Sam Zell a piece of the competitor company, has been stymied by the company’s other owner, Lehman Brothers.

Lehman blocked EQR’s attempt to purchase the stake back in January by exercising its “right of first offer” (ROFO) option and matching Equity’s bid. It has become no secret that Lehman would prefer to unwind the company via IPO, but Barclays and BOA are still sticking to their guns. The new minimum bid is $1.5 billion, and if Equity does decide to offer it, and Lehman once again exercises its right of first offer, Equity is awarded an $80 million break-up fee. According to New York–based investment banking firm Sandler O’Neill + Partners, Equity is likely happier with an extension than just walking away with the $80 million.

“We are not surprised to see EQR reach an agreement with BAC/Barclays to once again extend the deadline to bid on the banks' final Archstone tranche as gaining either all of Archstone or a few assets, at a minimum, are likely preferable to EQR than just walking away with an $80 million break-fee,” said the company in a statement. “We suspect that the presumed dialogue between EQR and Lehman/Archstone is becoming increasingly productive given EQR could always use the nuclear option to bid painfully high for the remaining tranche to try and force Lehman to cut a deal, knowing that Lehman would likely ROFO versus let EQR become a stakeholder.”

Newport Beach, Calif.-based Green Street Advisors’ senior research associate, Ray Huang, says it’s difficult to speculate but there would be winners in the deal.

“It is hard to draw definitive conclusions about what the extension might imply, but if we were to handicap the various scenarios, we continue to believe that the most likely outcome is that EQR negotiates the purchase of a sizable portfolio of Archstone assets,” Huang said. “ If EQR is able to buy a carved-out portfolio at fair market value (or better), create expense savings by layering the assets onto its formidable operating platform, and purchase the assets with cheaply priced equity, we think this would be a major win for shareholders.”   

Even though it is under a liquidation plan, whether or not Lehman Brothers will allow Equity to get its hands on an ownership stake in Archstone remains to be seen. But so far, it hasn’t been too eager to let EQR on the inside. In the next four weeks, it will become known if Lehman is willing to loosen its grip and let go of a piece of the industry that launched it into its initial tailspin.