Multifamily Executive is keeping close tabs on the potential sale of Archstone, as Lehman Bros., Bank of America, and Barclay’s try to navigate the right disposition strategy for the portfolio that was taken private for $22 billion in 2007. Check out our coverage, along with breaking news from across the wire, going back to 2007 on the sale and evolution of this behemoth apartment owner.
Lehman Brothers Holdings Inc. sued Bank of America Corp. (BAC) and Barclays Plc (BARC) for breach of contract after they agreed to sell a stake in Archstone to Sam Zell’s Equity Residential, Archstone’s “largest competitor,” according to court papers.
Last week’s announcement by Chicago-based Equity Residential (EQR) that it entered into an agreement to spend $1.325 billion in cash for a 26.5 percent ownership interest in Denver-based Archstone, which has 48,922 wholly-owned and stabilized apartment units and 1,332 apartment units under construction, took some people by surprise.
The battle for Archstone intensified Monday as the estate of Lehman Brothers Holdings Inc. challenged a deal cut by Sam Zell's Equity Residential to buy a large stake of the rival apartment-building owner.
In the high-stakes game to buy apartment giant Archstone, Sam Zell is throwing curveballs.
The estate of Lehman Brothers Holdings Inc. is trying to raise money for a possible counterbid to Equity Residential's deal for a 26.5 percent stake in U.S. apartment owner Archstone, according to a person with knowledge of the situation.
Equity Residential, the apartment company headed by real-estate mogul Sam Zell, has emerged as the lead bidder in the contest to buy roughly half of rival Archstone in what would be one of the largest real-estate transactions since the downturn, according to people familiar with the situation.
For a while, Chicago-based Equity Residential has been rumored as a potential buyer for parts of Denver-based Archstone’s massive portfolio. A Wednesday report from The Wall Street Journal verifies that speculation, saying that Equity Residential “has emerged as the lead bidder in the contest to buy roughly half of rival Archstone.”
Lehman Brothers Holdings Inc. (LEHMQ)’s Archstone, the defunct firm’s largest real-estate asset, won an arbitration brought by investors seeking hundreds of millions of dollars in damages.
The plight of Archstone has been a widely-debated topic in the industry for the past couple of years. The apartment giant, which was No. 8 on the Multifamily Executive Top 50 Owners list with 62,741 units, was taken private by in a Lehman Brothers Holdings with $22 billion leveraged buyout in 2007. And now, it's changing hands again.
While the number of apartment assets owned by Englewood, Colo.-based Archstone has remained steady (at 77) since the firm was privatized by Lehman Bros. and Tishman Speyer in 2007 for $22 billion, the geographic makeup of the firm’s portfolio has changed significantly, and could affect an exit strategy for the firm’s owners, who are reportedly evaluating whether to sell the company outright or pursue an IPO.
Following a Reuters report last week that revealed Archstone was quietly shopping its apartment portfolio, a shortlist of potential buyers declined to comment on whether or not the Denver-based owner/operator of 57,474 units has solicited their respective firms regarding a deal. Representatives for Alexandria, Va.-based REIT AvalonBay Communities and Chicago-based REIT Equity Residential tell Multifamily Executive they have no comment after being named by Reuters as possible buyers of some or all of Archstone’s assets. Archstone also declined to comment.
Lehman Brothers (LEHMQ.PK) is pushing ahead with plans to sell or list Archstone, the apartment company that it took private for $22 billion at the height of the property boom, the Financial Times said on Wednesday.
In 2005, ING Clarion Partners bought Atlanta-based Gables Residential Trust for $2.8 billion in cash. That same year, Morgan Stanley Real Estate's Prime Property Fund announced that it would buy Chicago-based AMLI Residential Properties for $2.1 billion. Then, in October 2007, the big domino fell—a fund of Tishman Speyer and Lehman Bros. bought Denver-based Archstone for $22.2 billion just as the credit crunch was gripping the world.
The headquarters of Archstone-Smith is a six-story building, shared with other tenants, and tucked into a nondescript suburban office park in Englewood, Colo. For all intents and purposes, the home office of the firm—considered the fourth-largest owner of multifamily real estate—is in the middle of nowhere. There aren't even any key Archstone-Smith assets in the Denver metro area. Its only strategic benefit as a location: equidistance from the company's 10 core markets in the Sunbelt and on the East and West coasts. If need be, CEO Scot Sellers or any other employee stationed at corporate can hop on a plane and be on site at virtually any Archstone-Smith property within three or four hours.
As you read this, history is being made. The joint venture of New York City private equity firms Tishman Speyer Properties and Lehman Bros. Holdings is about to seal the deal on its $22.2 billion acquisition of Denver, Colo.-based Archstone-Smith Trust, the titanic multifamily apartment real estate investment trust that will be taken private for $60.75 per share. Announced in May and scheduled to close on Oct. 5, the transaction will mark the largest multifamily cash privatization to date, setting a new standard for private equity buyouts of public multifamily entities. That's if it happens.
Archstone-Smith chairman and CEO R. Scot Sellers says his company has always been committed to maximizing value for its shareholders. Never was that more accurate than on May 29, when the Denver-based REIT announced that it had signed a definitive agreement to be acquired for $60.75 per share by a partnership sponsored by Tishman Speyer and Lehman Bros.