Report: Lehman estate to buy Archstone stake

AP News
Posted: May 24, 2012 8:33 PM
Report: Lehman estate to buy Archstone stake

Lehman Brothers Holdings Inc.'s bankruptcy estate has reached a deal to acquire a bigger stake in apartment-building owner Archstone for $1.58 billion, according to a published report.

The deal calls for Lehman to buy the stake from Bank of America Corp. and Barclays PLC, the Wall Street Journal reported Thursday, citing unnamed persons familiar with the matter.

Lehman's estate owns 73.5 percent of Englewood, Colo.-based Archstone and has sought to buy the remaining 26.5 percent that it doesn't already own.

BofA and Barclays joined Lehman in a $22.2 billion leveraged buyout of Archstone-Smith Trust in 2007.

Initially, Lehman owned a 47 percent stake in Archstone and the banks owned a 53 percent stake.

In December, apartment owner Equity Residential offered to acquire a 26.5 percent stake in Archstone from the two banks for $1.33 billion. But Lehman exercised its right to match other offers for the stake and acquired it instead.

Under the terms of the deal for BofA and Barclays' final piece of Archstone, Equity Residential will be paid $150 million, including an $80 million breakup fee and $70 million from Lehman, the Journal reported, citing unnamed persons familiar with the matter. Equity Residential is developer Sam Zell's investment firm.

The deal comes as the U.S. apartment market has been gaining strength, buoyed by a pickup in job growth that is encouraging more people who have been sharing housing with relatives or roommates to rent on their own.

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On Thursday, the National Association of Realtors forecast that apartment vacancies nationwide will continue to decline over the next 12 months to 4.3 percent. Rates below 5 percent generally lead to rising rental rates, which means bigger profits for landlords like Archstone.

As of March 31, Archstone owned or had an ownership stake in 434 apartment communities in the U.S. and Europe.

Lehman collapsed in 2008 in the biggest corporate bankruptcy in U.S. history.

Barclays, and BofA and Archstone declined to comment. Calls to Lehman representatives were not immediately returned.