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Lehman buys remaining Archstone stake

by Lou Whiteman | Published May 25, 2012 at 11:27 AM

Lehman Brothers Holdings Inc. on Friday, May 25 said it would acquire the remaining 26.5% it does not already own in Archstone Enterprise LP from Barclays Capital Real Estate Holdings Inc. and Bank of America Corp. in a deal valued at $1.58 billion.

New York-based Lehman has been battling to take full control of Archstone, which owns and operates apartment properties, as part of the liquidating company's plan to extract maximum value for its holdings. Lehman bought into Archstone in 2007, joining with Tishman Speyer Properties LP to acquire the Englewood, Colo.-based REIT for $22.2 billion.

Lehman's liquidation plan went into effect on March 6, ending the three and 1/2 year bankruptcy case of the storied investment bank whose collapse set off the global financial crisis in 2008. The plan, confirmed by the U.S. Bankruptcy Court for the Southern District of New York, allows Lehman to unwind its remaining holdings, including real estate, commercial loans and private equity and principal investments.

The company needed to take full control of Archstone in order to block Equity Residential from disrupting Lehman's plan for the apartment firm. Under Archstone's bylaws all important decisions about its fate must be unanimous unless one party holds at least 76% of voting rights.

Lehman until this year owned just 47% of Archstone, but in January stepped in when the banks were attempting to sell half of their stake to Sam Zell-led Equity Residential with a $1.325 billion deal for an initial 26.5% stake. This follow-on deal includes a $150 million break-up fee payable to Equity Residential, with Lehman paying $70 million and the banks splitting the remaining $80 million.

Lehman in a statement Friday said that the purchases were made "to prevent Equity Residential from acquiring the same interests in order to protect and preserve the value" of Archstone.

"With full ownership of Archstone, we will now be able to move forward and pursue monetization opportunities for the company," Lehman chairman Owen Thomas said. "This transaction protects Lehman's substantial investment, provides stability and gives us control of Archstone's future."

Lehman was advised by Steve Henschel and Eric Gleacher at Gleacher & Co., with inhouse advice from Webster Neighbor and Jeff Fitts. It took legal counsel from Weil Gotshal & Manges LLP's David Herman, Michael Bond, Kyle Krpata, Raymond Gietz and Scott Sontag.

Bank of America, whose lead banker was Greg Wright, was advised by a Kaye Scholer LLP's Mark Kingsley, Ed Gabbay, Aaron Rubinstein, Louis Tuchman and Sebastian Jungermann.

Barclays, whose lead banker was Lisa Beeson, took legal counsel from Simpson Thacher & Bartlett LLP's Patrick Naughton, Kevin Lehpamer, Karen Wang, Peter Pantaleo, Gregory Ressa, Patrick Dowd, Peter Kazanoff, Nancy Mehlman and Andrew Purcell. Its in house counsel was Liz Summers.

Equity Residential received advice from Morgan Stanley & Co.

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