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UPDATE 1-Tishman Speyer/Lehman close Archstone-Smith deal
October 5, 2007 / 8:32 PM / 10 years ago

UPDATE 1-Tishman Speyer/Lehman close Archstone-Smith deal

(Adds CEO quote, details on financing, background)

By Ilaina Jonas

NEW YORK, Oct 5 (Reuters) - A fund run by Tishman Speyer and Lehman Brothers Holdings Inc. closed on the roughly $15.3 billion purchase of apartment landlord Archstone-Smith ASN.N, Archstone said on Friday.

The deal may mark, for now, the end of a long string of private multibillion-dollar buyouts of real estate investment trusts -- which included office landlord Equity Office Properties and shopping center owner New Plan Excel -- as the market for debt used to finance the big takeouts has dried up.

As part of the financing of the deal, Fannie Mae purchased a $7.1 billion credit facility, secured by 105 multifamily properties. Freddie Mac executed a $1.8 billion structured transaction that provided new financing for 32 multifamily properties across the country and approved assumption of an additional 15 properties.

Tishman Speyer Real Estate Venture VII and Lehman lead the takeover offer of $60.75, which brings the total value of the deal, including assumed debt, to about $22.2 billion, the company said.

“As the rental market continues to strengthen, the Archstone-Smith apartment portfolio is well-positioned to create tremendous long-term value,” R. Scot Sellers, Archstone’s chief executive, said in a statement. Sellers will remain chief executive officer of the newly private company.

When the company first announced the merger in May, Archstone-Smith said it expected the deal to close in the third quarter. But in August, when the debt markets all but shuttered from fears stemming from the residential mortgage market, Archstone said the closing date had been delayed to the fourth quarter.

The market became concerned that the deal would not close, sending the share price as low as $53.80 in August.

Tishman Speyer and Lehman provided the equity for the deal, about $500 million. The debt was arranged or provided by Lehman, Banc of America Strategic Ventures Inc., an affiliate of Bank of America Corp. (BAC.N) and Barclays Capital, an affiliate of Barclays Plc (BARC.L).

Archstone-Smith operates a portfolio of apartment buildings in Washington, D.C., San Francisco, New York, southern California, Seattle and Boston. It also has holdings in Germany.

Tishman Speyer, which manages funds that own and develop real estate throughout the world, recently bought Peter Cooper Village and Stuyvesant Town, a collection of more than 100 apartment buildings on 80 acres in New York, for $5.4 billion.

It also is seen as a potential bidder to redevelop Manhattan’s 26-acre west midtown rail yards, where as much as 12 million square feet of office, apartments, hotels, cultural centers and other buildings could be built. (See www.reutersrealestate.com for the new global service for real estate professionals from Reuters)

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