NEW YORK CITY-Archstone-Smith Trust has closed the previously announced acquisition by a partnership by New York City-based duo Tishman Speyer Real Estate Venture VII L.P. and Lehman Brothers Holdings Inc. The transaction, valued at approximately $22.2 billion, includes Archstone-Smith's outstanding debt, as GlobeSt.com reported when the deal was announced in May. As expected, Archstone-Smith plans to delist its common shares from the New York Stock Exchange, making this deal the largest public-to-private M&A transaction in the multifamily REIT sector.

The deal is being financed by equity provided by Tishman Speyer, and debt and equity capital provided and arranged by Lehman, Banc of America Strategic Ventures Inc., Barclays Capital and various affiliates. As GlobeSt.com previously reported, pursuant to the merger, holders of Archstone-Smith's common shares will receive cash consideration of $60.75 per share, without interest and less applicable withholding taxes, for each share issued and outstanding immediately prior to the effective time of the merger. In addition, in connection with the merger of Archstone-Smith Operating Trust with an affiliate of the partnership sponsored by affiliates of Tishman Speyer and Lehman Brothers, “holders of Archstone-Smith Operating Trust's class A-1 common units will receive one newly issued Series O preferred unit of Archstone-Smith Operating Trust or, if they so elected, a cash payment equal to $60.75, without interest and less applicable withholding taxes, for each class A-1 common unit that they own, or a combination of Series O preferred units and the cash consideration.”

“This transaction with Tishman Speyer and Lehman Brothers is a powerful combination of real estate assets, management, and expertise that will greatly benefit all parties,” notes R. Scot Sellers, who will remain CEO of the Denver based Archstone, in a prepared statement. “As the rental market continues to strengthen, the Archstone-Smith apartment portfolio is well-positioned to create tremendous long-term value.”

Archstone-Smith, an S&P 500 company, owned all or part of 86,014 units in 344 properties as of the end of March and had 3,500 employees. The company's portfolio is concentrated in Washington, DC metropolitan area, Southern California, the San Francisco Bay Area, the New York metropolitan area, Seattle and Boston.

Tishman Speyer's multifamily portfolio totals approximately 11,500 units, located primarily in New York City. Almost all of it was acquired in October, when with Blackrock Inc. it paid $5.4 billion for the Stuyvesant Town and Peter Cooper Village properties from MetLife Inc, as GlobeSt.com previously reported.

“We're delighted to have acquired a portfolio of residential rental properties that is unparalleled both in its quality and scope,” explains Rob Speyer, president of Tishman Speyer, in a release. “Archstone-Smith has been the premiere organization in its market for many years, and we look forward to being in business with its exceptional team of professionals.”

Mark Walsh, managing director and global head of real estate for Lehman Brothers notes that “our partnership with Tishman Speyer brings together two firms with long track records of creating value in real estate. We are excited about the closing of this transaction and the opportunity to help Archstone-Smith manage its first-class collection of properties.”

In August, Archstone-Smith extended the deadline for the close of the buyout to October 4, instead of by August 31, as GlobeSt.com previously reported. The company also waived a condition calling for unitholders to release Archstone-Smith and its buyers from previously existing tax protection agreements. Also in August, some 78% of the shareholders of Archstone-Smith gave their blessing the acquisition.

“Archstone-Smith has created a fantastic portfolio of apartment communities and has developed an industry-leading platform that includes more than 2,500 talented associates who are vital to our success,” noted Sellers, when announcing the merger. “We have always been committed to maximizing value for our shareholders, and we believe this merger accomplishes that objective, offering a significant premium over the unaffected share price. We are looking forward to continuing to provide great apartments and great service to our customers as part of the Tishman Speyer family, and continuing to grow our business for many years to come.”

Additionally, Lehman Brothers has secured the participation of Fannie Mae and Freddie Mac in the transaction. Fannie Mae purchased a $7.1 billion credit facility which is secured by 105 multifamily properties that were part of the transaction. “Fannie Mae is pleased to serve as a constant and reliable source of liquidity in today's ever-changing capital markets,” notes David Worley, SVP of risk management at Fannie Mae, in a release.

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. Mitchell Kiffe, VP of multifamily sourcing for Freddie Mac notes that “this is a great example of Freddie Mac's capacity to effectively and quickly serve as a reliable source of funding in all market environments.”

Earlier this week, The Irvine Co. agreed to take a stake in the Archstone-Smith multibillion-dollar buy-out. The privately held Irvine Co. will buy 16 apartment complexes–Archstone's Southern California portfolio–for a reported $1.4 billion. The properties are located in Orange and San Diego counties, as GlobeSt.com reported. The deal brings additional joint venture equity into Tishman Speyer Properties and Lehman Brothers Holdings Inc.'s $15.2-billion acquisition of Archstone. As part of the Southern California portfolio, Tishman and Lehman will retain 10% of those properties, with the Irvine Co. holding the balance.

Instant Insights /

Tishman, Lehman Close on $22B Archstone-Smith Deal

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