Equity Residential Bids on 53 Percent Stake in Archstone

According to an article on the WSJ, Sam Zell’s Equity Residential recently came out as the lead bidder in a move to buy about 50 percent of Archstone, which is currently held by Bank of America and Barclays PLC. If an agreement is reached, the transaction would result in one of the largest since the economic downturn. Equity Residential offered more than $2.5 billion in cash and stock for a 53 percent stake in Archstone, but a higher bidder could step in before an agreement is reached. The rest of Archstone is owned by the bankruptcy estate of Lehman Brothers Holdings Inc., which plans to retain its stake in the apartment firm. A sale of Archstone to Equity Residential would be valued at about $16 billion and include about $11 billion in debt held by Fannie Mae and Freddie Mac. Archstone, which has about 77,000 apartments, has sold about $2 billion in assets since the Lehman buyout, and Equity Residential would receive a discount given that it would be buying into a “contentious” partnership. Any decisions regarding Archstone must be made by unanimous consent. If Archstone were sold as a whole company, it could be worth up to $18 billion, says Green Street Advisors Analyst Craig Leupold. Lehman is concerned that Equity Residential may want to replace Archstone’s management team and management operation, but if the bid wins, it would be the largest investment since the economic downturn.