Fannie and Freddy Ride In With Financing; Tishman/Lehman Poised to Flip $1.4B in SoCal Apartment Assets to Irvine Co.
It may be the last of the big REIT privatization deals, at least for a while. In easily the most closely watched transaction of the summer, Archstone-Smith Trust (NYSE:
ASN) completed the sale of its portfolio to a fund of Tishman Speyer and Lehman Bros. for $22.2 billion, including Archstone’s outstanding debt.
Archstone-Smith common shareholders will receive $60.75 per share cash for each outstanding share immediately prior to the effective time of the merger announced back in May. ASN stock closed at $60.70 Friday, with the closing bell followed shortly by the announcement, which was already widely expected, on Wall Street.
Analysts worried last summer that the deal might fall apart or be sharply re-priced due to the tightening of debt markets fueled by the residential real estate mortgage meltdown. In August, Archstone delayed the closing of the deal from the third to the fourth quarter, causing the company’s shares to spiral to the low 50s.
The transaction is being financed by Tishman Speyer equity and debt and equity capital provided and arranged by Lehman Brothers Holdings Inc., Banc of America Strategic Ventures, Inc., Barclays Capital and their affiliates. Lehman drafted a pair of debt-market beacons of liquidity, Fannie Mae and Freddie Mac, to provide structured financing and credit for the transaction.
Fannie Mae purchased a $7.1 billion credit facility secured by 105 Archstone 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.
Fannie Mae is pleased to serve as a "constant and reliable source of liquidity in today's ever-changing capital markets," said David Worley, senior vice president of risk management at Fannie Mae.
"As the rental market continues to strengthen, the Archstone-Smith apartment portfolio is well-positioned to create tremendous long-term value," said R. Scot Sellers, chief executive officer of Englewood, CO-based Archstone, who will remain in that position post-merger. The REIT has applied for delisting of its common shares on NYSE.
The Irvine Co. confirmed this week that it has agreed to take a $1.4 billion stake in the Archstone portfolio by buying 16 Southern California apartment assets in Orange and San Diego counties, contingent upon the closing of ASN’s deal with the Tishman/Lehman partnership.
Archstone-Smith, one of the nation's largest apartment owner-operators, has plum assets in the Washington, D.C. area, Southern California, the San Francisco Bay Area, New York, Seattle and Boston. As of the closing, the company owned or had an ownership position in 359 communities representing 87,667 units, including units under construction.