Apartment Giant Will Use Proceeds to Pay Off Significant Debt, Allowing Bankrupt Lehman to Repay Creditors and Shareholders
Lehman Bros Holdings Inc. has filed to relaunch Archstone as a public company, just two months after winning full control of the Colorado-based apartment in a battle with Sam Zell’s Equity Residential -- and nearly five years after Lehman and Tishman Speyer took Archstone private in a $22.2 billion leveraged buyout that played an important role in the giant investment bank’s collapse and bankruptcy.
Through the initial public offering (IPO), Archstone intends to again structure itself as a real estate investment trust (REIT) and apply for the listing of its common stock on the New York Stock Exchange under the symbol ASN.
The company did not list the number of shares it plans to offer or the offering price. According to Archstone’s S-11 registration filed Aug. 10 with the U.S. Securities and Exchange Commission, the company has about $9.27 billion in consolidated debt compared to $14.2 billion in assets.
Archstone will contribute the offering proceeds to its operating partnership, primarily to repay debt. As of March 31, about $2.8 billion of Archstone’s U.S. consolidated debt was freely prepayable or prepayable subject to a minimal premium.
Remaining proceeds will be used for general working capital purposes, potential future acquisitions, development costs and capital expenditures.
Lehman sees monetization of Archstone holdings as a way to repay creditors and shareholders hurt by the collapse of the investment banking giant, which helped worsen the U.S. financial crisis of 2007 and 2008.
However, rival apartment REIT Equity Residential made a $1.33 billion play for a 26.5% stake in Archstone in December, triggering a lengthy and costly fight for control of the company.
Lehman exercised its right of first offer to block a series of bids by EQR, which walked away with a $150 million transaction termination fee after Lehman completed a deal to purchase the remaining stake in the apartment company held by affiliates of Bank of America and Barclays Capital for $1.58 billion.
Archstone is primarily focused on the acquisition, development, redevelopment, operation and management of apartment communities in certain supply-constrained U.S. coastal markets, including Washington, D.C., Southern California, the San Francisco Bay Area, New York City, Boston, Seattle and Southeast Florida.
The planned offering comes as many analysts say pricing may have peaked in the top-tier apartment properties in core markets where Archstone has a strong presence, although almost all agree multifamily fundamentals remain strong and are getting stronger for property sub-types.
As of March 31, Archstone owned or had an ownership interest in 181 communities with 59,419 units in operation or under construction. The company also owned or controlled land for the development of 30 communities in planning that would add more than 8,546 new units to its U.S. portfolio.