), a real estate investment trust (REIT), has recently signed a
binding purchase agreement with the affiliates of
Bank of America
Barclays Bank PLC
) to acquire their remaining ownership stake of 26.5% in Archstone
for $1.58 billion in cash.
Archstone is a private company which owns, operates and develops
multifamily apartment properties. It was owned by a consortium of
financial institutions including Bank of America, Barclays, and the
bankruptcy estate of Lehman Brothers Holdings Inc. While Bank of
America and Barclays collectively held a 53% stake in the company,
the remaining 47% was held by Lehman.
Last year, Equity Residential struck a deal with Bank of America
and Barclays to acquire half of their combined ownership interests.
However, Lehman had the 'right of first offer' (ROFO), under which
the banks were obliged to present the stake with any offer
acceptable to them and offer Equity Residential a chance to either
match or beat it. Subsequently, as Lehman exercised this right and
acquired this 26.5% interest, Equity Residential's contract with
the banks was terminated.
Presently, Equity Residential exercised its previously assigned
exclusive right to purchase the remaining 26.5% of the banks'
interests in Archstone. However, Lehman has also exercised its ROFO
right and executed a binding purchase agreement with the two banks
to acquire the Archstone interest for the same purchase bid. This
transaction is expected to close within approximately 15 days. Both
the parties have released each other from all claims regarding
As per the agreement, if Lehman now acquires the interest, Equity
Residential will be entitled for a break-up fee of up to $80
million from both the banks and a termination fee of $70 million
from Lehman. On the contrary, if Lehman chooses not acquire the
interest, Equity Residential's agreement with the banks will remain
In case, after the final acquisition of Lehman, if Equity
Residential acquires all the stakes of Archstone within 120 days,
under certain circumstances it will likely have to payback all or a
portion of $150 million received on the account of termination and
break-up fees. Presently, Equity Residential has not negotiated
with Lehman regarding the buyout of all outstanding interest in
Archstone. But they may exercise the activity as the agreement does
not prevent the company from exercising such type of negotiations
in the future.
Based in Chicago, Illinois, Equity Residential engages in the
acquisition, development, and management of high quality apartment
properties in top U.S. growth markets. Equity Residential owns or
has investments in 427 properties located in 14 states and the
District of Columbia, consisting of 121,011 apartment units.
Equity Residential currently retains a Zacks #3 Rank, which
translates into a short-term Hold rating. We are also maintaining
our long-term Neutral recommendation on the stock. One of its
) also holds a Zacks #3 Rank.
(We are reissuing this article to correct a mistake. The
original article, issued May 29, 2012, should no longer be relied
BANK OF AMER CP (BAC): Free Stock Analysis
BARCLAY PLC-ADR (BCS): Free Stock Analysis
EQUITY RESIDENT (EQR): Free Stock Analysis
UDR INC (UDR): Free Stock Analysis Report
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