Tishman & Lehman Near Agreement to Acquire Archstone-Smith REIT for Over $20 Billion

Shares of apartment REIT Archstone-Smith gained 8% Friday to close at $55.23 on news that Tishman Speyer Properties and Lehman Brothers Holdings are in negotiations to buy it for more than $20 billion, including debt. Archstone-Smith's market cap is $12.3 billion, and according to the WSJ has $6.3 billion of debt. The company is expected to sell at a premium. The purchase will follow the $23 billion buyout of Equity Office Properties Trust by the Blackstone Group in February. Archstone-Smith owns 86,000 apartments in 344 complexes in dense metropolitan areas across the country. According to UBS analyst Alexander Goldfarb, the company offers "high-quality assets, presence in key markets, low leverage and high-rise properties that can be viewed as call options on the next condo wave." The company also owns DeWAG, a German apartment developer. Before takeover speculation began to swirl around Archstone-Smith, its stock was trading at a 13% discount to NAV. Tishman Speyer is a large real estate developer with properties around the world. In October, together with Blackrock, Tishman bought New York apartment complexes Stuyvesant Town and Peter Cooper Village from MetLife for $5.4 billion.

Sources: Wall Street Journal, Bloomberg, TheStreet.com
Commentary: Housing Bubble and Real Estate Market Tracker [May 17, 2007] • iShares REIT ETF Drops: Could Be a Long Way Down • Bidding War Between Blackstone and Vornado For EOP Finally Ends With Blackstone On Top
Stocks/ETFs to watch: Archstone-Smith Trust (ASN). Competitors: Apartment Investment & Management Co. (AIV), Avalonbay Communities Inc. (AVB), Equity Residential (EQR). ETFs: DJ Wilshire REIT ETF (RWR), Vanguard REIT Index ETF (VNQ), Vanguard Mid-Cap Value ETF (VOE)

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