Tishman Speyer Gobbles Archstone-Smith for Over $22 Billion

In one of the biggest real estate deals ever, Tishman Speyer and Lehman Brothers have bought Archstone-Smith, the real estate investment trust that owns more than 86,000 apartments nationwide. The $22.2 billion acquisition includes at least 10 buildings in Manhattan and Brooklyn. It's the largest such public-to-private acquisition ever among apartment REITs.

For Tishman Speyer, the acquisition may be a welcome change. The company bought Stuyvesant Town and Peter Cooper Village in 2006 for more than $5 billion, but most of the apartments in those complexes are protected from market-rate rents by government controls. Not so with the Archstone-Smith apartments. One-bedrooms in the Archstone 39th start now at $4,475 a month; in the Archstone 101 West End, a studio can run toward $2,900 a month.

More on this record deal in tomorrow's print edition of The Observer.

Full release below.

 

Archstone-Smith Agrees to Be Acquired by Tishman Speyer Partnership

DENVER--(BUSINESS WIRE)--Archstone-Smith (NYSE:ASN) today announced that it has signed a definitive merger agreement to be acquired by a partnership sponsored by Tishman Speyer and Lehman Brothers (including its Private Equity group), (the "Partnership"), in a transaction valued at approximately $22.2 billion, including the assumption and refinancing of Archstone-Smith's outstanding debt and excluding transaction costs. The transaction represents the largest public to private merger and acquisition transaction in the multifamily REIT sector.

Under the terms of the merger agreement, the Partnership will acquire all outstanding common shares of beneficial interest in Archstone-Smith for $60.75 per share in cash. The purchase price per share represents a 22.7% premium over the share price on May 24, 2007, immediately prior to published reports regarding a potential acquisition. The company will pay its regular quarterly dividend that is payable on May 31, 2007 to common shareholders of record as of May 16, 2007, but will not pay any additional dividends on its common shares thereafter. It is currently expected that, in connection with the merger, Archstone-Smith's Series I preferred shares will either be redeemed at the liquidation preference of $100,000 per share plus accrued but unpaid dividends through the closing date of the merger or be converted into preferred shares of the surviving entity in the merger, at the election of the Partnership.

"Archstone-Smith has created a fantastic portfolio of apartment communities and has developed an industry-leading platform that includes more than 2,500 talented associates who are vital to our success," said R. Scot Sellers, chairman and chief executive officer, Archstone-Smith. "We have always been committed to maximizing value for our shareholders, and we believe this merger accomplishes that objective, offering a significant premium over the unaffected share price. We are looking forward to continuing to provide great apartments and great service to our customers as part of the Tishman Speyer family, and continuing to grow our business for many years to come."

Archstone-Smith's board of trustees unanimously approved the merger agreement and the merger and has recommended the approval of the transaction by common shareholders. Completion of the transaction, which is currently expected to occur in the third quarter of 2007, is contingent upon customary closing conditions and the approval of Archstone-Smith's shareholders, who will be asked to vote on the proposed transaction at a special meeting that will be held on a date to be announced. The transaction is not contingent on receipt of financing by the Partnership.

Unitholders of Archstone-Smith Operating Trust, the operating entity through which Archstone-Smith conducts substantially all of its business and which owns substantially all of its assets, will be offered the opportunity to elect to receive $60.75 per unit in cash or a newly issued preferred unit in Archstone-Smith Operating Trust.

Rob Speyer, Senior Managing Director of Tishman Speyer, stated, "Archstone is an exceptional company that has built one of the finest collections of multifamily assets in the industry. We are excited to work with such an extraordinary management team led by Scot Sellers and welcome the opportunity to help grow this company."

At the request of the Partnership and in connection with the execution of the merger agreement, R. Scot Sellers agreed to terms of employment with the Partnership that will supersede his current employment arrangements with Archstone-Smith effective upon and subject to completion of the merger.

The transaction is being financed by equity provided by Tishman Speyer with the balance of the debt and equity capital provided and arranged by Lehman Brothers Inc. and Bank of America.

Morgan Stanley acted as exclusive financial advisor and Hogan & Hartson LLP acted as legal advisor to Archstone-Smith. Lehman Brothers Inc. and Bank of America acted as financial advisors to the Partnership. Wachtell, Lipton, Rosen & Katz, DLA Piper LLP, and Schulte Roth and Zabel LLP provided legal counsel to Tishman Speyer. Weil Gotshal & Manges LLP and Cadwalader, Wickersham & Taft LLP provided legal advice to Lehman Brothers Inc. Kirkland & Ellis LLP provided legal advice to Bank of America. In addition, Cadwalader, Wickersham & Taft LLP represented Lehman Brothers Inc. and Bank of America as joint lead arrangers of the credit facilities.



About Archstone-Smith
Archstone-Smith (NYSE:ASN), an S&P 500 company, is a recognized leader in apartment investment and operations. The company's portfolio is concentrated in many of the most desirable neighborhoods in the Washington, D.C. metropolitan area, Southern California, the San Francisco Bay Area, the New York metropolitan area, Seattle and Boston. The company continually upgrades the quality of its portfolio through the selective sale of assets, using proceeds to fund investments in assets with even better growth prospects. Through its two brands, Archstone and Charles E. Smith, Archstone-Smith strives to provide great apartments and great service to its customers – backed by unconditional service guarantees. As of March 31, 2007, the company owned or had an ownership position in 344 communities, representing 86,014 units, including units under construction.

About Tishman Speyer
Tishman Speyer is one of the leading owners, developers, operators, and fund managers of first-class real estate in the world. Since 1978, Tishman Speyer has acquired, developed and operated more than 230 properties totaling over 100 million square feet and over 14,000 residential units, and manages a property portfolio in excess of $40 billion in total value across the United States, Europe, Latin America and Asia, including signature properties such as New York's Rockefeller Center and the Chrysler Center, Berlin's Sony Center and Torre Norte in São Paolo, Brazil.