(Read more on the multifamily market.)
NEWPORT BEACH, CA-The Irvine Co. has agreed to take a stake in the Archstone-Smith multibillion-dollar buy-out. The privately held Irvine Co. will buy 16 apartment complexes--Archstone's Southern California portfolio--for a reported $1.4 billion. The properties are located in Orange and San Diego counties.
The deal brings additional joint venture equity into Tishman Speyer Properties and Lehman Brothers Holdings Inc.'s $15.2-billion acquisition of Archstone. As part of the Southern California portfolio, Tishman and Lehman will retain 10% of those properties, with the Irvine Co. holding the balance.
Archstone, Tishman and Lehman officials were unavailable for comment, but an Irvine Co. official confirmed the joint venture agreement, originally reported in the Wall Street Journal, but declined to confirm financial details or comment on the extent of the company's stake in the deal. According to a statement released by the firm, Tony Russo, the company's senior vice president of corporate affairs, said "the agreement is contingent upon the successful closing of a larger public-to-private merger [Tishman-Speyer] that is scheduled to close Friday."
According to Archstone filings, the company holds 6,000 apartment units in the OC-San Diego markets. That addition gives the Irvine Co. further leverage in the region, where it already holds a significant multifamily presence. A company report says it owns 90 apartment properties in the California regions of Orange County, West Los Angeles, San Diego and Silicon Valley.
The firm's multifamily division received kudos last week as its Northern California properties topped J.D. Power and Associates' latest ranking of apartment management companies in the San Jose/Silicon Valley market.
Irvine officials believe the Archstone sites will mesh with their current ones. "Archstone-Smith is a high quality multifamily REIT," said Russo. "We believe the product in which we are investing is on par with ours. It will complement our holdings in Orange and San Diego counties." He added that the "the investment is a significant sign of our confidence in the long-term economic future of Southern California--and the counties of Orange and San Diego in particular."
As for the entire portfolio buy, that deal moved a step closer yesterday as the European Commission cleared Tishman and Lehman to acquire Archstone. According to filings, the deal is worth $15.2 billion ($60.75 a share) with another $6.5 billion in debt being assumed by the buyers. The portfolio includes nearly 350 apartment complexes in the US and Germany totaling 86,000 units.
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