CHICAGO-Locally based Equity Residential has canceled its first $1.3 billion bid for 26.5% interest in multifamily giant Archstone, according to an SEC filing this morning, but reserves the right to submit an offer for a similar stake. Lehman Bros. exercised a right of first refusal to buy the interest instead, giving the New York City-based bankrupt firm a 73.5% majority stake in Archstone, according to the Equity filing.
Equity said in its filing that on Friday, Lehman “delivered a binding notice to the sellers, exercising its right of first offer with respect to the purchased interests, (and) entered into a purchase agreement and closed on the acquisition of the purchased interests.” The sellers are Bank of America and Barclays Bank, which had held a 53% majority stake in Denver-based Archstone, and have now sold half of that stake to Lehman, according to Equity's filing. Neither Lehman nor Archstone officials could be reached for this story.
However, Equity said in its filing that it “is entitled” to buy the banks’ remaining 26.5% share in Archstone for $1.3 billion, or more. Earlier this month, a Lehman bankruptcy judge ruled that Equity can try to acquire the interest, and that Lehman may have to enter a bidding war to keep the shares out of Equity’s hands.
Lehman had said in court filings, while trying to block the Equity offers, that there have been certain material breaches of the Archstone agreements. The company said in a court motion that the banks have “failed to include all material terms of the transfers.” Lehman said in the motion, and in its SEC filing, that it has not been provided documents and information agreed to be provided by both parties if a sale was to be made. Lehman also asked a judge to force the banks to produce these documents. In the motion and in Lehman SEC filings, the company claims that it does not believe Equity’s offer values Archstone correctly.
Equity and the banks, in the court answers and in Equity’s SEC filings, maintain that Lehman has been given more information than is required by contract. “At base, plaintiffs simply don’t like the fact that defendants have chosen to sell 50% of their interests in the Archstone Entities to a competitor,” the banks said in their court-filed answer.
Archstone has 48,922 apartment units, including 14,000 in Germany. Equity, owned by local commercial real estate icon Sam Zell, owns or has investments in 417 properties in 15 states and Washington, DC. The company has said it would fund the purchase through cash, debt, sales and its $1.2 billion revolving credit facility.
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