Lehman gets green light to buy additional stake in Archstone

US Bankruptcy Judge James Peck has approved the estate of the former Wall Street banking giant’s right of first offer for half of Bank of America and Barclays’ shares in Archstone for roughly the same price that rival Equity Residential was offered.

A US bankruptcy judge has given the estate of Lehman Brothers Holdings the green light to buy half of two banks' stakes in Archstone for roughly the same price of $1.33 billion that rival Equity Residential has tried to pay for them.

In US Bankruptcy Court in New York on Wednesday, Judge James Peck approved Lehman’s right of first offer for half of Bank of America and Barclays Capital’s respective ownership shares in Archstone. Combined, the two banks own 53 percent of the Denver-based apartment giant. 

The order entered by the court gives Lehman the authority to proceed with the purchase, but does not legally obligate the former Wall Street banking giant to move ahead with the acquisition. However, sources familiar with the situation say that it is very likely that Lehman will go ahead with the acquisition. A spokeswoman for Lehman declined to comment. 

Lehman has until 23 January to exercise this right of first offer. If Lehman moves forward with the acquisition, it will own 73.5 percent of Archstone. 

In December 2011, Bank of America and Barclays agreed to sell half of their shares in Archstone to Sam Zell’s Chicago-based REIT Equity Residential for $1.33 billion. Lehman tried to block the sale, claiming in court documents that Equity Residential would be a “contentious” partner. After a two-day mini-trial held at bankruptcy court last week, Judge Peck denied Lehman’s request to block the sale. 

A spokesman for Equity Residential said last week that the Zell REIT would wait and see if Lehman would exercise its right of first offer before making a decision about how to move forward. According to documents that Equity Residential filed with the US Securities and Exchange Commission on Wednesday, if Lehman closes on the deal by 25 January, Equity Residential will then have a 30-day window in which to negotiate with Bank of America and Barclays for the remaining 26.5 percent for a purchase price of at least $1.33 billion.   

In 2007, Lehman led a $22 billion buyout for Archstone in one of the largest real estate deals in history. The acquisition helped lead to Lehman’s collapse in 2008, which in turn contributed to the global financial crisis. Archstone remains the largest real estate platform on Lehman’s books.

Late last year, Judge Peck approved of Lehman's $65 billion plan to pay back its creditors and emerge out of Chapter 11 bankruptcy protection. The plan should be put into motion sometime in the first quarter of 2012.