Tishman Speyer, Lehman splurge on REIT deal

A joint venture between Tishman Speyer and Lehman Brothers has acquired the Archstone-Smith REIT in one of the largest takeprivates since Blackstone's Equity Office triumph earlier this year.

Tishman Speyer Properties and financial partner Lehman Brothers shelled out $22.2 billion (€15.5 billion) for Colorado-based apartment REIT Archstone-Smith Trust.

The deal was made through Tishman Speyer Real Estate Venture VII along with debt and equity capital provided by Lehman and other financial partners including Banc of America Strategic Ventures and Barclays Capital. Shareholders of the Colorado-based REIT, which has applied to delist its common shares from the New York Stock Exchange, saw a payout of $60.75 per share.

With 359 properties in its cache, Archstone oversees a collection of 87,667 apartment units, including units under construction. Its portfolio includes garden-style apartment communities, which operate under the Archstone Communities brand, and high-rise apartment properties, operating under the Charles E. Smith name. The properties are concentrated in the metro areas of Washington, DC, Southern California, San Francisco, New York, Seattle and Boston.

“As the rental market continues to strengthen, the Archstone-Smith apartment portfolio is well-positioned to create tremendous long-term value,” Archstone chief executive Scot Sellers said in a statement. Sellers will continue in his position for the Tishman-Lehman partnership following the deal.

Lehman's latest private equity real estate fund, Lehman Brothers Real Estate Partners II, closed in 2005 with $2.4 billion in equity and targets opportunities in North America, Europe and Asia-Pacific. The firm's private equity real estate team is headed by Raymond Mikulich and Mark Walsh, Lehman's global head of real estate.

Since early 2006, the majority of high-profile REIT privatizations have been in the office sector, including The Blackstone Group's $39-billion buyout of Equity Office in February, and its acquisitions of Trizec Properties in October 2006 and CarrAmerica in March 2006.

The multi-family sector has also been generating interest among investors: Last year, Morgan Stanley acquired Baltimore, Maryland-based REIT Town & Country for $1.3 billion and Chicago-based AMLI Residential Properties Trust, which went for $2.1 billion.