Archstone-Smith Trust said Tuesday it has accepted a $22.2 billion offer from Tishman Speyer Properties and Lehman Brothers Holdings in a deal that will take one of the state’s largest public companies private.
The two bidders are offering $60.75 a share for Arapahoe County-based Archstone-Smith, a 22.7 percent premium to the company’s closing price Thursday but still below where the stock traded in February.
The Tishman Speyer-Lehman partnership will also assume $6.5 billion in Archstone-Smith’s long-term debt, purchase preferred shares and retain R. Scot Sellers as the company’s chief executive and chairman.
Archstone-Smith owns apartment complexes across the country. It is the state’s second-largest real-estate investment trust, after ProLogis, and the nation’s second-largest REIT specializing in multifamily housing.
REITs pool investor dollars to purchase real estate, then pass along as dividends any rent receipts left over after expenses.
“Archstone is an exceptional company that has built one of the finest collections of multifamily assets in the industry,” Rob Speyer, senior managing director of Tishman Speyer, said in a statement.
Representatives of both companies declined to provide additional information on the deal beyond that offered in a news release.
Archstone-Smith spokesman David Pendery said more details, including the fate of the Arapahoe County headquarters and employees working there, will follow in the merger agreement and proxy filings.
Archstone-Smith employs more than 2,500 people nationally but doesn’t provide city-by-city breakouts of employment, Pendery said.
John Lay, president and chief executive of the Southeast Business Partnership, estimates about 50 people work at the company’s headquarters.
“We will try to do everything we can to retain as much of the organization as we possibly can,” Lay said. “It is not a large presence for a company as large as they are.”
Archstone-Smith had a $12 billion market value before rumors of the deal started leaking out Friday. The company is one of only 10 in Colorado large enough to be included in the S&P 500, a national index of blue-chip companies.
Archstone- Smith owns more than 86,000 apartments in 344 communities concentrated primarily in densely populated metropolitan areas such as Washington, D.C.; New York City; Los Angeles; San Francisco; Seattle; and Boston.
New York-based Tishman Speyer manages a $40 billion real-estate portfolio, with the Rockefeller Center and Chrysler Center in New York City among its signature holdings. The company also oversees about 14,000 residential units.
Rising rents and falling vacancy rates, fallout of the slowing housing market, have made apartment investments more attractive to private-equity investors, James Corl, chief investment officer of real-estate funds with Cohen & Steers, told Bloomberg.
Corl said stock investors got it wrong, driving down REIT share values earlier this year on fears that a housing slowdown would hurt rental markets. That opened the door for private-equity investors.
Archstone-Smith shares closed up $6.19, or 11.21 percent, to end at $61.42 on Tuesday. That price is higher than the $60.75 a share in cash on the table, indicating that investors expect a higher bid.
“Typically, it would be at a discount if no other bid was expected to account for time value of money and deal risk,” said Troy Johnson, a portfolio manager at Quixote Capital Management in Greenwood Village.
Assuming a higher bidder doesn’t swoop in, the deal is expected to be completed in the third quarter, pending shareholder and regulatory approvals.
Staff writer Aldo Svaldi can be reached at 303-954-1410 or asvaldi@denverpost.com.
