$13.5-billion deal for Archstone confirmed

Real estate investment trust Archstone-Smith said Tuesday that it had agreed to be acquired by Tishman Speyer and investment bank Lehman Bros. Holdings Inc. in a deal valued at $13.5 billion, reflecting the strong demand for high-end real estate by private investors.

Englewood, Colo.-based Archstone, the No. 2 U.S. apartment REIT behind Equity Residential, is considered to have one of the top portfolios of apartments and projects under development, concentrated in Southern California, the San Francisco area, Seattle, New York, Boston and Washington.

As of May 1, Archstone-Smith had 222.9 million shares outstanding, according to filings with the Securities and Exchange Commission. That would value the deal at $13.5 billion, or $60.75 a share.

The companies have said the total value, including the assumption and refinancing of Archstone-Smith’s outstanding debt and excluding transaction costs, was $22.2 billion.

Archstone declined to provide additional details.

Shares of Archstone jumped $6.19 on Tuesday to $61.42.

The deal also lifted the stocks of other apartment-oriented REITs. AvalonBay Communities Inc. soared $8.20 to $127.10, Equity Residential advanced $3.20 to $50.75 and Apartment Investment and Management Co. gained $2.62 to $54.66.

Archstone said its board of trustees unanimously approved the deal, which still needs Archstone shareholders’ approval. Chairman and Chief Executive Scot Sellers will remain with the company.

The deal continues the trend of private buyers acquiring large portfolios of properties by buying entire publicly traded real estate companies. In February, Blackstone Group acquired office REIT Equity Office for $23 billion, plus the assumption of debt, which brought the total value of the deal to about $39 billion.

But the Archstone deal marks a departure because most of the companies that have already been in play have needed some corporate or portfolio restructuring, which the public market usually does not relish.