Tishman Speyer Properties — owner of New York’s Rockefeller Center and the Chrysler building — and Lehman Brothers Holdings Inc. will buy Archstone-Smith for about $15.5 billion, turning one of the largest publicly traded real estate trusts over to private investors.
The buyout announced Tuesday provides further evidence of a booming market for commercial real estate and intense investor interest in owning real estate investment trusts, which pay lower taxes by distributing almost all taxable income to shareholders.
The deal follows the Blackstone private equity group’s takeover of Sam Zell’s Equity Office Properties Trust in a $23 billion all-cash deal in early February. Blackstone beat out Vornado Realty Trust by upping its bid 15 percent from an initial offer made in November.
Archstone’s board approved the deal unanimously at a price of $60.75 per share. The company’s last quarterly filing with the Securities and Exchange Commission listed total diluted shares outstanding at 231 million. With roughly another 27 million shares held by outside partnerships, the deal is priced at around $15.5 billion.
The price represents a 22.7 percent premium over Archstone’s Thursday closing price, before news reports of a possible takeover sent the share price up 8 percent to $55.23 on Friday.
Shares of Archstone-Smith rose $5.62, or 10 percent, to $60.85 mid-afternoon Tuesday, indicating that the market expects an improved bid. The shares hit a 52-week high of $64.77 in January.
Archstone-Smith Trust said the deal was worth $22.2 billion, including $6.9 billion in debt to be assumed and refinanced.
Real estate investment trust analyst Craig Leupold of Green Street Advisors said the Tishman deal undervalues the company.
“In our opinion, that’s a disappointing outcome for shareholders,” Leupold said. “We don’t think the price fully reflects the value of the company.”
The sale is expected to close in the third quarter. The company will pay its last regular quarterly dividend on Thursday. Shareholders still must vote on the buyout, though no date was announced.
“Archstone is an exceptional company that has built one of the finest collections of multifamily assets in the industry,” Tishman Speyer Senior Managing Director Rob Speyer said in a statement.
Archstone-Smith, based in Englewood, Colo., owns 86,000 apartments, under the brands Archstone and Charles E. Smith, in New York, Los Angeles, San Francisco, Boston and Washington. It was founded in 1963. Leupold said Archstone owns one of the highest-quality apartment portfolios in the country, and that the management team has implemented a 30-second credit approval process and innovative revenue management to improve profits.
Tishman Speyer is one of the leading owners and operators of real estate in the world. In addition to Rockefeller Center, the company owns other iconic properties such as London’s CityPoint and Tower Place, Frankfurt’s MesseTurm and Berlin’s Sony Center.
Last year, Tishman paid a record $5.4 billion for New York’s Stuyvesant Town/Peter Cooper Village, another sign of its confidence in the market for apartment properties.