Lehman Brothers Holdings Inc.'s estate said Monday it is selling apartment-building owner Archstone Enterprise LP in a $6.5 billion cash and stock deal.
The sale of its single-largest asset to Equity Residential and AvalonBay Communities Inc. will provide Lehman with further funds to pay creditors. It also gives its estate a stake in two major apartment ownership companies as the real-estate industry is gaining strength.
"The sale of Archstone to Equity Residential and AvalonBay is a very positive outcome for our creditors," said Lehman's Chairman Owen Thomas.
New York-based Lehman Brothers collapsed in September 2008 in the biggest corporate bankruptcy in U.S. history. In March, it emerged from bankruptcy and its main mission now is to sell off assets to pay back creditors and investors.
Equity Residential, which is based in Chicago and whose chairman is real-estate mogul Sam Zell, will acquire about 60 percent of Archstone's assets and liabilities. AvalonBay, based in Arlington, Va., will acquire about 40 percent. The deal includes $9.5 billion in Archstone's debt.
Archstone is based in Englewood, Colo. and operates apartment communities across the country.
Lehman was among investors that bought Archstone in 2007 for about $15.5 billion plus $6.9 billion in debt shortly before the real-estate market collapsed, precipitating Lehman's downfall. The investment firm initially owned about half Archstone and in late 2011 it increased its stake to 73.5 percent. Earlier this year, it bought the remaining stake from Bank of America Corp. and Barclays Bank PLC for $1.58 billion
Since taking full ownership, Lehman considered a number of options for the business, including potentially taking it public.
Lehman will receive nearly $2.69 billion in cash for Monday's deal plus 34.5 million shares of Equity Residential's stock and 14.9 million shares of AvalonBay's stock that are worth about $3.8 billion combined. Lehman will have a 13.2 percent stake in AvalonBay and 9.8 percent stake in Equity Residential after the deal.
The deal is expected to go through as there are no financing contingencies and does not face a shareholder vote at AvalonBay or Equity Residential. The companies have 120 days to complete the transaction.
The buyers said the sale will add a number of qualities apartment communities to their portfolios.
Equity Residential is selling 19 million shares in a public offering to fund the deal. That could include up to 2.9 million additional shares for overallotments. AvalonBay plans to sell 14.5 million shares to fund its portion of the deal, plus 2.2 million for overallotments.
Shares of Equity Residential fell $1.48, nearly 3 percent, to $52.95 in after-hours trading following the news. AvalonBay shares fell $1.95 to $127.00 after hours.