Archstone Inc., the apartment building owner and developer owned by Lehman Brothers Holdings Inc., said on Monday it plans to raise up to $3.45 billion in its initial public offering, making it the biggest U.S. commercial real estate IPO ever.
If the offering is launched this year, it would be the third largest U.S. IPO of 2012, behind Facebook Inc and Banco Santander's Mexican unit.
As of Sept. 30, the company owned or had an interest in 169 apartment communities, or 54,442 units, in the United States, according to documents filed Monday with the U.S. Securities and Exchange Commission.
About 98 percent of the company's portfolio is near a coast. The buildings are located in Southern California, the San Francisco Bay Area, Southeast Florida, and the metropolitan areas of Washington, D.C., New York, Boston and Seattle. Average monthly revenue for an apartment was $2,168 in the third quarter, and the occupancy rate was 94.2 percent.
Archstone has been cited as one as the primary causes behind Lehman's collapse. Lehman and Tishman Speyer acquired Archstone Smith, one of the largest owners of U.S. apartments, through a $23.7 billion leveraged buyout in 2007. Lehman, Bank of America Corp and Barclays Plc provided $6.4 billion in secured financing, with Lehman contributing 47 percent, or more than $3 billion.
As real estate values fell and credit began to dry up, Archstone could not repay some of its loans. Its lenders ended up owning the company in 2010, with Lehman getting 47 percent and the banks a combined 53 percent.
As apartment values rebounded, Lehman had wanted to spin off Archstone in an IPO, but the banks balked. Instead, the two banks wanted to sell their stakes to Equity Residential. Ultimately, Lehman bought out the banks' stakes in two separate transactions for about $2.98 billion. The entire two-step deal was completed in June.
Real estate investors have been looking forward to Archstone's IPO as an indicator of how well other real estate companies, such as Hilton Hotels, could do in a public offering.
Archstone intends to qualify as a real estate investment trust or REIT. Citigroup and JP Morgan are underwriting the IPO, the company said in the filing with U.S. regulators.
The filing did not reveal how many shares the company planned to sell or the expected price. Some analysts have estimated Archstone to be worth about $16 billion. However, the company has been selling assets so its value is a moving target.
The Englewood, Colorado-based company intends to list its common stock on the New York Stock Exchange under the symbol "ASN."
Archstone intends to use the IPO proceeds for repayment of debt and general working capital expenses.
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