Archstone

Archstone is one of the largest investors, developers and operators of apartment communities in the United States. As of June 30, 2011, the company owned or had an ownership position in 434 communities located in the United States and Europe, representing 77,084 units, including units under construction. Nearly all of Archstone's portfolio is concentrated in large coastal cities, including Washington, D.C., Los Angeles, San Diego, San Francisco, New York, Seattle, and Boston.

On October 5, 2007, the firm was taken private in a US$22.2 billion acquisition by the private real estate builder-operator firm Tishman Speyer and Lehman Brothers Holdings Inc., in alliance with several major United States investment banks.

History

In 1946 Charles E. Smith founded The Charles E. Smith Companies, which then grew to become the largest real estate company in the Baltimore-Washington Metropolitan Area.^[1]

In 1967, the company formed its division Smith Management Construction (SMCI) to build office interiors within the commercial office buildings owned by the Charles E. Smith Companies. The construction division later expanded outside of the Smith portfolio of properties.^[1]

In 1994, The Charles E. Smith Companies formed a publicly-traded REIT named Charles E. Smith Residential Realty (formerly NYSE: SRW). The new REIT owned 11,000 apartments in the Washington, D.C. area. It also acquired the Smith Management Construction division from the former parent company.^[1]

In 1993, Smith Residential Realty had earned about $10 million.^[2]

While going public during the 1994 economic soft landing, the new REIT paid about 8.4% in dividend yield during its first year, while the stock stayed in a narrow trading range. Earnings that year came in at about $13 million.^[2]

However, in 1995, with negative stockholder equity, and long term debt of almost $400 million, the Smith Residential Realty stock turned down about 20% to a new low early that year, as earnings plunged by a third to $8 million. But by year-end the stock price recovered to its earlier 1994 higher trading range. By then the company was showing positive shareholder equity on its balance sheet, although its long-term debt had continued to grow as well, up to $465 million.^[2]

By the late 1990s, the young REIT company had grown exponentially from its rough start of the mid 1990s.

In 2001, Charles E. Smith Residential Realty merged with Archstone Communities of Denver, forming the $9.6 billion Archstone-Smith Trust.^[1]

In the mid 2000s, five senior managers in Archstone-Smith's SMCI division, Rick Wrieden, Ann Kerns Bowley, Bill Kirten, Bob Pronier, and Frank Talbot, bought out the SMCI division, and took it independently private.^[1]

In May 2007, Archstone-Smith Trust announced that it would be taken over by Tishman Speyer and Lehman Brothers Holdings Inc. (NYSE: LEH) for $15.5 billion. Tishman Speyer, which lead the takeover, also owns Rockefeller Center and the Chrysler building in New York City. Lehman Brothers provided capital for the deal in alliance with Bank of America (NYSE: BAC), Strategic Ventures Inc. and Barclays Capital (NYSE: BCS).^[3]

Archstone-Smith shareholders received a 22.7% premium over the pre-announcement closing price of the stock.^[3]

References

1. ^ ^{a b c d e} SMCI, About Us
2. ^ ^{a b c} Standard & Poor's Stock Guide, various issues
3. ^ ^{a b} EU inquiry deadline for Tishman Speyer, Lehman Bros buy of Archstone-Smith Oct 3, forbes.com, AFX News Limited, Thomson Financial, Brussels, 09.03.07

External links

• http://www.archstoneapartments.com