Archstone-Smith Trust

Archstone-Smith Trust, formed from a 2001 merger, is the third largest United States Real Estate Investment Trust (REIT). Its core business is the ownership and management of residential apartment buildings in major metropolitan areas across the United States.

Since May 2007 it has been in the process of a US$15.5 billion takeover by a private real estate builder-operator firm in alliance with several major United States investment banks.

Prior to acquisition by Tishman Speyer and Lehman Brothers Holdings Inc. completed on Oct. 5, 2007, Archstone-Smith Trust was listed on the New York Stock Exchange as ASN.

The acquisition of Archstone-Smith Trust by Tishman Speyer and Lehman Brothers Holdings Inc. was completed on Oct. 5, 2007. Payouts of $60.75 per share.

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. [http://smconst.com/subframes/about.htm SMCI, About Us] ]

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.

In 1994, The Charles E. Smith Companies formed a publicly-traded REIT named Charles E. Smith Residential Realty (formerly nyse2|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.

In 1993, Smith Residential Realty had earned about US$10 million.Standard & Poor's Stock Guide, various issues]

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 US$13 million.

However, in 1995, with negative stockholder equity, and long term debt of almost US$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 US$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 US$465 million.

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 US$9.6 billion Archstone-Smith Trust.

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.

In May 2007, Archstone-Smith Trust announced that it would be taken over by Tishman Speyer and Lehman Brothers Holdings Inc. (nyse2|LEH) for US$15.5 billion. Tishman Speyer is leading the takeover. It also owns Rockefeller Center and the Chrysler building in New York City. Lehman Brothers is providing capital for the deal in alliance with Bank of America (nyse2|BAC), Strategic Ventures Inc. and Barclays Capital (nyse2|BCS). [http://www.forbes.com/markets/feeds/afx/2007/09/03/afx4076335.html 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]

Archstone-Smith shareholders would receive a 22.7% premium over the pre-announcement closing price of the stock.

The European Commission is reviewing the deal under the European Union's 'simplified' merger review procedure, which applies to mergers and acquisitions that it does not believe pose any competition concerns. The commission has set a deadline of October 3, 2007 for its inquiry into the deal.

The acquisition of Archstone-Smith Trust by Tishman Speyer and Lehman Brothers Holdings Inc. was completed on Oct. 5, 2007. Payouts of $65.75 per share were received by shareholders on ~ Oct. 09, 2007 depending on brokerage.

Leasing Practices

Numerous residents of [http://www.archstoneapartments.com Charles E. Smith] -branded high-rise properties in the Washington, DC area have complained of unexpected and unusually high rent increases upon expiration of their leases. Increases in excess of 40% per month have been reported for a one bedroom apartment. [http://ihatearchstonesmith.blogspot.com] The company defends their actions by noting that these properties are exempt from rent control laws and, as such, they may charge any rent amount that they feel appropriate after providing 30-days notice. However, most leases require tenants to provide 60-days notice of intent to move--even if the lease is about to expire. As such, a tenant could be forced to pay higher rent for at least 30-days with no option to move. It has also been noted that rent increases for current residents have been significantly higher than rents offered to new residents for substantially similar units [http://discuss.washingtonpost.com/wp-srv/zforum/03/r_realestate_gebhardt022703.htm] --only to continue the cycle of double-digit rent increases when a new tenant attempts to renew their lease.

Additionally, residents of [http://www.archstoneapartments.com Archstone] communities in the San Diego area have complained that the managers refuse to return security deposits--regardless of the condition of their apartments upon move-out. [http://www.apartmentratings.com] These apartments include, at least, Archstone Harborview, in downtown, and Archstone Mission Valley.

Manhattan Apartments

Unusually high rent increases upon expiration of their leases have been prevalent as well in Manhattan apartments. In 2006-2007, when Archstone-Smith purchased the Key West and Westmont buildings existing tenants received substantial rent increases for one year leases only to be raised by similar levels the following year.

Archstone-Smith raised prices for a 2 bedroom apartment from the mid $3000 range in 2006 to the mid $5000 in 2008 for many existing tenants. This seems to be their normal practice in the area for Archstone-Smith. Archstone-Smith claims these prices to be market however these levels are in excess of comparable surrounding market apartments [http://newyork.craigslist.org/cgi-bin/apartments.cgi] . Archstone-Smith prices are published and updated daily on their website [http://www.archstoneapartments.com/Apartments/New_York/New_York_City/Key_West/floorplans.htm] .

In 2007 numerous complaints were filed with the city of New York for hot water outages in the Key West apartments

References

External links