The proposed $22 billion leveraged buyout of Archstone Smith (NYSE: ASN) by Tishman Speyer and Lehman Brothers may spark a new round of go-private deals in the apartment REIT sector.
Rumors about new takedowns have driven up shares of almost all multifamily REITs after several lackluster months in the REIT space following Blackstone’s $39 billion buyout of Equity Office Properties Trust. More deals seem likely among multifamily REITs, largely due to the fact that as a group they are trading at an average 6% discount to net asset value in a strong apartment market.
Analysts say even if apartment fundamentals remain strong, all bets are off if interest rates don’t fall and capital dries up. Any topping offer for Archstone would have to be at least $4 per share more than the current bid to hedge risk and to overcome the agreement’s $235 million breakup fee.
Fueled by the topping rumors, ASN’s shares have traded at or above the Tishman bid price since the deal was announced late last month. The offer represents a nearly 23% premium over the pre-deal stock price.