Lehman's Archstone to raise $3.5 billion in closely watched IPO

Mon Nov 19, 2012 11:23pm EST
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By Ilaina Jonas

(Reuters) - 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 listing, which will be in the form of a real estate investment trust or REIT, takes place this year, it would be the third largest U.S. IPO of 2012, behind Facebook Inc and Banco Santander's Mexican unit.

Archstone's filing did not reveal how many shares the company planned to sell or the expected price. Some analysts have estimated the company's worth at about $16 billion but the company has been selling assets, making it difficult to value.

While Archstone has a large and highly attractive portfolio of properties, it also bears the dubious honor of being cited as one of the primary reasons behind Lehman's collapse.

Lehman's huge stake in the company, estimated at some $6 billion to $7 billion, and the eventual sale of that stake which must take place under the bank's bankruptcy exit plan may put off some investors.

"There's a lot of hair on this deal any way you want to slice it," said Andrew McCulloch, a senior analyst at Green Street Advisors.

Archstone will be listed on the New York Stock Exchange with the ticker "ASN". As a REIT, it can avoid paying corporate level income taxes if it distributes at least 90 percent of its taxable income to shareholders in the form of dividends.

The IPO will also be closely watched as a barometer of how well other real estate companies, such as Blackstone Group LP's Hilton Hotels, could do in a public offering.   Continued...