Archstone Lightens Debt Load by $5.4B

Archstone can breathe a big sigh of relief. With the conclusion of financial restructuring, the national apartment investment and operations company has eradicated $5.4 billion from its total debt.

December 3, 2010
By Barbra Murray, Contributing Editor

Courtesy Flickr Creative Commons user AMagill

Archstone can breathe a big sigh of relief. With the conclusion of financial restructuring, the national apartment investment and operations company has eradicated $5.4 billion from its total debt.

Like so many other property developers and owners, Archstone was unable to escape the financially devastating ramifications of the credit crunch and the commercial real estate downturn. But, though few had likely divined it, the company’s real troubles actually began in October 2007 when the now-defunct Lehman Brothers Holdings Inc. and affiliates of Tishman Speyer Real Estate Venture VII L.P. acquired Archstone–known as Archstone-Smith until a 2008 name change–in a $22.2 billion deal that included the assumption of existing debt and the privatization of the company. Of course, one year later, Lehman filed for Chapter 11 bankruptcy protection.

A little time and a great deal of effort, however, can sometimes change things for the better. Now it is a new day for Archstone, as the trouble-ridden road that followed the Lehman collapse has been cleared for the apartment company.

As per a U.S. Bankruptcy Court document, in May, the court signed off on a plan for the financial restructuring of Archstone as agreed upon by Lehman and other debtors and affiliates, including Bank of America and Barclays Capital Real Estate Inc., thereby resulting in the recently completed reduction of $5.4 billion via a debt-to-equity conversion.

“This restructuring resolves legacy financial issues and will allow the company to focus on growing our best-in-class brand and operating platform,” Chaz Mueller, COO of Archstone, noted in a prepared statement.

Currently, Archstone owns or has an ownership stake in 441 completed or in-progress multi-family properties totaling more than 81,600 units in coveted locations in the Washington, D.C., Los Angeles, San Diego, San Francisco, New York, the Seattle and Boston areas, and Europe.