The commercial real estate mergers keep getting bigger. After buying Peter Cooper Village and Stuyvesant Town in 2006, Tishman Speyer has put on it’s aquisition hat again and is swallowing up Archstone-Smith for the paltry sum of 15.5 billion dollars. Archstone-Smith owns more than 86,000 apartments across the country and is a publicly traded company.
Tishman Speyer is paying a 22 percent premium for the shares of Archstone-Smith, or $60.75 per share. Lehman Brothers is participating in the deal with Tishman Speyers as a partner.
For Tishman Speyer, the acquisition may be a welcome change. The company bought Stuyvesant Town and Peter Cooper Village in 2006 for more than $5 billion, but most of the apartments in those complexes are protected from market-rate rents by government controls. Not so with the Archstone-Smith apartments. One-bedrooms in the Archstone 39th start now at $4,475 a month; in the Archstone 101 West End, a studio can run toward $2,900 a month. via The New York Observer.
Update: I was driven crazy by the different valuations put on this deal. But the experts in the media could not figure it out either. The range is from Bloomberg’s 13.5 billion to the NY Observers 22.2 billion. I settled on the AP’s 15.5 Billion as it is the most widely reported number, but let’s let the dust settle before we try to figure this one out.
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Why is buying 86,000 apartments at the peak of a residential real estate cycle for $180,200 per apartment a “paltry sum?”
At a time when utilities and property taxes are rising as they are?
Let’s see…with federal, NY state and NYC income taxes, it takes about $6,700 of pre-tax income per month to pay $4,475 in rent for a one-bedroom apartment. For that, you could buy and maintain a $1.5 million four-bedroom home in the suburbs of NYC. Yet, those kind of homes are not selling, and the backlog in some burbs is up to 24 months’ supply or more. I don’t think you know much about New York City real estate. Homes and apartments in this market are part of the same universe. Homes are sagging. Why should apartments be soaring?