Lehman wants to spend $1.7b on real estate firm

Lehman Brothers Holdings, which has approval for a US$65 billion ($84 billion) bankruptcy liquidation plan, will ask a judge to let it use US$1.3 billion of the estate's money to increase its stake in Archstone, its biggest real estate asset, according to a person familiar with the planned bid.

Equity Residential, founded by Sam Zell, said this month that it had offered Bank of America and Barclays US$1.3 billion for 26.5 per cent of Archstone, or about half of their stake.

Lehman, which currently owns 47 per cent of Archstone and has an option to inform the banks this week that it will match the Zell company's offer, will tell the judge the investment is needed to protect the estate's interest in the company, said the person, who declined to be identified because the discussions are private.

The purchase would be the first step in a Lehman plan to gain control of Archstone, an owner of apartment developments.

The defunct securities firm seeks to sell or liquidate Archstone for at least US$6 billion, according to another person familiar with the plan.

Lehman's strategy depends on taking over Archstone, said the person, who declined to be named because the money-raising efforts are private.

Lehman had been seeking to raise money in talks with investors including Blackstone Group and Brookfield Asset Management, said a third person familiar with the plan who also asked not to be identified because the negotiations are private.

Lehman, which filed the biggest bankruptcy in US history in 2008, along with its affiliates has about US$23 billion of available cash, according to court papers.

The cash bid for the Archstone stake was reported earlier by the Wall Street Journal.

Lehman has said in regulatory filings that Archstone is worth "at least" US$1 billion more than the US$5 billion equity value portrayed by the Equity Residential offer.

"Lehman believes that the EQR purchase price does not take into consideration the value of Archstone's platform, including its management, which Lehman believes is the best in the industry, nor does it take into account Archstone's valuable strategic position within the apartment industry," the bankrupt firm said in a filing with the Securities and Exchange Commission. A spokeswoman for Lehman declined to immediately comment on the firm's plans for Archstone.

Similarly Zell, London-based Barclays, and North Carolina-based Bank of America, didn't immediately respond to requests for comments.

Archstone, which Lehman acquired in a US$22 billion leveraged buyout with Tishman Speyer Properties, has ownership interests in hundreds of apartment developments from Washington and New York to San Francisco.

Lehman, which is selling some assets and buttressing others for a future sale, fetched US$3.9 billion through June 30 from property sales, according to court papers.

Chief executive Bryan Marsal has said real estate sales will continue through 2014.

- BLOOMBERG