8-KMaterial AgreementsRegulation FDExhibits & Filings

EQUITY RESIDENTIAL 8-K Report, Material Agreement (Feb 21, 2012)

Filed February 21, 2012For Securities:EQR

Summary

This Form 8-K filing by Equity Residential (EQR) and its operating partnership, ERP Operating Limited Partnership, announces a material amendment to an existing agreement concerning the acquisition of interests in entities affiliated with Archstone, a multifamily apartment property owner and operator. The primary update is the extension of the exercise period for ERP to acquire the remaining 26.5% interest from certain affiliates of Bank of America and Barclays PLC. This extension, now through April 19, 2012, is coupled with an increase in the minimum required consideration to $1.485 billion. Investors should note the potential impact of Lehman Brothers Holdings Inc.'s right of first offer (ROFO) to acquire these interests. If Lehman exercises this right, EQR is entitled to a $80 million break-up fee, though conditions exist where EQR might have to repay it. The amendment also addresses potential adjustments to compensation if EQR later acquires interests in the Archstone Entities at a higher price than initially agreed upon with the sellers.

Key Highlights

  • 1Extension of the exercise period for ERP to acquire the remaining 26.5% interest in Archstone-affiliated entities by 60 days, now through April 19, 2012.
  • 2Increase in the minimum total consideration for the acquisition to $1.485 billion, up from a previously implied figure.
  • 3Confirmation that if Lehman Brothers exercises its right of first offer (ROFO) to purchase the interests, ERP will receive a $80 million break-up fee.
  • 4Provisions for potential repayment of the break-up fee by ERP under specific circumstances.
  • 5Mechanism to adjust compensation to sellers if ERP later acquires Archstone interests at a higher price than that received by the sellers in the current transaction or a subsequent Lehman transaction.
  • 6The transaction remains subject to the terms of a previously terminated Interest Purchase Agreement and Lehman's ROFO.
  • 7The filing includes a press release dated February 21, 2012, announcing these amendments.

Frequently Asked Questions

The filing announces a material amendment to an agreement regarding Equity Residential's (through its operating partnership ERP) potential acquisition of a 26.5% interest in entities affiliated with Archstone. The amendment extends the time ERP has to decide whether to proceed with the acquisition and increases the minimum consideration.

The amendment extends the acquisition exercise period by 60 days to April 19, 2012, and raises the minimum purchase price to $1.485 billion. It also clarifies terms related to Lehman Brothers' right of first offer and potential break-up fees.

If Lehman Brothers exercises its right of first offer and purchases the interests, Equity Residential is entitled to receive a $80 million break-up fee from the sellers. However, there are circumstances under which ERP would be obligated to repay this fee.

The increase in the minimum consideration to $1.485 billion suggests that either market conditions have evolved, or ERP believes the assets are worth more than initially contemplated, requiring a higher commitment to proceed with the acquisition under the amended terms.