8-KMaterial AgreementsRegulation FDOther Events+1

EQUITY RESIDENTIAL 8-K Report, Material Agreement (May 25, 2012)

Filed May 25, 2012For Securities:EQR

Summary

This Form 8-K filing from Equity Residential (EQR) on May 25, 2012, details the conclusion of a complex series of transactions related to the Archstone Entities. ERP Operating Limited Partnership (ERP), a subsidiary of EQR, entered into an Interest Purchase Agreement to acquire the remaining 26.5% interest in Archstone Entities from affiliates of Bank of America and Barclays for $1.58 billion. However, this acquisition will not proceed as Lehman Brothers Holdings Inc. exercised its right of first offer and entered into a binding agreement to purchase these same interests. As a result of Lehman's acquisition, ERP is expected to receive significant termination fees totaling $150 million ($80 million from the Sellers and $70 million from Lehman). The filing also notes that ERP and the Sellers have released each other from any litigation related to Archstone. While ERP initially pursued direct acquisition, the outcome shifts to a substantial fee generation, underscoring the dynamic nature of the transaction and the company's strategic positioning.

Key Highlights

  • 1ERP Operating Limited Partnership (ERP) was set to acquire a 26.5% interest in Archstone Entities for $1.58 billion.
  • 2Lehman Brothers Holdings Inc. exercised its right of first offer to purchase the same 26.5% interest for $1.58 billion.
  • 3ERP will not acquire the Archstone interests as Lehman's purchase is expected to close by June 8, 2012.
  • 4ERP is entitled to receive aggregate termination fees of $150 million: $80 million from the sellers and $70 million from Lehman.
  • 5ERP and the Sellers have mutually released all claims and litigation related to the Archstone Entities.
  • 6ERP may be required to repay a portion of the termination fees if it acquires Archstone assets within 120 days of Lehman's acquisition.

Frequently Asked Questions

ERP Operating Limited Partnership (ERP) was pursuing the acquisition of the remaining 26.5% interest in various Archstone Entities from affiliates of Bank of America and Barclays for a total purchase price of $1.58 billion.

ERP did not proceed with the acquisition because Lehman Brothers Holdings Inc. exercised its right of first offer (ROFO Right) and entered into a separate agreement with the Sellers to purchase the same 26.5% interest in the Archstone Entities.

Although ERP will not acquire the Archstone interests, it is entitled to receive a total of $150 million in termination fees. This includes an $80 million Sellers' Termination Fee and a $70 million Lehman Termination Fee.

Yes, ERP may be required to repay all or a portion of the termination fees to the Sellers and/or Lehman if ERP acquires all or substantially all of the assets of the Archstone Entities within 120 days of Lehman's acquisition of the interests.