Better buy

25 January 2010 By Lauren Silva

Buyers including Wilbur Ross are lining up to buy the sprawling Manhattan residential complex after Tishman handed the keys over to lenders. But Tishman also overpaid for Archstone $22 bln worth of U.S. apartments. Of the two, Archstone looks the more promising investment.

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Tishman Speyer, Bank of America, Lehman Brothers and Barclays bought ArchstoneSmith in 2007 for $22 billion. Tishman invested $250 million for 5 percent of the deal. The banks arranged the rest of the financing, including $15 billion of debt, $9 billion of which was sold to Fannie Mae and Freddie Mac. In March last year, the banks recapitalized Archstone with a $485 million investment. Tishman did not contribute to that investment.

Tishman has ceded control of Stuyvesant Town and Peter Cooper Village to its lenders. Tishman and partner BlackRock bought the property for $5.4 billion. It is now worth $2 billion or less, according to Reuters.

At the end of 2009, rental prices reached 30year lows and vacancies hit their highest level in three decades, according to real estate research firm Reis.

(The third paragraph of this column has been changed from its original version to make clear Lehman also provided cash.)

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