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Lehman Told Not to Pay Gleacher for Advice on Archstone

Dec. 9 (Bloomberg) -- Lehman Brothers Holdings Inc., which is trying to raise about $2.6 billion as part of a plan to sell Archstone, its biggest real estate asset, was told not to pay Gleacher & Co. for its advice because the firm’s fees are “not reasonable.”

Gleacher sought as much as $15 million in fees from bankrupt Lehman if Archstone is sold, including a retainer of as much as $3.6 million at a rate of $300,000 a month, according to a court filing. Lehman is already paying Lazard Freres & Co. for investment banking advice and shouldn’t hire Gleacher, said the U.S. Trustee who oversees bankruptcies for the Justice Department.

“The debtors have already retained Lazard Freres & Co. to perform the same services,” said Tracy Hope Davis, the U.S. Trustee. “The proposed fees to be paid to Gleacher are not reasonable.”

Gleacher has been working for Lehman for at least nine months without being officially hired, Davis said in a court filing today. Lehman is now asking a judge to make the hiring official and pay back fees to Gleacher. The judge should decline, Davis said.

The firm’s chairman, Eric Gleacher, who founded Lehman’s mergers and acquisitions group before leaving in 1983, didn’t immediately respond to an e-mail seeking comment on the fees. Kimberly Macleod, a Lehman spokeswoman, said she couldn’t immediately comment.

Controlling Stake

Lehman aims to raise about $2.6 billion to buy a controlling stake in Archstone from Bank of America Corp. and Barclays Plc, with a goal of selling or liquidating the apartment owner for $6 billion or more, according to a person familiar with the plan.

Lehman, which has court approval for a $65 billion liquidation plan to pay creditors, is trying to raise money for an Archstone deal in talks with investors including Blackstone Group LP and Brookfield Asset Management Inc., said another person familiar with the plan. Both people asked not to be identified because the negotiations are private.

Bank of America and Barclays have been offered about $1.3 billion for half of their 53 percent stake in Archstone, which Lehman would have to match, Lehman has said in a filing.

Apartment Developments

Archstone is worth “at least” $1 billion more than the $5 billion equity value implied by a bid for the banks’ stake by Equity Residential, founded by Sam Zell, Lehman said.

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

Lehman invested $2.4 billion in the buyout of Archstone in 2007 and currently owns 47 percent of Archstone, according to court papers. Chief Executive Officer Bryan Marsal has said real estate sales will continue through 2014.

The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Linda Sandler in New York at

To contact the editor responsible for this story: John Pickering at

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