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Lehman Sued by Shareholders Over Archstone Asset Sale

Feb. 26 (Bloomberg) -- Lehman Brothers Holdings Inc. was sued in Denver by former shareholders of its Archstone Inc. unit seeking to block a sale of Archstone assets that they claim are valued at $16 billion.

The complaint, filed yesterday in federal court, also names as defendants Chicago-based Equity Residential, and another publicly traded apartment owner, AvalonBay Communities Inc. based in Arlington, Virginia.

In December, Equity Residential, founded by billionaire Sam Zell and the largest publicly traded U.S. apartment landlord, said it will acquire about 60 percent of Archstone in a cash-and-stock deal valued at about $16 billion, including debt, with AvalonBay buying the other 40 percent.

The plaintiffs are former owners of an Archstone trust who claim that through a 2007 merger with units owned by Tishman Speyer Properties LP, they were “coerced” to assume a different category of ownership “without adequate consideration,” according to the complaint.

The pending $16 billion sale “will leave Archstone an empty shell with no assets” from which investors could win a court judgment in a separate, pending case over the 2007 merger, according to the complaint.

“Archstone will also have nothing from which to satisfy its obligations, including distributions, redemptions and tax protections,” the investors said in the complaint.

Lehman Liquidating

Lehman, which is still liquidating and trying to cut claims after exiting bankruptcy court protection last year, has so far paid creditors about 9 cents on the dollar, or half of what it expects to pay by about 2016. It said in December that it raised $3.9 billion for creditors in the quarter ended Sept. 30 and another $1.6 billion in October and November, while its $6.5 billion sale of apartment owner Archstone was due to close by March 26.

Kimberly Macleod, a Lehman spokeswoman, didn’t immediately return an e-mail yesterday after regular business hours seeking comment on the lawsuit. Marty McKenna, a spokesman for Equity Residential,and Jason Reilly, a spokesman for AvalonBay, didn’t immediately return e-mails yesterday after regular business hours seeking comment.

The case is Stender v. ERP Operating Limited Partnership, 13-cv-00496, U.S. District Court for the District of Colorado (Denver).

To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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