Strategic Combination Creates $9.3 Billion Apartment Company;
Strengthens Presence in the Nation's Most Desirable Protected Markets
DENVER and ARLINGTON, Va., May 4 /PRNewswire/ -- Archstone Communities
(NYSE: ASN) and Charles E. Smith Residential Realty (NYSE: SRW) today
announced that they have agreed to merge, creating a company with a strong
presence in the nation's most desirable protected markets. Upon completion of
the transaction-which was unanimously approved by the Boards of both
companies-the combined company will own 87,456 units, including 4,899 units
under construction. Based on yesterday's closing prices, the combined entity
would have a total market capitalization of $9.3 billion. The combined entity
will operate under the name Archstone-Smith Trust, and will use the Smith
Residential brand name for its high-rise portfolio; the Archstone brand name
will be used for all other communities.
"The combination of Archstone and Smith Residential brings together two of
the most respected brands in the apartment industry, creating a company with
unmatched reach, resources and opportunity," said R. Scot Sellers, Archstone's
chairman and chief executive officer. "Our complementary platforms will
significantly enhance our combined long-term growth rate and allow us to
extend the company's urban high-rise expertise into attractive markets,
including Manhattan, Los Angeles, San Francisco and Seattle. The expansion of
our high-rise portfolio will create substantial incremental value for the
shareholders of both companies."
Archstone-Smith will own and operate an exceptional apartment portfolio,
with more than 70% of its investments concentrated in the nation's most
desirable protected markets, including the Washington, D.C. metropolitan area,
Boston, Chicago, the San Francisco Bay area, Southern California, Southeast
Florida and Seattle.
The total market value of the transaction is approximately $3.6 billion.
For each Smith Residential share held, a shareholder will receive 1.975 shares
of Archstone-Smith. The exchange ratio is not subject to change and there is
no collar or minimum trading price for the shares. As part of the
transaction, Archstone will convert to an UPREIT structure. The transaction
is structured to qualify as a tax-free merger. Archstone-Smith's dividend
will remain at Archstone's annualized level of $1.64 per share. The
transaction is expected to close in September 2001, subject to the approval of
shareholders of both companies, the partners of Charles E. Smith's Operating
Partnership and other customary conditions.
"Long-term value in the apartment business is created through the
ownership of assets in excellent locations in supply-constrained markets
combined with an outstanding customer-focused operating team," said Robert H.
Smith, chairman of Smith Residential. "These are the principles upon which
Charles E. Smith was founded and operated successfully for over 50 years. We
are very fortunate that Archstone shares our values and approach to this
business. We are extremely excited about our future together and the value
the new company will create for our shareholders, employees-and the residents
we serve."
The combined entity will operate from corporate headquarters in Denver,
with divisional offices in Arlington, Va., Irvine, Calif., and Atlanta. Upon
completion of the merger, Mr. Smith, Robert P. Kogod and Ernest A. Gerardi,
Jr. will join Archstone-Smith's Board of Trustees; Mr. Smith and Mr. Kogod
will also serve on Archstone-Smith's Executive Committee. Mr. Sellers will
serve as chairman and chief executive officer of the combined company; Mr.
Smith will serve as chairman of the Charles E. Smith Division. In addition,
Richard A. Banks will serve as president of the combined company's Western
Division, J. Lindsay Freeman will serve as the president of the combined
company's Eastern Division, and W.D. (Denny) Minami will serve as president of
the combined company's Charles E. Smith Division. Charles E. Mueller, Jr.
will serve as Archstone-Smith's CFO.
In light of today's announcement, Smith Residential's Board of Directors
has postponed its annual meeting of shareholders, which had been scheduled for
May 22, 2001. Smith Residential shareholders will be notified of the
rescheduled date of the meeting.
Archstone's and Smith Residential's senior management will host a joint
conference call to discuss the merger transaction today, May 4, 2001, at
11 a.m. EDT. In addition, Archstone will release its first quarter 2001
financial results before the open of market.
For live listen-only access to the call:
-- Conference call dial-in: Toll-free (888) 423-3280.
-- Webcast: At http://www.Archstonecommunities.com. Select "Investors" and follow
the instructions.
To hear a replay of the call:
-- Webcast replay: At http://www.Archstonecommunities.com. Select "Investors."
The call will be archived Until Monday, May 14, 2001.
-- Conference call replay: Call toll-free (800) 475-6701 (access code
584555). The call replay will be available beginning at 5 p.m. EDT on
May 4, 2001 through May 11, 2001 at 11:59 p.m. EDT.
Archstone Communities is a leading real estate operating company focused
on the operation, development, redevelopment, acquisition and long-term
ownership of apartment communities in protected markets throughout the United
States. With a current total market capitalization of $5.8 billion, Archstone
has a strategic national presence with 194 communities representing
59,650 units, including 3,807 units in its development pipeline, as of March
31, 2001, in markets that include 31 of the nation's 50 largest metropolitan
markets. Archstone's press releases are available by calling (800) 982-9293
or by visiting its web site at http://www.archstonecommunities.com.
Smith Residential is a leader in providing urban living solutions in
selected American cities. The company is a self-managed real estate
investment trust that develops, acquires, owns, leases, and manages
multifamily residential rental properties. The Company is based in Arlington,
Virginia, with operations in Washington, D.C., Northern Virginia, Chicago,
Boston, and Southeast Florida. As of March 31, 2001, the company owned or had
an interest in a portfolio of over 30,000 apartments. Total capitalization of
the company, including its operating partnership, exceeds $3 billion.
Investor information, including press releases about Smith Residential, is
available on the Company's web site at http://www.charlesesmith.com and also through
PR Newswire's Company News on Call by fax at 1-800-758-5804, ext. 101271, or
at http://www.prnewswire.com.
Archstone - Smith
Merger Transaction Announcement
May 4, 2001
ARCHSTONE - SMITH MERGER BENEFITS
Tremendous strategic opportunity
-- Creates pre-eminent apartment company
- Concentrated in nation's most desirable protected markets
-- Enhances national development capability
-- Combines the two most distinctive brands in the apartment industry
-- Significantly enhances liquidity and broadens shareholder base
-- Complementary business strategies facilitate integration
Powerful growth fundamentals
-- Stronger sustainable growth rate
- Strong internal growth - 8.3% weighted average NOI growth in Q1
2001
- Complementary development platform
- Substantial corporate efficiencies of $7 - $8 million annually
-- Extends high-rise platform nationally
- Manhattan
- San Francisco
- Los Angeles
- Seattle
-- Internally funded expansion opportunities
- Archstone's capital recycling experience
- $1.5 billion of non-core assets remaining
COMBINED COMPANY PROFILE
Apartment communities:(1) 255
Apartment units:(1) 87,456
Employees: 3,000+
Total capitalization: $9.3 billion
- Fourth largest in REIT industry
Equity capitalization: $5.7 billion
-Second-largest apartment company
Estimated annual revenues: $1.1 billion
Corporate headquarters: Denver, Colo.
Divisional offices: Arlington, Va.
Irvine, California
Atlanta, Georgia
(1) Includes operating communities & communities under construction
BEST NATIONAL PORTFOLIO IN THE APARTMENT INDUSTRY
Top six markets comprise over 70% of total portfolio(1)
% of Total
Market Portfolio
Washington, D.C. Metro Area 29%
Southern California 10%
San Francisco Bay Area 11%
Chicago 8%
Southeast Florida 8%
Boston 5%
(1) Represents operating communities and communities under construction,
based on projected stabilized net operating income.
MERGER CREATES PRE-EMINENT APARTMENT COMPANY
Archstone-Smith % of combined portfolio by market(1)
% of Total
Market Portfolio
Washington, D.C. Metro Area 29%
Southern California 10%
San Francisco Bay Area 11%
Chicago 8%
Southeast Florida 8%
Boston 5%
Seattle 4%
Denver 3%
Atlanta 3%
Raleigh 2%
Phoenix 2%
MERGER TRANSACTION DETAILS
Combined company: Archstone converts to
UPREIT structure;
Charles E. Smith assets merged in
Exchange ratio 1.975 Archstone shares for each
Charles E. Smith share
Imputed cap rate 7.5% for Charles E. Smith assets
Assumptions - $29.31 Archstone NAV per share
- Market NOI growth rates
Operational efficiencies $7 - $8 million annually
2002 FFO $2.45 - $2.52 per share
Financial reporting Focus on earnings per share;
adopt Charles E. Smith accounting
policies for make-ready
capitalization
DEEP, EXPERIENCED MANAGEMENT TEAM
Additions to Existing Board Robert H. Smith, Robert P. Kogod &
Ernest A. Gerardi, Jr.
R. Scot Sellers Chairman and Chief Executive Officer
Robert H. Smith Chairman - Charles E. Smith Division
Charles E. Mueller, Jr. Chief Financial Officer
Richard A. Banks President - West Division
J. Lindsay Freeman President - East Division
Wesley D. Minami President - Charles E. Smith Division
Dana K. Hamilton Executive Vice President - National
Operations
Daniel E. Amedro Chief Information Officer
Caroline Brower Secretary and General Counsel
STRONG BALANCE SHEET, FINANCIAL FLEXIBILITY
Total market capitalization $9.3 billion
Equity market capitalization $5.7 billion
Total existing lines of credit $994 million
- Drawn $188 million
- Available capacity $806 million
2001 ratios (pro forma)
- Interest coverage 3.2 x
- Fixed charge coverage (1) 2.6 x
- Total debt to total book capitalization 42%
- Total debt to total market capitalization 39%
(1) Includes interest expense and preferred stock/unit dividends
MARKET CAPITALIZATION ANALYSIS(1) (dollars in billions)
Archstone Charles E. Smith Archstone - Smith
Preferred $0.4 $0.4 $0.8
Secured debt $0.8 $1.3 $2.1
Unsecured debt $1.4 $0.1 $1.5
Equity $3.1 $1.8 $4.9
Total market
capitalization $5.7 billion $3.6 billion $9.3 billion
(1) Based on closing share prices as of May 3, 2001
MERGER TRANSACTION - PROPOSED TIMELINE
Board approval May 3, 2001
Public announcement May 4, 2001
File joint proxy statement with SEC May/June 2001
Mail joint proxy statement to shareholders July/August 2001
Shareholder vote / closing August/September 2001
Archstone Communities Trust and Charles E. Smith Residential Realty, Inc.,
urge you to read the important information contained in the joint proxy
statement prospectus, when it becomes available, regarding the proposed
business combination transactions referenced in this press release.
Registration statements related to the Archstone and Archstone-Smith
securities to be issued in the merger of Smith Residential with and into
Archstone-Smith and in the merger of Charles E. Smith Residential Realty L.P.
with and into Archstone have not yet been filed with the Securities and
Exchange Commission (SEC). You may obtain a free copy of the joint proxy
statement/prospectus included as part of the registration statement, when it
is available, and other documents filed by Archstone, Archstone-Smith, Smith
Residential, and Smith Residential, L.P., respectively, with the SEC
(including the documents incorporated by reference into the joint proxy
statement/prospectus) at the SEC's web site at http://www.sec.gov. Shareholders of
Archstone may also obtain a free copy of the joint proxy statement/prospectus
and these other documents by directing a request to Archstone Communities
Trust, 7670 S. Chester St., Suite 100, Englewood, CO 80112, Attention: Julie
Brubaker, or by calling (800) 982-9293. Shareholders of Smith Residential and
partners of Smith Residential L.P. may also obtain a free copy of the joint
proxy statement/prospectus and these other documents by directing a request to
Charles E. Smith Realty Inc., 2345 Crystal Drive, Arlington, VA 22202,
Attention: Greg Samay, or by calling (703) 769-1029.
Pursuant to Instruction 3 of Item 4 of Schedule 14A, the participants in
the solicitation include Archstone, its trustees, Smith Residential, its
directors, and may include their respective executive officers. Information
concerning the Archstone trustees and executive officers in Archstone and
their direct and indirect interests in Archstone is contained in its proxy
statement for its annual meeting of shareholders dated March 30, 2001.
Information concerning the directors of Charles E. Smith and their direct and
indirect interests in Smith Residential is contained in its proxy statement
for its annual meeting of shareholders, dated April 13, 2001. As of the date
of this communication, none of the foregoing participants beneficially owned
in excess of 1% of the Smith Residential Common Shares, except Robert H. Smith
(a director and executive officer) and Robert P. Kogod (a director and
executive officer). As of the date of this communication, none of the
forgoing participants beneficially owned in excess of 1% of Archstone Common
Shares.
The securities may not be sold, nor may offers to buy be accepted, prior
to the time the registration statements become effective. This press release
shall not constitute an offer to sell or the solicitation of an offer to buy
nor shall there be any sale of these securities in any state in which such
offer, solicitations or sale would be unlawful prior to the registration or
qualification under the securities laws of any such state.
In addition to historical information, this press release contains
forward-looking statements under the federal securities laws. These
statements are based on current expectations, estimates and projections about
the industry and markets in which Archstone and Smith Residential operate,
managements' beliefs and assumptions made by managements. While managements
of Archstone and Smith Residential believe that the assumptions underlying the
forward-looking statements are reasonable, such statements are necessarily
subject to uncertainties and may involved certain risks, many of which are
difficult to predict and beyond the control of management. As a result,
forward-looking statements are not guarantees of future performance and
involve certain risks and uncertainties which are difficult to predict.
Actual operating results may differ materially from what is expressed or
forecasted in this press release. See "Risk Factors" in Archstone's 2000
Annual Report on Form 10K and Smith Residential's 2000 Annual Report on Form
10K, both of which are on file with the SEC, for certain factors which could
affect Archstone's and Smith Residential's future financial performance.
SOURCE Archstone Communities
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Related links:
http://www.archstonecommunities.com
Photo Notes:
NewsCom:
http://www.newscom.com/cgi-bin/prnh/19990907/ASNLOGO
PRN Photo Desk, 888-776-6555 or 201-369-3467
CONTACT:
Investors, Charles E. Mueller, Jr. of
Archstone Communities, 800-982-9293, or 303-708-5959, or Greg
Samay of Charles E. Smith Residential Realty, 703-769-1069; or
Media, Dana Hamilton of Archstone Communities, 303-708-5977, or
Susan Goyette of Charles E. Smith Residential Realty,
703-769-6746
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