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AvalonBay To Acquire 40% Of Archstone; Affirms FY12 FFO Outlook - Quick Facts

AvalonBay Communities, Inc. (AVB) and Equity Residential (EQR) announced that they entered into an agreement with Lehman Brothers Holdings, Inc. to acquire the assets and liabilities of Archstone Enterprise LP, which consist principally of a portfolio of high quality apartment communities in major markets in the United States, for approximately $16 billion in the aggregate.

As per the terms of the Agreement, AvalonBay will acquire approximately 40% of Archstone's assets and liabilities and Equity Residential will acquire approximately 60% of Archstone's assets and liabilities. The transaction is expected to close during the first quarter of 2013.

The combined purchase price for the assets consists of (i) $2.7 billion in cash, (ii) a stipulated fixed number of shares of AvalonBay and Equity Residential common stock valued at $3.8 billion as of the market's close on Friday, November 23, 2012, (iii) the assumption of approximately $9.5 billion of consolidated and unconsolidated debt at Archstone's share, and (iv) preferred equity units with a redemption value of $330 million as of September 30, 2012.

AvalonBay reaffirmed its fourth quarter and full year 2012 Earnings per Share and Funds from Operations attributable to common stockholders outlook.

For the fourth quarter of 2012, including the impact of Hurricane Sandy, AvalonBay expects earnings per share of $1.34 to $1.39. For the fourth quarter of 2012, including the impact of Hurricane Sandy, AvalonBay expects Projected FFO of $1.40 to $1.45. Analysts polled by Thomson Reuters expect the company to report earnings of $1.42 per share for the fourth-quarter. Analysts' estimates typically exclude special items.

AvalonBay still expects earnings per share for the full year 2012 to be in the range of $4.47 to $4.52. AvalonBay expects Projected FFO for the full year 2012 to be in the range of $5.45 to $5.50. Analysts expect the company to report earnings of $5.45 per share for fiscal 2012.

AvalonBay expects to increase the common stock dividend for the first quarter of 2013 by a range of between 8% and 12%.

Lehman has agreed that it will not sell or hedge shares of the Company's common stock until April 26, 2013. AvalonBay has agreed that it will enter into a Registration Rights Agreement with Lehman to help facilitate its sale of the shares acquired in the transaction.

In a separate press release, Equity Residential reaffirmed its 2012 Normalized FFO guidance range of $2.74 to $2.78 per share. Analysts expect the company to report earnings of $2.75 per share for fiscal 2012.

Equity Residential currently anticipates no change to the 4% to 5% same store revenue growth expectation that it has previously provided for 2013.

Equity Residential expects that its 2013 Normalized Funds from Operations will be reduced by up to $0.04 per share because of the Archstone transaction, primarily due to the company's planned disposition activity.

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