Equity Residential and AvalonBay Communities Inc. entered into an agreement with Lehman Brothers Holdings Inc. to acquire the assets and liabilities of Archstone Enterprise L.P. for approximately $16 billion. Archstone Enterprise assets consist primarily of high-quality apartment properties in major U.S. markets. Under the terms of the agreement, Equity Residential will acquire approximately 60 percent of Archstone’s assets and liabilities, while AvalonBay will acquire 40 percent.

The combined purchase price consists of $2.7 billion in cash, a fixed number of Equity Residential and AvalonBay common shares valued at $3.8 billion as of Nov. 23, 2012, the assumption of approximately $9.5 billion in debt and $330 million in preferred equity.

The assets being acquired by Equity Residential will include 78 stabilized operating properties containing 23,110 units with an average monthly rent of $2,492 per unit. The properties are located in Washington, D.C., San Francisco, New York, Boston, Seattle, Southern California and South Florida, among other markets. The transaction values the apartments at $367,003 each, with a cap rate of approximately 5 percent. Equity Residential will also acquire four properties currently under development in the Washington, D.C. metro area, San Francisco, Phoenix and South Florida, as well as 15 land sites for future development.

Equity Residential will pay its portion of the purchase price with $2.016 billion in cash, including proceeds from asset sales, and the issuance of 34,468,058 shares of common stock, plus the assumption of $5.5 billion in secured debt.

“Archstone’s assets will fit perfectly into the Equity Residential portfolio, further improve the overall quality of our assets and add scale to our operating platform in our core markets,” said Equity Residential President and CEO David J. Neithercut in a statement. “Furthermore, by funding much of this acquisition with proceeds from the sale of assets in our non-core, exit markets, we are accelerating the completion of the total transformation of our portfolio.”

The transaction is scheduled to close in the first quarter of 2013.

The new announcement comes just less than a year after Equity mounted a previous effort to buy a stake in Archstone.

Last December, Eequity Residential entered into a contract to acquire an approximate 26.5 percent ownership interest in Archstone for $1.325 billion in cash. At the time, Archstone was owned in a complex joint venture with 53 percent of the firm controlled by affiliates of Bank of America and Barclays Bank PLC and the remaining 47 percent controlled by Lehman Brothers Holding Inc. Lehman fought the bid from the get go and worked quickly to find a way to retain ownership of Archstone.

According to the terms of the deal, Lehman had a right of first offer to acquire the 26.5 percent stake. In January, Lehman, after receiving bankruptcy court approval, opted to exercise this right. That, in turn triggered a separate agreement between Equity, Bank of America and Barclays Bank PLC to acquire the other 26.5 percent stake controlled by those entities. Lehman also retained a right of first offer to match that bid. Lehman ultimately exercised that option, which resulted in a Equity receiving $150 million in break-up and termination fees in May. The terms of that payout included a clause that should Equity acquire all of substantially of Archstone within 120 days of Lehman’s acquisition that it would be required to return all or a portion of the $150 million. Instead, Equity waited six months before launching this new bid.