Lehman in $1.58 billion Archstone apartment deal: sources NEW YORK (Reuters) - Lehman Brothers Holdings Inc, one of three owners of Archstone, has reached a deal to buy the last portion of the apartment company it does not own for $1.58 billion, sources with knowledge of the matter said on Thursday. Lehman will buy the 26.5 percent of Archstone that it does not own from Bank of America Corp (BAC.N) and Barclays Plc (BARC.L). In January, Lehman bought half the banks' stake, or 26.5 percent of Archstone, for $1.325 billion. That came after Barclays and Bank of America struck a deal to sell the 26.5 percent stake to Equity Residential (EQR.N), whose chairman is Sam Zell. Equity Residential was then also given the right to bid for the banks' remaining stake. But Archstone's ownership structure gave Lehman the right to match the offer for the first slice. Lehman bought the stake and later filed a lawsuit against the two banks in the U.S. Bankruptcy Court in Manhattan. The fight over Archstone comes against the backdrop of a strong rebound in the U.S. apartment market, which has strengthened as Americans, unable to get mortgages, have shifted from home ownership to renting. And as the economy has firmed, rents have surged and occupancy is tight in most areas. Lehman has a 73.6 percent stake in Archstone, with Bank of America owning 13.9 percent and Barclays 12.5 percent, according to the lawsuit. Archstone owns 73,135 apartment units in the United States and Europe, some in buildings in the most desirable urban areas in Washington D.C., New York, Boston and Seattle. Equity Residential owns 121,011 units. The last slice of Archstone is critical to Lehman because it blocks Equity Residential from controlling Archstone's fate. Under the ownership structure, unless a party had at least 76 percent stake, all important decisions regarding Archstone needed to be unanimous. This would have given Equity Residential, who wanted Archstone, veto power over compensation, financing, acquisitions and other important decisions. With the last stake, Lehman can control Archstone's fate. The deal the banks and Equity Residential struck in December allowed Zell's company to bid for the last slice of Archstone should it not get the first slice. The second 26.5 percent stake carried a price tag of at least $1.325 billion, but that was later raised to $1.5 billion. But Equity Residential won't walk away empty-handed. The deal gives Zell's company a break-up fee of $150 million, sources said. As of the end of last year, Equity Residential had spent about $4 million in its pursuit of Archstone. The companies are expected to announce the deal late Thursday or Friday. The agreement was first reported by the Wall Street Journal. Representatives from Archstone and Lehman did not return phone calls seeking comment. The agreement also requires Lehman to drop the lawsuit, a source said. The unusual triumvirate structure had its roots in the $22.2 billion 2007 Lehman Brothers/Tishman Speyer-led leveraged buyout of Archstone Smith, one of the largest owners of U.S. apartments. Lehman and the banks provided $6.4 billion in secured financing, with Lehman contributing 47 percent, or more than $3 billion. As the credit crisis deepened in the subsequent years, Archstone could not repay some of its loans. Its lenders ended up with the company in 2010, with Lehman owning 47.3 percent, and the banks a combined 53 percent - with Bank of America's share at 27.7 percent and Barclays at 25 percent. As the U.S. economy and apartment market improved, the three looked to extract cash from Archstone. Lehman wanted to return Archstone to the public market through an initial public offering. The banks said they would only consider a private sale of their interest and did so last summer, according to the lawsuit. When the deal is done, it will leave Lehman free to find a partner to help finance Archstone, without triggering the same provision for the other parties to match it. Lehman has been talking to at least one possible partner, Ivanhoé Cambridge, the real estate investment arm of Canadian pension fund Caisse de dépôt et placement du Québec, a source said. Reporting by Ilaina Jonas; Editing by Lisa Shumaker and Muralikumar Anantharaman