Apartment company Equity Residential (EQR) struck a deal with Bank of America Corp. (BAC) and Barclays PLC (BCS, BARC.LN) over the weekend to extend its purchase option to buy a stake in competitor Archstone by 60 days, according to a press release Monday and people familiar with the terms of the deal.

In return, Equity Residential, controlled by Chicago real estate investor Sam Zell, has agreed to raise its minimum price from $1.44 billion to $1.485 billion for 26.5% of Archstone.

The remainder of Archstone is owned by the bankruptcy estate of failed investment bank Lehman Brothers Holdings Inc.

The move is the latest twist in a complicated sale process for Archstone, which was taken private in a $22 billion leveraged buyout by a Lehman-led team at the height of the market in 2007. That deal is widely viewed as one of the largest of the $40 billion in risky commercial real estate bets that were in large part responsible for Lehman's bankruptcy in 2008.

For the last year, Lehman has been arguing with Barclays and Bank of America over how to best unwind the Archstone investment, which is Lehman's largest single remaining asset. Lehman would prefer to take the company public again in an initial public offering process, while the banks have signaled that they would rather sell the company quickly in a private transaction.

Last summer, the banks held a 53% stake in Archstone, and began looking for a buyer, with Equity Residential emerging as the lead bidder late last year.

Under the terms of Archstone's ownership agreement, the banks were required to offer Lehman the right to match any offer made to buy all or part of the company.

Last month, Lehman blocked Archstone's bid to buy the first half of the banks' 53% stake by paying $1.33 billion cash. If Lehman decides to match Equity Residential's offer for the second piece owned by the banks, Zell's company is entitled to an $80 million break-up fee.

In a Monday research note to investors, J.P. Morgan analyst Anthony Paolone wrote that the increased minimum price reduces the capitalization rate -- or investment yield -- on Equity Residential's potential investment in Archstone from 5.3% to 5.02%, and values the company at $16.6 billion, including debt.

-By Robbie Whelan, Dow Jones Newswires; 212-416-2905; robbie.whelan@wsj.com

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