Two REITs Test Publicly Traded Waters

Amid a protracted IPO drought, two real estate investment trusts (REITs) are testing publicly traded waters. Los Angeles-based office landlord Maguire Properties (MPG) went public Wednesday at $19 a share. Maguire isn’t yet a REIT, but the firm is seeking such status. The other real estate firm, American Financial Realty Trust (AFR) also went public Wednesday, opening at $12.50 a share. AFR owns bank properties throughout the United States.

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Maguire Properties owns several trophy office buildings in L.A., among them the Library Tower (formerly called the U.S Bank Tower). The IPO of 36.5 million shares was carried out by joint underwriters Credit Suisse Group’s (CSR) Credit Suisse First Boston and Citigroup, Inc. Maguire Properties offers investors a quarterly dividend payment of 40 cents a share. That, along with a $19 a share price, gives Maguire an 8% yield—higher than the 6.8% average yield of NAREIT’s composite index.

That 8% yield may sway investors from some sobering facts about the company, though. According to the Wall Street Journal, risks cited in the firm’s SEC filing include roughly $1 billion worth of debt that will follow the offering. And Maguire Properties also is not profitable: during the first quarter of this year the company lost $1.5 million on a pro-forma basis on revenue of $65.8 million.

But Les Loffman, national director of REIT services at Ernst & Young, says that these two IPO’s bode well for the real estate business, and the economy in general. "These two IPO’s raised $1.5 billion total, which is more than all IPO’s so far this year," he says. Loffman believes that these two REITs going public signifies that Wall Street is gaining confidence in the near-term future of real estate, especially since REITs have held up better than most other investments this year. "These are all very good signs for real estate," he adds.


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