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American Assets Trust (AAT) $500mm IPO
with a market cap of $1.045 billion at the price range mid-point of $20
Scheduled for Thursday January 13, 2011 |
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SUMMARY |
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REIT with office properties in Southern California, Northern California and Hawaii |
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3 tenants account for 33% of revenue |
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California is not a growth market anymore |
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VALUATION |
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Compared to recent REIT IPOs AAT appears to be seeking an IPO premium |
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For example, compared to six REIT IPOs in the past year, three currently pay more than AAT’s projected 4.2% payout rate, at the price range mid-point of $20. |
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The three include Whitestone (WSR) 7.7%; Piedmont Office (PDM) 6.2%; Campus Crest (CCG) 4.7%. And are up from their IPO price 20%, 38% and 8% respectively. |
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The remaining three have a lower payout rate and have declined from their IPO price. Compared to all six REITS AAT’s price-to-book value is the highest (lower is better) |
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FORMATION TRANSACTIONS NOT ARMS LENGTH |
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. Post-IPO Ernest S. Rady and his affiliates, directly or indirectly, will own a 41% beneficial interest in AATr company |
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. AAT did not conduct arm’s-length negotiations with Mr. Rady with respect to the terms of the formation transactions
. AAT did not obtain any third-party appraisals of the properties and other assets to be acquired by AAT from the prior investors in connection with the formation transactions |
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DISTRIBUTION POLICY |
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. Intends to pay on an annualized basis $0.84 per share, an annual distribution rate of 4.2% based on the price mid-point of $20. |
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. AAT estimates that this initial annual distribution rate will represent 73% of estimated cash available for distribution for the 12 months ending September 30, 2011. |
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USE OF PROCEEDS |
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$455mm
• $342.1 million to repay in full the outstanding indebtedness
• up to $8.5 million for tenant improvements and leasing commissions at The Landmark at One Market;
• $10.1 million for loan transfer and consent fees and credit facility origination fees;
• $5.9 million to pay non-accredited prior investors in connection with the formation transactions;
• up to $2.0 million to pay costs related to the renovation of Solana Beach Towne Centre; and
• remainder of $87mm for general corporate purposes, including working capital, future acquisitions, transfer taxes and, potentially, paying distributions. |
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COMPARISONS |
Mrkt |
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Expected |
ExpDividend |
Price / |
% offered |
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Both scheduled for Jan 10wk |
Cap (mm) |
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payout |
% payout |
TangibleBV |
in IPO |
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Ameridan Asset (AAT) |
$1,014 |
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$0.84 |
4.2% |
1.9 |
49% |
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market cap at $20 mid-range |
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Pacifc Prop Office PCE |
$438 |
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$0.36 |
4.5% |
1.5 |
80% |
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market cap at $8 mid-range |
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COMPARE & CONTRST |
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IPO |
change |
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Market Cap |
from |
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Price / |
Price / |
Div |
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($mm) |
IPO |
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BookValue |
TangibleBV |
payout |
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American Assets (AAT) |
$1,014 |
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1.9 |
1.9 |
4.2% |
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Pacifc Prop Office PCE |
$438 |
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1.1 |
1.5 |
4.5% |
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REIT IPOs in the last year |
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Ranked by payout return |
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Whitestone REIT (WSR) |
$83 |
20% |
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1.3 |
1.3 |
7.7% |
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Retail Prop: IPO Aug 25 |
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Piedmont Office REIT (PDM) |
$4,310 |
38% |
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1.5 |
1.7 |
6.2% |
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IPO Feb 10 |
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Campus Crest (CCG) |
$383 |
8% |
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1.5 |
1.5 |
4.7% |
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Student housing REIT IPO Oct 13 |
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Chesapeake Lodging (CHSP)* |
$349 |
-6% |
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0.9 |
1.2 |
4.2% |
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IPO Jan 21 |
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Excel Trust (EXL), REIT* |
$200 |
-9% |
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1.0 |
1.2 |
3.8% |
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Retail Prop: IPO April 22 |
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Hudson Pacific (HPP) |
$336 |
-11% |
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1.5 |
1.7 |
2.5% |
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Entertainment industry |
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offices in California IPO June 23 |
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*annualizing most recent dividend |
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