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Summary

  • Newly-organized Maryland REIT formed on November 26, 2013 to acquire, own and operate high-quality office properties.
  • No target payout.
  • Per share dilution on the IPO is $10.43 which is high relative to the price range mid-point of $15.

Based in Vancouver, Canada, City Office REIT (NYSE:CIO) scheduled a $101 million IPO on the NYSE with a market capitalization of $189 million at a price range midpoint of $15 for Friday, April 11, 2014.

The full IPO calendar is available at IPOpremium.

Conclusion
CIO is a newly-formed REIT with no target payout. Also, the per share dilution on the IPO is $10.43 which is high relative to the price range mid-point of $15.

The rating on CIO is negative.

SEC Documents
Manager, Joint managers: Janney Montgomery Scott, Wunderlich Securities, Oppenheimer & Co.

Co-Managers: Ladenburg Thalmann & Co., BB&T Capital Markets, Compass Point, D.A. Davidson, Boenning & Scattergood, Feltl and Company

End of lockup (180 days): Wednesday, October 8, 2014

End of 25-day quiet period: Tuesday, May 6, 2014

Summary

CIO is a newly-organized Maryland corporation formed on November 26, 2013 to acquire, own and operate high-quality office properties located within its specified markets in the United States.

Valuation

Glossary

Valuation Ratios

Mrkt

Price /

Price /

Price /

Price /

% offered

Cap (MM)

Sls

Erngs

BkVlue

TanBV

in IPO

City Office REIT

$189

5.9

-24.2

2.1

3.3

53%

Conclusion

CIO is a newly-formed REIT with no target payout. Also, the per share dilution on the IPO is $10.43 which is high relative to the price range mid-point of $15.

The rating on CIO is negative.

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above.

Business

CIO is a newly-organized Maryland corporation formed on November 26, 2013 to acquire, own and operate high-quality office properties located within its specified markets in the United States.

CIO has not had any corporate activity since its formation, other than the issuance of 1,000 shares of its common stock to Second City in connection with its initial capitalization and activities in preparation for this offering and the formation transactions.

Formation transactions

Following the completion of this offering, CIO and its operating partnership will acquire substantially all of its assets and its operating partnership will conduct substantially all of its operations.

All of the initial property interests that CIO will acquire in the formation transactions currently are owned by the Property Ownership Entities.

As a result of the formation transactions, CIO will acquire a 100% interest in each of the Washington Group Plaza, Cherry Creek and Corporate Parkway properties and CIO will acquire an approximately 76% interest in the AmberGlen property, 90% interest in the Central Fairwinds property and 95% interest in the City Center property.

The parties retaining the remaining interests in the AmberGlen, Central Fairwinds and City Center properties at the conclusion of the formation transactions will not receive any common units, common stock or cash from CIO for their property interests.

The value of the consideration to be paid to each of the entities in the Second City Group in the formation transactions will be determined according to the terms of the respective contribution agreements. The contributions will be effected concurrently with the completion of this offering.

Dividend Policy

To satisfy the requirements to qualify as a REIT and generally not be subject to U.S. federal income and excise tax, CIO generally intends to make regular quarterly distributions to holders of its common stock, beginning at such time as its board of directors determines that CIO has sufficient cash flow to do so, over time in an amount equal to its taxable income, which would be reduced by, among other things, the amount of the annual advisory fee and any acquisition fees payable, and offering expenses reimbursable, to its Adviser pursuant to the Advisory Agreement.

Although CIO anticipates making quarterly distributions to its stockholders over time, its board of directors has the sole discretion to determine the timing, form (including cash and shares of its common stock at the election of each of its stockholders) and amount of any distributions to its stockholders.

Competition

Competition for office properties includes an indeterminate number of other real estate investors, including domestic and foreign corporations and financial institutions, publicly-traded and privately-held REITs, private institutional investment funds, investment banking firms, life insurance companies and pension funds, some of which have greater financial resources than CIO does.

CIO does, however, generally believes that its target markets contain relatively few well capitalized buyers.

5% stockholders

Second City Capital Partners II, Limited Partnership 100%

Use of proceeds

CIO expects to net $89 million from its IPO. Proceeds are allocated as follows:

$19.4 million to acquire interests in its initial properties, including the payment of transaction expenses in connection with the contribution of its initial properties in the formation transactions;

$6.5 million to repay portions of certain mortgage loans (1) as the proceeds from its new mortgage loans will be less than the amount of mortgage loans CIO will repay in connection with this offering; and

the remaining $63.5 million for general working capital purposes, including payment of expenses associated with its formation transactions, future acquisitions and creating reserves for capital expenditures, tenant improvements and leasing commissions.

Disclaimer: This CIO IPO report is based on a reading and analysis of CIO's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Source: IPO Preview: City Office REIT