American Assets Trust, Inc. (AAT) is offering 25 million shares (all primary) at an indicated range of $19.00-21.00, for an implied market cap of $1.014B at the midpoint. The lead underwriters on the offering are BofA Merrill Lynch, Wells Fargo Securities and Morgan Stanley. AAT is a full service, vertically integrated and self-administered real estate investment trust, or REIT, that owns, operates, acquires and develops high quality retail and office properties in attractive, high-barrier-to-entry markets primarily in Southern California, Northern California and Hawaii. The company has a 40 year operating history, and their executive director, Ernest Rady will own 40% of the company post IPO.
ATT’s assets are comprised of over 4.5M sq. ft. of office, retail, mixed use and multifamily, with a West Coast concentration (65% California). The company describes their assets as an irreplaceable portfolio with: 48% retail, 32% office, 13% mixed use and 7% multifamily. 40% of their assets are located in the San Diego (CA) area, 27% are in Oahu (HI), 16% in San Francisco (CA), 8% in San Antonio (TX), 7% in Monterey (CA), and 2% in Los Angeles (CA).
AAT’s superior locations and high-barrier to entry markets enable the company to have superior operating margins (approx 72.5% for retail/mixed use and office segments), resulting from higher than average occupancy rates (96% average retail and 92% office), and best in class annualized base rent per leased sq. ft ($24.99 for retail/mixed use and $39.17 for office).
At the midpoint of the range, $20.00, ATT is coming at an estimated annualized dividend yield of 4.2%. While there has been some talk that this yield is not as attractive as some of the later successful 2010 REIT IPOs, when comparing this yield to their direct market comps it appears reasonably attractive. The West Coast focused office REIT comps (including DEI, KRC and HPP) trade at an average forward dividend yield of about 3%, and the retail REIT comps (including such names as FRT, REG, KIM, EQY and WRI) trade about in line on a forward dividend basis. Where AAT looks attractive is on some of the operating metrics like pro forma trailing twelve month EV/EBITDA, as well as annualized 2010 pro forma FFO. In both categories AAT appears to be at a reasonable discount.
Based on the valuation and apparent strong demand on this offering, it looks as though AAT will kick off the 2011 IPO year on a positive note.
There has also been some talk about the anticipated offering this week of another West Coast office REIT, Pacific Office Properties Trust (PCE). While this offering is being viewed as an initial public offering, and will be newly listed on the NYSE, the company is currently publicly traded on the AMEX under the same symbol (PCE). Thus, it is technically a secondary or follow-on offering rather than an IPO.