American Assets Climbs After First U.S. IPO of 2011

American Assets Trust Inc. advanced 3.7 percent after raising $564 million in the largest initial public offering of a U.S. real estate investment trust in more than a year.

The owner of properties from San Francisco to Honolulu gained 75 cents to $21.25 in New York Stock Exchange trading after earlier climbing to $22. The San Diego-based investment trust sold 27.5 million shares at $20.50 each after offering 25 million for $19 to $21 apiece, according to data compiled by Bloomberg. The sale was the biggest for a U.S. REIT since Starwood Property Trust Inc. raised $932 million in August 2009.

American Assets completed the first U.S. initial offering of 2011 after more than half the IPOs by REITs last year left buyers with losses, data compiled by Bloomberg show. Barclays Plc of London estimates U.S. initial sales will raise $50 billion this year, an increase of 34 percent, after the Standard & Poor’s 500 Index recovered all of its losses spurred by the collapse of Lehman Brothers Holdings Inc. in September 2008.

“Investors are adjusting their risk profile,” said Daniel Genter, president of RNC Genter Capital Management in Los Angeles, which oversees about $3.7 billion. “People are becoming less concerned about the bottom falling out from under them.”

Office, Hotel Properties

Bank of America Corp. of Charlotte, North Carolina, Wells Fargo & Co. in San Francisco and New York-based Morgan Stanley led the offering. American Assets owns office, retail and hotel properties in California, Hawaii and Texas valued at about $2 billion, according to Green Street Advisors, which has specialized in real estate research for more than two decades.

Proceeds from the IPO will be used to pay debt. At the original midpoint price, American Assets would have had a market capitalization of $1.01 billion, or a 5.9 percent discount to its net asset value of about $1.08 billion, its prospectus and data compiled by Bloomberg show. Non-mortgage REITs trade at an average premium of 17 percent, according to Green Street.

The eight REITs that completed U.S. IPOs in 2010 advanced an average of 1.9 percent, trailing the 13 percent climb by the S&P 500, according to data compiled by Bloomberg. Ten property trusts postponed or withdrew their initial sales, the data show.

Welsh Property, Americold

Welsh Property Trust Inc. of Minnetonka, Minnesota, was valued at a 70 percent premium to diversified REITs before shelving its IPO in June. Americold Realty Trust, the Atlanta- based warehouse operator owned by billionaire Ron Burkle’s Yucaipa Cos., pulled its sale in May after seeking a price of more than twice the valuation of property trusts worldwide, data compiled by Bloomberg showed.

“The reason that a lot of REIT IPOs didn’t make it to the finish line in 2010 is because they had unrealistic pricing expectations from the start,” unlike American Assets, Laura Clark, an analyst at Newport Beach, California-based Green Street, said before the pricing by American Assets. In addition, “American Assets isn’t coming to the market with balance sheet issues,” she said.

To contact the reporter on this story: Lee Spears in New York at lspears3@bloomberg.net.

To contact the editor responsible for this story: Daniel Hauck at dhauck1@bloomberg.net.

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