NEW YORK CITY—Office landlord Paramount Group Inc. has filed for an IPO that could be the largest ever by a US company seeking REIT status. Citing unnamed sources said to be familiar with the matter, Bloomberg reported on Thursday that the owner of 10.4 million square feet in New York, San Francisco and Washington, DC is seeking to raise $2.5 billion.
If the Bloomberg report is accurate, the $2.5-billion stock offering would be second only to Hilton Worldwide Holdings’ $2.7-billion IPO last fall among US-based real estate firms. The largest REIT IPO to date was Douglas Emmett‘s in 2006, which raised $1.4 billion.
GlobeSt.com reported in July that Paramount was considering an IPO, along with other possible scenarios including a reverse merger into a publicly traded REIT. The company’s SEC filing on Wednesday afternoon did not specify the number of shares it plans to offer, the pricing or a timetable for the offering. It set a placeholder amount of $100 million, and listed Bank of America Merrill Lynch, Morgan Stanley and Wells Fargo as underwriters.
In its SEC filing, the would-be REIT spelled out its strategy for increasing cash flow from operations. Among other things, that entails leasing up the 963,000 square feet of space currently available, increasing the existing below-market rents and pursuing a disciplined acquisition strategy.
“Since 1995, we have acquired 27 high-quality office properties with a total value of approximately $11.1 billion primarily in our targeted submarkets of New York City, Washington, DC and San Francisco,” according to Paramount’s SEC filing. “We intend to continue our core strategy of acquiring, owning and operating class A office properties within submarkets that have high barriers to entry, are supply constrained, exhibit strong economic characteristics and have a pool of prospective tenants in various industries that have a strong demand for high-quality office space.”
The filing listed a dozen class A assets in Paramount’s current portfolio. In Midtown Manhattan, they include the company’s headquarters at 1633 Broadway along with 1301 and 1325 Ave. of the Americas, 31 W. 52nd St., 900 Third Ave. and 712 Fifth Ave; while Paramount’s DC assets include 425 Eye St., Liberty Place, 1899 and 2099 Pennsylvania Ave. in the nation’s capital and Waterview in Rosslyn, VA. In San Francisco, it owns the 1.6-million-square-foot One Market Plaza. The portfolio is 90.7% leased to a roster of 253 tenants, with rents averaging $65.06 per square foot.
Citing NAREIT data, Bloomberg reported Thursday that REIT IPOs are down significantly this year. Just three companies in the REIT space to date have staged initial stock sales thus far in 2014, compared to 19 for all of 2013.