LOS ANGELES-Thomas Properties Group on Tuesday rebuffed a bid bya San Fernando Valley-based investment group to enter talks abouttaking the Downtown L.A.-based office landlord private, a bid thatrevolves around the question of asset values and also runs counterto the current IPO trend among commercial real estate companies,industry analysts say. The Weisman Family Foundation and fiveindividual stockholders filed SEC documents and sent a letter toThomas officials this month stating that Weisman believes theThomas stock is undervalued and asking to meet with the company'sboard to discuss the possibility of taking Thomas private.

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A statement by Thomas Tuesday said that its board "reviewed theunsolicited indication of interest" by the stockholders led byWeisman and "does not believe that it is the right time toentertain discussions of the nature suggested in the WeismanGroup’s letter."

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Thomas Properties stock was trading at $2.58 in early June whenWeisman sent its letter, which said that it considered Thomas to beworth at least $3.75 per share. Thomas stock has risen since thenand was trading at $3.29 Tuesday afternoon. The stock could beworth far more than that, however, according to a research reportby Milwaukee-based Robert W. Baird & Co., which states a targetprice of $6 for the stock and gives it an "outperform" rating,meaning that the stock is expected to outperform the broader USequity market over the next 12 months.

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Regardless of what the exact value of Thomas stock is right now,"It is clearly undervalued," says analyst Craig Silvers, presidentof Los Angeles-based Bricks & Mortar Capital, which invests inREITs and other publicly held real estate companies. Silvers pointsout that estimated values of publicly held real estate companiescan vary widely because the stock values are tied to the net assetvalue of the companies' holdings.

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Today's values are difficult to establish because so fewproperties are trading, and future values are hard to peg becausethey depend on the speed and the strength of the eventual economicrecovery, Silvers points out. A March research report by JMPSecurities, for example, estimated Thomas' net asset value at$4.20, compared to Silvers' own estimate of $7 to $8.

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Silvers says that although there are still many going-privatetransactions in the general market, "In the REIT sector, everythinghas been going public." Although Thomas is not a REIT, it isfollowed by REIT analysts. In fact, he says, "Because it's not aREIT, it's not getting what I think is a fair valuation," he says,estimating that the stock is worth "$7 to $8, maybe even more,depending on the strength of the economic recovery."

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Even before Thomas turned down the offer to talk with Weismanabout going private, the Baird report, by David Loeb and AndrewWittmann, stated that a take-private transaction would be"difficult to accomplish." It noted that Thomas Properties CEO JimThomas and the majority of the largest shareholders "see value inthe company near or above "$7.55 per share" and "would be unlikelyto accept a Weisman Group offer, even at a substantial premium overtoday's price." The top seven Thomas Properties shareholders,including Thomas, "hold approximately 70% of the common stock andhave a demonstrated history of patient investing," according to thereport.

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Silvers says that Weisman's overture to Thomas may be a bid toput the company in play by generating interest among otherinvestors who "might be willing and able to pay" closer to $7 or $8per share. Whatever the value, it is surely higher than the $3.29that the stock was trading for Tuesday afternoon, he says. "I'm anowner of the stock. I don't want them to sell cheaply," headds.

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The Baird analysts say that part of their investment thesisregarding Thomas is that the company "has developed a solid jointventure relationship with CalSTRS (the California State Teachers'Retirement System), which allows it to acquire properties which itwould not otherwise have the capital to purchase." CalSTRS played akey role recently in the refinancing of City NationalPlaza, a landmark Thomas asset in Downtown L.A.

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