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

A statement by Thomas Tuesday said that its board "reviewed the unsolicited indication of interest" by the stockholders led by Weisman and "does not believe that it is the right time to entertain discussions of the nature suggested in the Weisman Group’s letter."

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

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

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

Silvers says that although there are still many going-private transactions in the general market, "In the REIT sector, everything has been going public." Although Thomas is not a REIT, it is followed by REIT analysts. In fact, he says, "Because it's not a REIT, 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."

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

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

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