Douglas Emmett Plans $1B Public Offering

SANTA MONICA, CA-Douglas Emmett Inc. has filed a registration statement with the Securities and Exchange Commission for an initial public offering that would turn the privately held firm into a publicly traded REIT with nearly 12 million sf of office buildings and 3,000 apartments. The new REIT would raise more than $1 billion through the stock sale, according to Emmett's SEC filing, which did not specify a price for the stock or timing for the offering.

Emmett officials are in the quiet period following their filing, but REIT analyst Craig Silvers, president of Los Angeles-based Bricks & Mortar Capital, tells GlobeSt.com that the IPO could be well-received even though it occurs at a time when many REIT have gone from public to private.

"It could be the right product at the right time," Silvers says, pointing out that Emmett's holdings include prime West Los Angeles office and apartment buildings, for which investor demand is strong. He comments that Emmett's reasons for going public likely include some of the same reasons that any company goes public, whether REIT or not: to provide liquidity to its owners, to access additional capital and to provide incentives to employees.

Real estate companies that go public via the REIT route can offer the additional benefit of granting operating partnership units to property owners in exchange for assets, an arrangement that provides substantial tax benefits in comparison with a conventional property sale, Silvers points out. He also notes that, with the private takeovers of Los Angeles-based Arden Realty and other office REITs, "Even though Main Street pays more for properties by and large than Wall Street pays, the demand for office properties might give a Main Street-type valuation to Douglas Emmett."

The Emmett IPO says that the company's office portfolio consists of 46 properties totaling 11.6 million sf, with an occupancy rate of 92.1%, while its multifamily portfolio consists of 2,868 units and is 99.3% leased. The company lists $2.75 billion in debt.

Besides owning and operating some of the most desirable office and apartment assets in Los Angeles, Emmett has a growing presence in Honolulu as a result of what the company describes as "a consistent and focused strategy of identifying submarkets that are supply constrained, have high barriers to entry and exhibit strong economic characteristics such as population and job growth and a diverse economic base." Among its local holdings are the 100 Wilshire Blvd. office building in Santa Monica, the Trillium office project in Woodland Hills and the Sherman Oaks Galleria in Sherman Oaks.