Douglas Emmett Prices Shares in $1B IPO

SANTA MONICA, CA-Douglas Emmett Inc., the owner of nearly 12 million sf of office space and 3,000 apartment units, says that it will price shares of its previously announced $1 billion initial public stock offering at $19 to $21. Emmett, which plans to operate as a REIT that will trade on the New York Stock Exchange under the symbol DEI, did not specify a date for the offering.

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.

Emmett's Los Angeles County properties are concentrated in the premier submarkets of Brentwood, Olympic Corridor, Century City, Santa Monica, Beverly Hills, Westwood, Sherman Oaks/Encino, Warner Center/Woodland Hills and Burbank. The company also owns holdings in Honolulu.

Over the years as a private entity, Emmett has managed nine institutional funds and raised more than $1.5 billion in equity capital primarily from university endowments, foundations, pension plans, banks, other institutional investors and high net worth individuals. Beginning in 1993, it bought 55 properties, representing an aggregate investment of approximately $3.1 billion.

Emmett officials are in the quiet period following their filing, but REIT analyst Craig Silvers, president of Los Angeles-based Bricks & Mortar Capital, has told GlobeSt.com that the IPO could be well-received even though it occurs at a time when many REITs have gone from public to private. Silvers points out that Emmett's holdings include prime West Los Angeles office and apartment buildings, for which investor demand is strong.

According to Silvers, 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.

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," Silvers says.

Besides owning and operating some of the most desirable office and apartment assets in Los Angeles, Emmett has a growing presence in Honolulu. Among its Los Angeles area 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.