As downtown L.A. real estate company Thomas Properties Group Inc. takes early steps on the road to turning itself into a real estate investment trust, some investors want to sit on the sidelines, and others want to jump in the game.

Thomas Properties has sold assets in El Segundo, Houston and northern Virginia that it deems to be low-cash flow and therefore not appropriate for a REIT. The company has also reinstated its cash dividend that it suspended two years ago; most REITs make dividend distributions.

These moves are all part of the company’s strategic plan to maximize cash flow from a portfolio of income-generating properties, with the end goal of becoming a REIT in the next few years.

“We are growing our cash position, trying to create a portfolio that is more stable and cash flow-oriented,” John Sischo, chief operating officer for Thomas Properties, told the Business Journal.

Nevertheless, the company is not abandoning the development business. Work is continuing on two huge development projects in Los Angeles: an $800 million office complex in Universal City, and a $1 billion office, hotel and retail development at the site of the Wilshire Grand Hotel in downtown.

Investors liked the announcement of the dividend, sending shares up 15 percent to $2.86 a share Nov. 16 and turning Thomas Properties into the biggest weekly gainer on the LABJ Stock Index. (See page 34.)

But the next day, one of the few analysts following the company issued a downgrade to “neutral” from “buy”; that sent the share price down to $2.78.

In making his downgrade, Mitch Germain, an analyst for San Francisco’s JMP Securities, cited the company’s moves to become a REIT. He said institutional investors would prefer to wait on the sidelines until they see how the strategy plays out.

“We see risk in the redeployment of the cash proceeds from the asset sales,” Germain said.

Last week, Thomas Properties sold its stake in a 578,000-square-foot office tower and six adjacent acres of land in Houston, netting $16 million from the sale. Last month, the company sold a 2.15-acre hotel site in El Segundo to OTO Development LLC in Spartanburg, S.C., for $4.4 million.

Germain may see the moves as risky, but another analyst has a much different view. David Loeb, analyst with Milwaukee’s Robert W. Baird & Co., said the company is wise to dispose of properties that don’t generate enough cash flow.

“We view the disposition announcements positively and the company’s capital recycling efforts are a way to realize value and improve cash flow,” Loeb said. He has a “buy” rating on Thomas Properties, with a target price of $6 a share, more than double the current price.