Transpacific Development Co. is “seriously considering” going public through a real estate investment trust and could file a prospectus with the Securities and Exchange Commission within the next 90 days, TDC President Tom Irish said last week.
The 25-year-old Torrance-based company, which specializes in buying, developing and managing suburban office buildings, would join an expanding field of companies that have formed REITs in recent years.
Driving the trend is the access to Wall Street capital that REITs provide. In the past three months, office REITs nationwide raised more than $1 billion through stock offerings, according to Richard Klien, partner with E & Y;/Kenneth Leventhal in Century City.
TDC already owns more than 3 million square feet of buildings in California, Arizona and Hawaii.
Locally, it owns the 950,000-square-foot Santa Monica Business Park, the 300,000-square-foot Marina Business Center in Marina del Rey and the 385,000-square foot Cerritos Towne Center, as well as a 50,000-square-foot speculative office project currently under construction in Cerritos.
Most of those properties would be included in TDC’s portfolio if the company goes public, said Randy Boggan, chief financial officer. TDC retained Morgan Stanley-Dean Whitter six months ago to investigate forming a REIT, and the company is now nearing a decision on the matter.
If TDC does go public, it would continue purchasing and developing suburban office space in the Western United States, Boggan said. The extent of those activities remains uncertain because the size of the public offering has not yet been determined.
TDC’s possible REIT would be the latest of several local REITs to form, including Beverly Hills-based Arden Realty Inc. and El Segundo-based Kilroy Realty Corp.
Arden saw its share price rise from its $20 initial offering price last October to $27 three months later. Kilroy stock premiered at $23 in January and has reached $28. Shares of Kilroy and Arden were trading at between $26 and $27 last week.
Irish said TDC was “traveling toward” forming a REIT when those companies went public, and their success has caused TDC to more seriously consider moving forward.
But some experts wonder if the best time to form an office REIT has already passed.
“There’s so much competition now every time a suburban office property goes for sale, there are hundreds of bidders,” said Michael Adler, a partner at real estate appraisal firm Sommer Adler & Co. “The market is overheated.”
But he added that a REIT could find a profitable niche in developing and managing property in tight markets.
Irish said this is an exciting time to be in real estate as the market rebounds. He noted that his company owns property in the Bay Area that has seen rents go up from $2 per square foot in 1995 to $3.50 per square foot now.