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American Assets Trust Raises $564 Million With IPO

AMERICAN ASSETS TRUST INC.

Founder and chairman: Ernest Rady.

Financial information: Not disclosed.

No. of local employees: Not disclosed.

Headquarters: San Diego.

Year founded: 1967.

Stock symbol and exchange: AAT, New York Stock Exchange.

Company description: Real estate investment trust, with property holdings primarily in San Diego, Honolulu and San Francisco.

San Diego-based American Assets Trust Inc. raised about $564 million in 2011’s first U.S. initial public offering of common stock.

The Jan. 13 IPO was also the latest in a series of successful stock offerings by established, locally based real estate investment trusts, geared to boosting portfolios in a climate of favorable pricing and low financing rates.

During the past year, those included Realty Income Corp., BioMed Realty Trust Inc. and Excel Trust Inc.

Leaders of American Assets could not be reached for comment at press time. In a Jan. 19 statement, the company announced the formal completion of its offering of 27.5 million shares of common stock, priced at $20.50 per share.

Exercising Their Option

It also said underwriters of the IPO had exercised their option to purchase slightly more than 4.12 million additional shares at the same price.

As its stock began trading on the New York Stock Exchange, under the symbol AAT, officials said the company would use IPO proceeds for acquisitions, repayment of outstanding debt, property improvements and other general business purposes.

American Assets Trust was founded in 1967 by Ernest Rady, who remains its executive chairman. During the past four decades, Rady also acquired and built up successful finance and insurance companies, such as Westcorp and Insurance Company of the West.

According to the real estate research firm Green Street Advisors Inc., American Assets has a real estate portfolio valued at around $1.9 billion. The bulk of its holdings prior to the IPO — 43 percent — were in the San Diego market, with the rest in Honolulu, San Francisco, San Antonio and Monterey, Calif.

Sixty percent of the REIT’s portfolio is in retail, with 28 percent office, and the rest divided almost evenly between residential and hotels. Its larger San Diego holdings include the Carmel Mountain Plaza retail center, the Torrey Reserve office complex, and the 548-unit Loma Palisades Apartments.

A Solid History

Jim Sullivan, managing director of Newport Beach-based Green Street Advisors, said the IPO outcome indicates wide respect among investors for American Assets’ track record in acquiring high-quality properties in strong-performing real estate markets.

“It’s a reflection of investors being excited to see them take that step of going public,” he said, adding that the firm’s leaders will likely “continue to buy properties in the markets they know best.”

In a research report, Green Street noted that American Assets’ post-IPO balance sheet is “stronger than average,” and the company has a “newly minted $250 million line of credit” to support debt-funded investments.

Bloomberg News reported that the American Assets IPO was the largest U.S. REIT offering in more than a year, and the biggest since Starwood Property Trust Inc. raised $932 million in August 2009.

Sullivan noted that commercial real estate buying activity, especially among publicly traded REITs, has been rising since early 2010, following the “panic year” of 2009 which saw most investors retreat in the wake of the financial market collapse.

In the past year, public REITs have had the advantage of better access to crucial capital than most private investors, usually at lower interest rates. Sullivan said the REITs are facing rising competition from private investors to acquire prime properties, but will likely maintain the upper hand as long as financing rates stay low.

For now, he said, investors see REITs as efficient avenues to invest in targeted sectors and geographic regions within the realm of commercial real estate.

Those investors have generally been well rewarded over the past two years. According to the National Association of Real Estate Investment Trusts, an industry trade group, REITs in 2010 matched gains of 2009 and continued to outperform the broader equity market.

The group reported that its NAREIT All Equity REITs Index delivered a total return of 27.95 percent in 2010, compared with 15.06 percent for the S&P 500.

By segment, U.S. REIT returns in 2010 ranged from 18.4 percent for office-focused funds and 18.8 percent for industrial properties, to 33.4 percent in the retail sector, 42.7 percent for hotel properties and 47 percent for apartments.

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