Pacific Gulf Makes Initial $121-Million Stock, Bond Offer

Pacific Gulf Properties Inc., a Newport Beach real estate investment trust, went public Thursday with a $71.2-million initial stock offering and $50 million worth of bonds.

Under the symbol PAG, the company’s stock opened at $18.25 per share on the American Stock Exchange and closed unchanged.

The Pacific REIT is a spinoff of apartments and industrial property owned by Santa Anita Realty Enterprises, Inc., a REIT based in Arcadia. The Pacific offering is an attempt by Santa Anita to reduce debt and increase value for its shareholders.

A real estate investment trust raises money by selling stock to shareholders and then investing in real estate or mortgages. These securities’ high rates of return have recently attracted investors.

Santa Anita said Thursday that it will take a charge of $11 million, or 98 cents a share, on the sale of its properties to Pacific Gulf. In exchange for the properties, Santa Anita will receive 149,900 shares of Pacific Gulf, $44.4 million in cash, and will clear $44.3 million of debt related to the properties off its balance sheets.

Still, Santa Anita stock closed at $18.125 per share Thursday, up only 37.5 cents.

Pacific Gulf owns 11 apartment properties located in Southern California, Texas and the Pacific Northwest. The REIT also includes six industrial properties in Southern California and in Washington state.

While REITs have been popular on Wall Street recently as an option for yield-hungry investors, one local analyst questioned whether this newest REIT is the best deal available.

“There are a number of newer REITs that have come public within the last few years that have greater capability for creating shareholder value than Pacific Gulf or Santa Anita,” said Craig Leupold, an analyst with Green St. Advisors, a Newport Beach investment adviser.