Western National to Offer Public Stake in REIT : Real estate: The Orange-based apartment developer and manager plans to sell 8.3 million shares at $20 each.
Western National Group, the largest apartment developer and manager in Orange County, expects to offer investors an estimated $167-million stake in a real estate investment trust, according to a Securities and Exchange Commission filing.
The privately held company, which has more than $1 billion in assets and 27,000 apartment units under management, said it hopes to sell its REIT this year. In doing so, it would be following in the steps of other developers, including the Irvine Co., which sold most of its apartment business to outside investors last year in a successful $200-million public offering.
In its SEC filing, Western National, based in Orange, said it expects to sell as many as 8.3 million shares at a projected price of $20 apiece. Its underwriters would be New York investment bank Morgan Stanley & Co. and Montgomery Securities in San Francisco.
Because the REIT market is volatile, the actual price of the Western National shares would probably vary from the projected price, depending on when the issue comes to market. The shares would trade on the New York Stock Exchange under the symbol WNG.
The company plans to use the proceeds of the offering to repay debt and purchase properties for more apartment construction, the filing states.
Western National had a 1993 profit of $10.2 million, compared to earnings of $10.5 million in 1992, the filing states. The company attributed the 2.9% income drop to an increase in operating expenses and a decrease in revenue, which fell to $80.7 million from $81.7 million in 1992.
Before the REIT can be approved by the SEC, the state Department of Corporations must approve a proposal by the company to consolidate the assets and liabilities of its 65 existing partnerships.
REITs, which offer developers a way to raise capital, have been popular recently on Wall Street. The appeal for investors is that REITs can pass on most of their income to shareholders without being taxed, though the higher returns also mean greater risk.
Analysts said Thursday that the Western National REIT, depending on how it is structured, should be well received by investors.
“The REIT market is still very responsive,” said Mike Kirby, a principal with Green Street Advisors, a Newport Beach research firm that tracks REITS.
“By most measures, Western National will stack up well in terms of expertise. The issues around this deal will pertain to structure and pricing.”
The REIT would own and operate 71 multifamily housing properties with 10,489 units in Southern California, 79% of them in Orange County, according to the filing. The company said 94.7% of those apartments are now occupied. Western National would continue to manage for third parties 87 properties with 16,150 apartment units.
The new company also would purchase land in Southern California and build seven more apartment communities, adding 1,800 units, according to the filing. The REIT also might purchase a general-partner stake in a 316-unit multifamily property now being developed in Orange County.
More than 60% of Western National’s apartments are in northern Orange County, where the scarcity of undeveloped land and growth limitations “present an excellent opportunity to increase rental rates and occupancy rates,” according to the filing.
The majority of the company’s 71 properties were built in the 1970s, and a few were built in the 1960s. The properties range in size from 30 apartments to 500, with the average being 148 units. All 940 employees of Western National would be absorbed into the REIT, the filing states. However, Western National’s home-building arm, Western National Homes, would not be included.
Western National Group at a Glance
* Founded: 1963
* Headquarters: Orange
* Chief operating officer: Michael K. Hayde
* Employees: 940
* Business: Apartment development and management
* Properties owned and operated: 71
* Properties managed: 87
* Assets: More than $1 billion
Source: Western National Group
Researched by JANICE L. JONES / Los Angeles Times
