REAL ESTATE : Western National Group in Orange Is One Step Closer to Forming REIT

Western National Group, the largest apartment developer and manager in Orange County, has cleared the first big hurdle on its way to forming a real estate investment trust.

The company said it recently received approval from the state Department of Corporations to apply for consolidation of the assets and liabilities of its 65 existing partnerships, clearing the way for Securities and Exchange Commission approval of the REIT financing.

Based in Orange, privately held Western National has more than $1 billion in assets and 27,000 apartment units under management.

The company has said it hopes to offer investors a stake in a REIT worth an estimated $167 million, according to an SEC filing.

REITs, which offer developers a way to raise capital, have been popular on Wall Street recently.

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.

In its SEC filing earlier this year, Western National said it expects to sell as many as 8.3 million shares at about $20 each.

Its underwriters would be New York investment bank Morgan Stanley & Co. and brokerage Montgomery Securities in San Francisco.