Planned Irvine Apartment Issue Gets Break in Ratings

Irvine Apartment Communities’ planned $100-million issue of preferred stock, snubbed with a speculative “ba1” rating by Moody’s Investors Service, has been classified investment quality by Standard & Poor’s Corp. and Fitch Investors Service.

Irvine Apartments, created to allow public investment in apartments once owned entirely by the privately held Irvine Co., plans to use proceeds from the sale to continue its rapid expansion in Orange County and other upscale markets.

Had the other ratings services followed Moody’s lead, the securities would have been sold at less favorable terms.

The preferred stock, to be issued in December or January by a trust affiliated with Irvine Apartments, was rated “BBB” by Fitch, two notches above speculative grade.

The ratings service said question marks include the real estate investment trust’s heavy focus on Orange County, and its decision to expand into Silicon Valley, La Jolla and possibly other California markets.

But Fitch was impressed by the company’s dominant position in its market, as well as its “solid management” and “moderate” debt load. Irvine Apartment is the exclusive apartment builder for Irvine Co. on the huge Irvine Ranch.

‘Overall, IAC compares very well in terms of management strength and depth to other real estate companies,” Fitch wrote in assigning its rating last week.

Standard & Poor’s followed with a “BBB-” Wednesday, the lowest of its investment-grade ratings. It also noted Irvine Apartment’s strong market position and managers.

Irvine Apartment officials declined comment, citing a “quiet period” that regulators impose in the weeks leading up to a stock sale.

Most analysts see little chance of an economic downturn severe enough to derail the apartment company.

“The California economy has rebounded nicely over the last 18 months, further strengthening Irvine’s already strong position,” analyst Andrew S. Georges said in a recent report for Salomon Bros. on Irvine Apartment bonds.