Irvine Apartment Stock Up 15.4% on News of Buyout

Irvine Apartment Communities Inc. stock rose 15.4%, approaching its highest level for the year, a day after billionaire real estate developer Donald L. Bren offered to buy the shares of the real estate investment trust that he doesn’t already own for $540 million in cash.

Bren, through Newport Beach-based Irvine Co., offered $32.50 a share for the 83% stake in IAC. The stock climbed $4.19 to $31.56 a share, closing just below its 52-week high of $32.44. A total of 968,200 shares changed hands, nearly 12 times higher than the average daily volume over the last three months.

The shares had traded as low as $23 in September, reflecting Wall Street’s concerns that real estate investment trusts in general were paying too much for properties and were becoming overextended.

Irvine Apartment, a real estate investment trust, owns apartment properties on Bren’s Irvine Ranch, the nation’s largest master-planned community.

The move to take the company private comes amid a 16% slump in REIT stock prices this year, which makes it difficult for companies to finance acquisitions through share offerings.

Moody’s Investors Service responded to the buyout offer by placing the company’s subsidiaries, Irvine Apartment Communities LP and IAC Capital Trust, under review for a possible rating downgrade. The review affects more than $600 million in debt and preferred stock that will remain outstanding under the buyout offer.

Jordan Heller, an analyst at CIBC Oppenheimer, said Bren may be getting a good price given Irvine Apartment’s right to be the sole developer of multifamily housing on Irvine Ranch until 2020. “It’s a 20-year deal in one of the most attractive regions in the country,” he said. “I don’t see where that is reflected in the price.”