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Paramount’s US$2.5b IPO largest REIT offer

NEW YORK: Paramount Group Inc, a US office landlord, filed for an initial public offering (IPO) that is poised to be the largest ever for a real estate investment trust (REIT).

The New York-based company plans to raise more than US$2.5 billion (RM7.8 billion) in the stock sale, according to people familiar with the matter who asked not to be identified because the information is private. A filing by the company yesterday didn’t give a price range or number of shares to be sold.

Paramount last month filed a confidential registration statement with the Securities and Exchange Commission.

The company, which plans to qualify as a REIT, owns or has stakes in 12 office buildings in New York, Washington and San Francisco. Office rents in the two coastal cities are growing faster than in many other parts of the country as the economy grows and technology companies expand.

The largest IPO of a US REIT was a US$1.4 billion offering by Douglas Emmett Inc in 2006, according to data compiled by Bloomberg. There have been only three initial stock sales via REITs this year, down from 19 in 2013, according to the National Association of Real Estate Investment Trusts.

Paramount’s properties, which include San Francisco’s One Market Plaza and New York’s 712 Fifth Ave, were 90.7% leased to 253 tenants as of June 30, according to the filing. Its New York buildings accounted for 76% of its annualised rent.

“San Francisco is the best, strongest office market in the country at the moment,” said Robert Gadsden, portfolio manager at Alpine Woods Capital Investors LLC in Purchase, New York. “New York is showing signs of slow, grind-it-out improvement.”

Yesterday’s filing included a placeholder of US$100 million, an amount used to calculate registration fees that will change when the company sets the price range and number of shares it will sell, closer to the IPO.

Jason Chudoba, a spokesman for Paramount, declined to comment on the offering.

Effective rents, the amount paid after landlord discounts, may climb 6.1% next year in San Francisco and 5% in New York, compared with 3.8% growth in the US, according to a Reis Inc forecast. — Bloomberg

This article first appeared in The Edge Financial Daily, on August 29, 2014.

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