New REIT Hudson Pacific Properties (HPP) came in at the bottom of its expected IPO price as it debuted Thursday on the NYSE at $17 in a 12.8 million-share offering. This 2010 IPO of Hudson Pacific comes after news that a Toys R Us IPO is likely, and the Agricultural Bank of China is planning a massive IPO for mid-July.
Expected to raise about $243 million in its 2010 IPO, Hudson Pacific Properties had garnered about $217 million Wednesday night. Hudson Pacific will raise another $20 million in a private sale outside of the HPP IPO.
HPP, formed in L.A. last year, owns and operates office properties in California. It plans to operate as a REIT this year. A REIT must distribute at least 90 percent of its taxable income to shareholders annually as a dividend.
A sobering thought that likely weighed on investors during this 2010 IPO for Hudson Pacific: The real estate research firm REIS reported this spring that national office vacancy rates were at their highest level in 16 years. Not exactly a great market to be going public when you’re and REIT.
Cushman & Wakefield said Q1 data showed vacancies continued to increase and rental rates continued to decline. Central business district leasing rose in most markets, but the average vacancy rate in those districts was up to 15 percent from the end of Q1 from 14.7 percent at the end of 2009. On top of that, average asking rents fell in San Francisco according to REIS – showing big trouble in the primary stomping grounds for Hudson Pacific.
As of this writing, Wayne Faulkner did not own a position in any of the stocks or ETF funds named here.
