Prudential Securities Inc. has introduced a way for investors to take advantage of the high yield on real estate investment trusts.
The firm has launched Reitport, a package of five REIT stocks that can be purchased with a single, prespecified dollar investment.
Prudential's Reitport includes Cali Realty, Developers Diversified, Highwoods Properties, Pacific Gulf Properties, and Starwood Lodging-a combination of office, shopping center, apartment, and hotel investments.
Reitport is the latest innovation in a rapidly evolving market. It comes on the heels of a registration by Imperial Credit Industries to issue shares in an REIT that will be backed by subprime commercial mortgage loans.
Imperial Credit Commercial Mortgage Corp. said that in late September it will offer 23 million shares of stock at $15 each. The REIT-much like one from Ocwen Financial Corp. of West Palm Beach, Fla. - will purchase non- investment-grade loans backed by commercial properties.
About three quarters of the proceeds from the sale, or $206 million, will be used to purchase an undisclosed asset.
Friedman, Billings, Ramsey & Co. and Jefferies & Co. are underwriting the deal.
Several mortgage companies have formed, or are in the process of forming, real estate investment trusts to take advantage of favorable tax treatment.
And the trusts have gone public at a rapid clip in recent years. Since 1993 Prudential Securities alone has managed more than 125 REIT equity transactions, raising $20 billion.
Publicly traded REITs are popular among investors because their structure allows distribution of 95% of taxable income per year to stockholders.
Imperial Credit, Torrance, Calif., owns 49% of Southern Pacific Funding Corp., a subprime residential mortgage lender.
Imperial also announced last week that it would be taking its Franchise Mortgage Acceptance Co. public in the fourth quarter. Franchise lends to owners of Taco Bells, Wendy's, Burger Kings, and other franchises.
