REIT new issues seen picking up; Essex deal ahead; Public Storage slips; Sunstone unchanged

By Stephanie N. Rotondo

Portland, Ore., April 7 - A preferred stock trader said it was "steady-Eddie" in the market on Thursday.

"The new issue market seems to be getting a little bit of traction, especially in the REITs," he said.

However, a lack of supply has meant there has been little in the way of movement, with spreads "slowly tightening over the last year."

Essex Property Trust Inc. announced a new deal on Thursday, bringing yet another new issue to the real estate investment trust market. That follows a deal brought by Public Storage earlier in the week and one from Sunstone Hotel Investors Inc. last week.

Away from the REIT space, a trader said Royal Bank of Scotland plc preferreds "popped up" on chatter that new banking regulations would be better than previously thought.

Essex deal coming

Essex Property Trust launched a new $50 million issue of perpetual cumulative preferred stock on Thursday.

The company is expecting to sell 2 million shares at $25 each. A market source said the deal "probably won't grow much beyond 4 million."

"It seemed like a small, tightly held deal," he added. He noted that there was a "bottom feeder" bid at $24.65, though he also saw the preferreds offered at $24.80 earlier in the day.

Another trader saw a $24.70 bid in the gray market.

Price talk is 7.125% to 7.25%. Pricing is expected Friday.

Wells Fargo Securities LLC and Raymond James & Associates Inc. are the bookrunners.

The co-managers are Barclays Capital Inc., RBC Capital Markets Corp., Robert W. Baird & Co. Inc., FBR, Janney Montgomery Scott LLC, Morgan Keegan & Co. Inc. and Stifel Nicolaus & Co. Inc.

Proceeds are being contributed to the company's operating partnership to repurchase series B preferred stock and for general corporate purposes.

The REIT for apartment communities is based in Palo Alto, Calif.

PSA sinks, Sunstone steady

Elsewhere in the REIT new issue space, Public Storage's recent $325 million issue of series Q perpetual cumulative preferred shares was seen trading at $24.65 bid, $24.75 in the gray market.

A source had pegged the issue at $24.72 bid, $24.77 offered previously.

Meanwhile, Sunstone Hotel Investors' recent $100 million issue of 8% series D cumulative preferred shares was trading at $24.75 bid, also in the gray market.

The San Clemente, Calif.-based company said Thursday that its over-allotment option was exercised in full, raising an additional $15 million.

Rumors help RBS

Rumors about pending banking legislation helped Royal Bank of Scotland's preferreds gain ground, according to a trader.

He said the preferred stock "popped up today on rumors in London that the new capital regs for British banks would be more bank friendly than previously believed."

RBS' series T preferreds traded up 27 cents, or 1.35%, to $20.24.

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