Town and Country owners convert to REIT status Trust led by Lerner seeks to sell shares

June 05, 1993|By David Conn | David Conn,Staff Writer

The Baltimore-based owners of the Town and Country apartment complexes have quietly converted to a real estate investment trust and plan to sell stock to the public.

The filing, made two weeks ago with the Securities and Exchange Commission, said the proposed sale of at least 10 million shares could raise as much as $254 million.

The newly named Town and Country Trust, whose chairman and chief executive, Alfred Lerner, also is chairman of MNC Financial Inc., filed with the SEC to sell the shares at a price ranging from $20.25 to $22.75 a share. If the sale goes well, as many as 1.16 million more shares could be offered by the lead underwriter, Goldman, Sachs & Co.

Town and Country owns and manages 26 Town and Country apartment complexes in Maryland, Pennsylvania and Virginia. Those developments include 12,753 units.

The trust comprises an apartment management company, previously called the Town and Country Management Corp., and a related group of partnerships that own the apartment properties, which are each half-owned by Mr. Lerner.

The prospectus filed with the SEC doesn't say when the initial public offering would occur, and Town and Country officials declined to comment, citing restrictions while the company is in its "quiet period" before the sale.

Federal tax laws require REITs to pay at least 95 percent of their net income as dividends each year, in exchange for tax-exempt status. In essence, REITs allow individual shareholders to enjoy the cash flow from the large portfolio of properties.

When the public offering closes, Town and Country said it intends to pay $118.8 million to buy six properties spread throughout the three-state area, with 1,817 apartment units.

With the residential real estate industry appearing to emerge slowly from recession, and interest rates at historically low levels, REITs have gained popularity lately because of investors looking for higher yields on their money, plus the chance for gains in the stock price. Stock prices in the 149 "equity" REITs followed by the National Association of REITs rose more than 32 percent in the year that ended March 31.

Town and Country Trust said in its prospectus that it intends to begin paying an annual dividend of $1.59 a share in the third quarter of this year, for a dividend rate of between 7 percent and 7.85 percent, depending on how many shares are sold.

Assuming the minimum 10 million shares are sold, Mr. Lerner would end up owning 16.8 percent of Town and Country because of his 50 percent share in a group of partnerships that owns the properties, collectively known as The TC Cos. That 16.8 percent share includes an additional 540,000 shares he plans to buy from Town and Country Trust as part of the offering.

Mr. Lerner's partner in The TC Cos., Harvey Schulweis, would own 1.7 percent of the REIT; a partnership of Mr. Schulweis called Oriole Realty L.P. would own 11.9 percent; and the remaining 69.6 percent would be in the public's hands.

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