While perusing the news on my watch list last week, I came across an interesting press release from AmREIT
As a general rule I'm wary of secondary offerings. I prefer to see companies raise money for expansion through operating cash flow and reasonably financed debt. There are a couple of exceptions to my thinking, though. For a company with a sky-high stock price I definitely see the logic in pursuing a secondary offering, but that's not AmREIT. The other exception is real estate investment trusts, which as you may have guessed from its name, is exactly what AmREIT is.
Real estate investment trusts are a different animal altogether, because acquiring real estate requires capital --gobs of capital -- and because REITs are required to pay out the majority of their earnings as dividends building up a cash hoard isn't a realistic possibility. Real estate investment trusts don't become large entities like Simon Group
The specifics of AmREIT's offering involve selling 2.4 million class A shares at a price of $8.10 per share. This is a large offering for AmREIT, as it increases the class A share count by approximately 69% and it appears that nearly all of the capital raised will be used to purchase another property that over time will hopefully fund the growth in funds from operations that shareholders have come to enjoy from AmREIT in the brief time that it has been public.
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