Cohen and Steers Make a Well-Timed Bet
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Monday, September 20, 2004

Cohen and Steers Make a Well-Timed Bet

Just how good is the timing ability of Marty Cohen and Robert Steers? We may be about to find out. Even as some fear that cracks are appearing in the foundation of REITs, the pair of REIT investing specialists have concluded one of the few IPOs in the fund industry in recent years. Indeed, shares in the fund firm are trading more than 21 percent higher than their opening price of a month ago.

The successful offering may point the way for more fund firms to take the IPO route (Calamos Asset Management is already preparing an offering) and may boost the value of firms across the fund management industry.

The New York City-based Cohen & Steers completed its initial public offering on August 12, with its shares leaving the gate priced at $13. The IPO made the firm just one of a dozen or so primarily fund firms to trade on an exchange. It was also the most recent firm to float an offering since Neuberger Berman debuted in 2000. (Since then Neuberger Berman was taken over by Lehman Brothers).

Most notably, the fund firm managed to complete the public offering process during a lull in the IPO market. All together, it sold more than 8.6 million shares worth more than $110 million, including an over allotment of 1.1 million shares. At $13, the initial price was at the low end of the $13 to $15 range predicted by its bankers.

Merrill Lynch acted as the lead underwriter on the IPO while UBS and Wachovia Securities were senior co-managers of the offering. Bear Stearns & Co. also acted as a co-manager.

The fund firm expects to use proceeds of from the sale to build its product line. Currently, though, it is focusing on funds pursuing income in the form of dividend paying investments rather than just REIT focused offerings, according to sources at the fund firm. It is also using some of its cash to initiate a dividend to shareholders. Last week its board of directors declared its initial quarterly cash dividend of $0.10 per share.

The shift in focus from REITs may be as timely as the IPO itself. On Friday, the Wall Street Journal posited that rising interest rates and already high share prices for REITs are making investors nervous and that the industry is "showing cracks."

Since the end of 1999 when the REIT funds held just $9 billion in assets, REIT funds have pulled in more than $12.6 billion, according to Financial Research Corp. Cohen & Steers has been one of the biggest beneficiaries of the investor interest.

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