PIMCO to Release $600 Million REIT IPO

(April 7, 2011) — Pacific Investment Management Co. (PIMCO) is planning to raise $600 million in an initial public offering for a real estate investment trust.

PIMCO REIT Inc. — which will be led by Dan Ivascyn and Scott Simon, senior portfolio managers at PIMCO — will purchase commercial and residential mortgage-backed securities, real estate-related assets and other financial assets, the firm noted. The Newport Beach, Calif.-based company has filed documents with the US Securities & Exchange Commission (SEC) requesting approval to raise the money through a public offering of common stock that will trade on the New York Stock Exchange (NYSE).

“We believe that the US mortgage finance system is undergoing historic change,” PIMCO wrote in a filing. “Significant increases in regulation and public policy are influencing which investors will have the financial ability to hold real estate-related assets. We believe that private non- bank capital will represent an increasing share of these assets in the years to come.”

Since the start of the economic crisis in 2007, PIMCO has raised roughly $6.5 billion for private funds investing in troubled mortgages and related securities.

The IPO reflects continued aims by PIMCO to continue its diversification efforts, illustrating attempts by fund managers to raise billions of dollars to profit from a rebound in real estate.

The bond fund manager has recently taken steps to move away from bonds, expressing beliefs that the fixed-income rally of the past three decades is nearing its end. PIMCO’s Bill Gross has said that the $237 billion Total Return Fund will soon hold no government debt for the first time in over two years. It is also cutting its mortgage-backed securities from 42% to 34% of holdings. Instead, the fund is moving toward emerging-market debt, upping its holdings in this category to 10% of its total assets.