REAL ESTATE : Presley Offers First Stock Sale, Hopes to Net $64 Million

Today is the day that the Presley Cos. launches its initial public offering, hoping to net at least $64 million by selling 7 million shares at $10 a pop on the New York Stock Exchange

(Legal and printing costs and sellers’ commissions will eat up the other $6 million.)

So by late this afternoon, the investing public will have made known what it thinks of the marketability of a home builders’ stock in a recession.

Presley has already determined that while it is possible these days to find investors, they want assurances that the proceeds from the stock sale will be used to benefit the corporation.

In its initial preliminary prospectus, the 35-year-old Newport Beach company said it wanted to sell 10 million shares at somewhere between $13 and $16 per share. Presley also said it intended to pay its existing owners a $73-million dividend--10 times the $7.3 million they put up for the company in 1987. That would have devoured more than half the $140 million that Presley hoped to raise. Beyond that, the prospectus said Presley would use remaining funds for a variety of things, but didn’t spell out what was to go where.

After taking that proposal to prospective investors in a monthlong road show, Presley responded to the apparent cold shoulder it was getting with a new deal unveiled earlier this week, which calls for the company to sell fewer shares at lower prices.

The final prospectus also says that the existing owners will get only a $9.2-million dividend and that most of the rest of the money raised, about $55 million, will be used to repay bank debt.

Does all this mean that perhaps Presley should not have tried to go public?

Robert Toll doesn’t think so.

The chairman of Toll Bros. Inc., a regional home builder with projects in half a dozen Eastern states, took the bear by the tail in June with a secondary public offering that raised about $13 million. In doing so, he became the first builder to go to Wall Street since the housing crunch began in earnest in 1988.

Toll said the stock sold because, despite the nationwide housing-industry crunch, things aren’t all that terrible for most of the publicly traded builders. Most of the large ones have remained profitable.

At Toll Bros., that has translated into relatively strong performance on the New York Stock Exchange. “We were as low as $2.50 a share a couple of years ago,” Toll said. “Now we are trading at around $8.13. And other companies have risen from the dead as well.”

As Toll sees it, his company was better off going to market now at $6.68 a share than waiting a year or two and getting $10 a share in a hotter market. The proceeds would have gone up, but the deals for lower-cost land might have gone away.

And that would seem to be what is driving the Presley offering.