May 10, 2017 / 2:14 PM / 6 months ago

Five Point Holdings rises 10 pct in debut

May 9 (Reuters) - Shares of Five Point Holdings, a real-estate developer backed by No.2 U.S. homebuilder Lennar Corp, rose as much as 10 percent in their market debut on Wednesday.

The offering was priced at $14 per share, much lower than the proposed range of $18-$20, raising $294 million.

Shares of Five Point, which develops commercial and residential land sites in coastal California, rose to as much as $15.40, giving the company a market value of about $3.35 billion.

Lennar has also agreed to invest $100 million in the company. Following the offering, Lennar will have 40.2 percent stake in Five Point.

The IPO comes amid fears that higher home mortgage rates will hurt home sales, which are already under pressure from tight inventories due to shortage of skilled labor and land.

The company, however, operates in the housing hotbed of California where, experts say, millennials looking to buy bigger homes could boost demand.

Also, investments related to the technology sector could fuel demand for developed commercial space in areas such as Los Angeles, San Francisco and Orange County.

“We are also reaching point where a lot of millennials are looking for more space as they get married and start families,” said CFRA analyst Ken Leon.

Existing single-family home sales in California were up 6.9 percent in March from a year ago, according to a report by the California Association of Realtors.

At the regional level, the San Francisco Bay Area recorded annual sales gain of 6.4 percent and the Los Angeles metro area 6.7 percent.

The company is also seeking approval from governmental authorities to increase total commercial space at the San Francisco Shipyard and Candlestick Point, which has been recently exempted from restrictions on new office development applicable to all other projects citywide.

The company posted a 10.6 percent rise in net revenue in 2016. However, the net loss widened to $33.2 million in 2016 from $2.7 million in 2015 as selling, general and administrative expenses surged almost four times.

J.P. Morgan Securities LLC and Citigroup Global Markets Inc are among the underwriters for the IPO. (Reporting by Diptendu Lahiri in Bengaluru; Editing by Arun Koyyur)

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