Analysis of Holly REIT raises tough questions. (Holly Corp.'s plan to go public; real estate investment trust)

Editor's note: Last week, the Business Journal reported the general reactions of the investment community to plans by Holly Corp. of Tacoma, a major apartment builder, to go public.

Because Holly represents the first of what could be a series of Northwest real estate companies to test the public markets, we offer here a more detailed analysis.

Investment advisers here and nationwide are asking some hard questions about the prospects of Holly going public as a real estate investment trust, or REIT.

Holly's public offering may succeed, said the skeptics among a half-dozen investment advisers interviewed, but not necessarily at the share prices and yields sought in the prospectus.

Here are some of the issues pinpointed by fund managers and advisers:

Is Holly asking a reasonable price for its properties?

This is extremely difficult to answer, because some Holly properties are still under construction or in lease-up, and several are held in a joint venture that will carry on after the REIT is established.

Also, a premium is typically paid for the assets of a publicly traded company with professional management and plans for growth, …