Blackstone Adds to Biggest Year for REIT IPOs Since 2004
|November 12, 2013||Posted by Staff under Economic Principles, Financial|
The debut of Brixmor Property Group Inc. (BRX) is adding fuel to what is already the biggest year for U.S. real estate initial public offerings in almost a decade.
The No. 2 U.S. shopping-center landlord, owned by Blackstone Group LP, raised $825 million in its IPO today, excluding extra shares for underwriters, the largest IPO of a retail real estate investment trust since Simon Property Group Inc. (SPG) in 1993. Brixmor sold 41.25 million shares at $20 apiece after offering 37.5 million for $19 to $21 each.
Hilton is poised to be the largest hotel IPO ever. The company has increased room count in franchised and managed hotels by 39 percent since Blackstone bought it for $26 billion in 2007, expanding in Asia and other overseas markets, with plans to develop and build another 268,000 rooms, according to its IPO filing.
The U.S. economic recovery, falling commercial real estate vacancies, and low interest rates have primed the pump for public offerings, with REIT stocks at close to six-year highs.
Property-related IPOs, including REITs, real estate operating companies and mortgage trusts, have had their biggest year since 2004 by money raised. So far in 2013, real estate IPOs have raised $4.7 billion, compared with $3 billion in all of 2012. The total was $7 billion in 2004.
The Bloomberg REIT index — a 136-member gauge — has more than tripled from its 2009 low and in May reached the highest level since 2007. It has trimmed about 10 percent of those gains since then amid concern interest rates would rise and increase borrowing costs.
Blackstone (BX), based in New York, may take Hilton public as soon as December in what could be the year’s biggest real estate IPO. The McLean, Virginia-based hotel chain — which will have a traditional corporate structure rather than a tax-saving REIT — has filed to raise as much as $1.25 billion, a placeholder amount.
Companies do need compelling management, a growth strategy and value, whereas back in the ’03-’04 timeframe, a company could go public as a blind pool with just a strategy and no assets.
Since the last recession ended, the recovery in commercial real estate has spread from apartments to hotels, offices, and industrial properties.
Multifamily buildings have seen the biggest increase in average rents since the financial crisis, with effective rents, or the amount paid after any concessions, up 11.3 percent.
The real estate recovery has mostly been confined to primary markets such as New York and Chicago, with demand for assets in smaller cities lagging behind.
Private-equity real estate funds have been increasing distributions to investors as they sell holdings.
Ed. Notes: A few weeks later, this treated the topic in more depth.