IF 2009 WAS DEFINEDBY
the massive re-equitization undertaken in the
REIT industry, industry experts believe 2010
could be remembered for the number of new
companies entering the market. Industry data
show that U.S. REIT IPOs are on the rise in
arguably the most uncertain economic times
in the country’s history. There were nine REIT
IPOs in 2009 and four so far in 2010. Combined, these offerings raised more than $3.6
billion. In addition, experts say there are a potential slew of new offerings percolating.
The lingering capital market challenges for
private owners and the strong performance
of listed REITs are helping to fuel the IPO
pipeline, says Bob O’Brien, vice chairman and
U.S. real estate leader at Deloitte. “There is a
real argument in this climate for more public
ownership of real estate,” O’Brien says.
Ron Sturzenegger, managing director and
global head of real estate, gaming and lodging with Bank of America-Merrill Lynch,
agrees that the best place to access capital for
real estate companies currently is in the public markets. Sturzenegger says he expects the
majority of these offerings to be from existing
private companies going public in the later part
of 2010.
BLIND POOLS:
Diving in the Deep End
The offering type that has generated the most
recent attention has been from “blind-pool”
REITs, which have no current assets but seek
to raise capital in order to take advantage of
distressed asset values. These offerings ask
investors to bank on experienced management
teams with demonstrated talent, as opposed to
existing portfolios.
Marty Cicco, founder of MJC Associates (which was sold to Evercore Partners in
April), says these new blind-pool entities continue to fill a much needed gap in real estate
financing.
“Markets were battered in the financial crisis, so a few companies created interim investment vehicles known as blind pools in order to
stimulate deal flow,” Cicco says.
Sturzenegger agrees that the blind pools
serve as the means to an end: picking up some
