Blind-Pool Stock Sales Stumble
BusinessWeek reports: Richard Ziman and Timothy Callahan want to raise cash in the equity market after selling their real estate companies for a combined $12 billion before the property crash. Investors may balk at bankrolling their return.
Ziman, former chairman of Arden Realty Inc., and Callahan, who ran Trizec Properties Inc., have each filed to offer shares in "blind-pool companies" which seek to raise money before owning any assets. They plan to use proceeds from the deals to acquire discounted office properties, hoping their talent and track records will lure investors.
Their timing may be wrong. Recent blind-pool stock sales have been cut in size or canceled, or the shares are treading water, amid a slump in demand for initial public offerings. Meanwhile, real estate owners are trying to hold onto distressed or defaulted properties rather than unload them at fire-sale prices, leaving few buying opportunities.
Commercial real estate transactions declined 64% last year to $52 billion, data from researcher Real Capital Analytics show.
Only 14% of an estimated $150 billion in distressed U.S. commercial real estate has been taken back by lenders, according to Jessica Ruderman, director of research services at New York-based Real Capital.
“Blind pools have huge negatives and only make sense if they have the perfect management and the perfect opportunity,” Mike Kirby, chairman of Newport Beach, California-based Green Street Advisors Inc., a research firm focused on real estate investment trusts, said in an interview.
U.S. office REIT share prices are trading at 7% above the underlying value of their real estate and are a safer investment than blind pools, Kirby said.
Still, buildings aren’t changing hands, and even established REITs can’t find deals because owners expect values to rise following the government’s massive support of capital markets, according to Dan Fasulo, managing director of Real Capital.
“I don’t think we’re going to see the wave of distressed opportunities that everyone thinks is out there,” Fasulo said. “Lenders aren’t in a forced position at all. They’re not giving the good stuff away.”
View the full article on BusinessWeek: Blind-Pool Stock Sales Stumble
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Posted by: Nina Turner