Blackstone Group LP (BX:US)’s Brixmor Property Group Inc. (BRX:US), the second-largest U.S. shopping-center landlord, plans to raise as much as $787.5 million in a U.S. initial public offering to pay down debt.
Brixmor plans to sell 37.5 million shares for $19 to $21 each, excluding an overallotment for underwriters, the New York-based real estate investment trust said in a regulatory filing today. Proceeds will be used mainly to repay about $628.5 million under a credit line that matures in 2017.
The offering would be the largest IPO by a retail REIT since Simon Property Group Inc. (SPG:US), the world’s biggest owner of shopping malls, raised $840 million in 1993, according to the National Association of Real Estate Investment Trusts, a Washington-based trade group. Blackstone is taking Brixmor public at a time when U.S. shopping-center occupancies are at the highest in almost four years and rents are climbing.
Including the underwriter option to purchase additional shares, the offering may be as much as $905.6 million, topping Indianapolis-based Simon as the largest retail REIT IPO.
Brixmor owns and operates 522 retail centers, more than 70 percent of which are anchored by a market-leading grocery store, the company said in the filing. Most of the centers are located in the Eastern U.S. and Midwest. It’s the No. 2 U.S. shopping-center landlord by number of properties, behind Kimco Realty Corp. of New Hyde Park, New York.
Brixmor is selling about 12.7 percent of the company in the IPO after the exchange of all outstanding unit shares, according to the filing. That implies a market value of about $5.9 billion, based on the midpoint of the price range.
Among U.S. shopping-center REITs, Brixmor’s market value at that range would trail Kimco and Federal Realty Investment Trust (FRT:US), and be about even with DDR Corp., according to data compiled by Bloomberg.
Brixmor is selling all the shares being offered in the IPO, according to the filing. Blackstone will own about 73 percent of the common shares after the IPO, the filing shows. Centerbridge Partners LP will own 8.3 percent.
Blackstone acquired the core of Brixmor’s assets in 2011, when it bought U.S. shopping centers from Australia’s debt-laden Centro Properties Group. The firm sold some of the properties and acquired others, improving the quality of the portfolio, said Cedrik Lachance, managing director in charge of retail research at Newport Beach, California-based Green Street Advisors Inc.
“This is an asset base that is much stronger than the Centro asset base that was acquired by Blackstone,” he said.
Blackstone invested additional equity to buy shopping centers from Equity One Inc. and Regency Centers Corp. Most of those properties became part of Brixmor.
Brixmor is Blackstone’s third-biggest real estate investment by equity capital invested, after Hilton Worldwide Holdings Inc. and Equity Office. Blackstone’s $10.9 billion property fund raised in 2008, Blackstone Real Estate Partners VI, invested $1 billion of equity in the Centro purchase, and investors put in $1.3 billion, according to a fund prospectus obtained by Bloomberg News.
“Blackstone is raising capital to reduce leverage in that portfolio but more important, they are listing the shares to provide liquidity to their funds,” Lachance said.
Blackstone today reported a 3 percent increase in third-quarter profit (BX:US), bolstered by gains in its real estate group.
Shares of retail-focused REITs have declined in recent months amid concern that rising interest rates will increase landlords’ borrowing costs and hurt property values. The Bloomberg REIT Shopping Center Index of 18 companies fell 12 percent through yesterday from a five-year high in May.
Brixmor plans to list its shares on the New York Stock Exchange under the ticker BRX.
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