Brixmor Property Group Inc. (BRX:US), the second-largest U.S. shopping-center landlord, climbed 2 percent in its trading debut after raising $825 million in an increased initial public offering.
Brixmor closed at $20.40 after selling 41.25 million shares yesterday for $20 each, the midpoint of its proposed range of $19 to $21. The property company increased the size of the sale from 37.5 million shares. The proceeds will be used to repay debt, according to a regulatory filing by the New York-based real estate investment trust.
Brixmor, the first of several property-company IPOs expected from Blackstone Group LP (BX:US), is the second-largest U.S. real estate IPO this year. The economic recovery, falling commercial-property vacancies and low interest rates have helped make 2013 the busiest for property-company offerings since 2004, data compiled by Bloomberg show.
“It is a good outcome for Blackstone,” said Cedrik Lachance, managing director at Green Street Advisors Inc., a real estate research firm. “The upsize is good news as it gives the company a little more money” to pay down debt. Lachance said the pricing was in line with his estimate of fair value for the shares.
Brixmor is the largest IPO of a retail REIT since Simon Property Group Inc., the world’s biggest owner of shopping malls, raised $840 million in 1993, data compiled by Bloomberg show. Brixmor is listed on the New York Stock Exchange under the symbol BRX.
The company is benefiting from leasing improvements as anchor tenants help attract smaller retailers and the economy expands, Brixmor Chief Executive Officer Michael Carroll said today in a telephone interview.
“We’re seeing a broad-based recovery in the markets in which we operate,” Carroll said of the economy. “As we look out, we see continued improvement. It’s going to be slow but on a positive trajectory.”
Brixmor has increased occupancy for 10 consecutive quarters compared with year-earlier periods, to 92 percent as of June 30, according to its IPO filing.
Given that rents in place are lower than current market rates, “rent growth on lease renewals should be sizable,” Green Street’s Lachance wrote in an Oct. 20 report. “The company is maintaining strong leasing momentum while it is slowing down for the average strip-center REIT.”
Blackstone formed Brixmor in 2011, after purchasing shopping centers from Australia’s debt-laden Centro Properties Group for about $9 billion. The New York-based firm later sold some of the properties and acquired others from Equity One Inc. and Regency Centers Corp. Brixmor has 522 centers, the most in the U.S. after New Hyde Park, New York-based Kimco Realty Corp. (KIM:US)
“The pipeline for realizations is really growing,” Blackstone Chairman and CEO Stephen Schwarzman said on Oct. 17, on the private-equity firm’s third-quarter earnings call.
Blackstone, the world’s largest manager of alternative assets, also has filed for IPOs of hotel chains Extended Stay America Inc. and Hilton Worldwide Holdings Corp., which probably will take place later this year. Investors expect IPOs next year of the firm’s U.S. warehouse business, IndCor Properties Inc., and its house-rental company Invitation Homes.
Before Brixmor’s offering, real estate IPOs raised $3.9 billion this year, compared with $3 billion in all of 2012, according to data compiled by Bloomberg. The total was $7 billion in 2004, when 29 property companies went public, the data show.
Empire State Realty Trust Inc., the owner of Manhattan’s Empire State Building, completed 2013’s largest real estate IPO, raising $1.07 billion this month, according to data compiled by Bloomberg. American Homes 4 Rent, a housing landlord, raised $811.8 million in July. Both totals include overallotment options.
Brixmor sold almost 14 percent of the company in the IPO after the exchange of all outstanding unit shares, according to data compiled by Bloomberg. That implies a market value of about $6 billion.
The IPO would surpass Indianapolis-based Simon’s as the largest for a retail REIT if underwriters exercise their option to purchase additional shares. The year Simon went public was an exceptionally busy time for REIT IPOs, with the industry’s market value roughly doubling from 1992 to 1993 as the economy rebounded from the savings and loan crisis, according to the National Association of Real Estate Investment Trusts.
Blackstone will own about 73 percent of Brixmor’s common shares after the IPO and Centerbridge Partners LP will own 8.3 percent, the prospectus shows.
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