Corporate Financing Analysis - US REIT IPOs Cashing In On Real Estate Outlook - 01 MAY 2017
The REITs are in town and eager to raise funds to support their growth agendas as the outlook for the real estate industry in the US continues to improve. In 2017 to-date, the equity capital market (ecm) arena in the US, and more specifically the New York Stock Exchange (NYSE) have been happy to host deals from such trusts as they turn to investors for a cash injection.
To-date there have been three successful REIT floats completed on the 'big board' in New York in 2017; however, we note that there is a fourth deal on the way, and it serves as one which highlights returning confidence in the commercial real estate sub-sector. Indeed, following in the footsteps of market peers Invitation Homes, Clipper Realty, and Sachem Capital Corporation which have all successfully gone public since the turn of the year, TPG RE Finance Trust, a TPG-managed mortgage REIT focused on commercial real estate debt, has filed with the SEC to float, with support from joint bookrunners BofA Merrill Lynch, Citi, Goldman Sachs, and Wells Fargo. And such deals have contributed to the uptick in IPO pricing seen this year, with USD12.4bn having been raised from ecm investors in the US via first-time share sales - a pace on course to surpass the USD18.8bn raised across the entirety of the 2016 full-year period, data from Renaissance Capital shows.
While TPG has targeted a relatively modest close of USD100mn from its proposed public market listing, some market commentators believe there is plenty of upside in terms of how much the fund can potentially raise given its growing exposure to the lucrative commercial real estate market. With the US economy expanding, albeit slowly ( we forecast real GDP to accelerate by 2.0% in 2017, before i ncreasing to growth of 2.2% in 2018), on the back of rising consumer spending and job creation, there is solid demand f or property across the board. In turn, this is leading to rising rental costs in each of the real estate industry sub-sectors.
|Speeding Up Once More|
|US IPO Market Activity, By Deal Value USDbn|