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NREI: Three REITs Test the IPO Market

According to NREI:

June produced a flurry of new REIT activity with two IPOs that hit the market in a one-week period and a third waiting in the wings. Although most are chalking up the timing to mere coincidence, the offerings could be a good measure of how favorable the climate is for new REITs.

The three REITs that launched the week of June 12th include Safety, Income and Growth; Four Springs Capital Trust; and Granite Point Mortgage Trust.

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There are sectors of the REIT market that are outperforming their peers. For example, triple net lease companies have traded relatively well recently, which may have created a good window for Four Springs Capital, which specializes in triple net lease assets. Four of the five triple net lease REITs covered by research firm Green Street Advisors are trading at or above NAV. So that is a favorable climate for other net lease companies to try to do an IPO and access public capital, notes Dirk Aulabaugh, managing director of Green Street's advisory group.

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“I think there is always room for high-quality companies that may be able to provide REIT investors something that they can’t get today in the public markets,” says Aulabaugh. Safety, Income and Growth is good example of that in terms of the assets they are pursing. The public REIT space doesn’t have much that emulates what the firm is trying to do, which is specializing in long-term ground leases, according to Aulabaugh. Their story of stable cash flow and durability is one that could be appealing to REIT investors, he says.

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To read the full article from NREI, click here.