Brixmor IPO: A Retail REIT Opportunity

But will the volatility in real estate deals be a hinderance?

   

Brixmor Property Group — the nation’s No. 2 shopping center landlord — is coming public amid a skittish market for real estate deals.

Organized as a real estate investment trust, or REIT, Brixmor operates a portfolio of 522 shopping centers, which total about 87 million square feet. The bulk of these properties came from Blackstone’s (BX) $9 billion asset purchase from Centro Properties Group in 2011.

The portfolio is certainly top-notch. About 70% of the properties have market-leading anchor grocers like Kroger (KR), Publix and Walmart (WMT). The shopping centers are based primarily in top-50 metropolitan statistical areas including New York, Philadelphia, Houston, Chicago and Dallas.

Heading up Brixmor is CEO Michael Carroll, who has been with the New Plan Excel Realty Trust (the predecessor firm) for more than 20 years. The CFO is Michael Pappagallo, the former chief operating officer of Kimco Realty (KIM), which is America’s only shopping center operator larger than Brixmor.

For the past nine quarters, Brixmor has increased occupancy, which is now at 91.3%, and the company also has been aggressive with cost-cutting. Still, the financials haven’t shown too much growth — Q1 adjusted EBITDA came to $186 million, or only roughly 1% better than the year-ago period.

So how might the IPO do?

Again, real estate deals have been dicey of late. Today, in fact, homebuilder UCP (UCP) slipped in its trip to the public markets. After pricing its transaction at $15 — on the low end of the $15-to-$17 range — it’s now down a few percent in today’s trading.

Still, Brixmor might find some interest. Shopping REITs still have been decent performers despite the rise in interest rates, as evidenced by the 11% year-to-date return for the iShares Retail Real Estate Capped ETF (RTL).

Thus, considering Brixmor’s massive scale, strong financials and top management team, this deal should be fine.

Brixmor plans to list on the New York Stock Exchange under the symbol of “BRX.” Lead underwriters include BofA Merrill Lynch (BAC), Citigroup (C), JPMorgan (JPM) and Wells Fargo Securities (WFC).

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/ipo-playbook/brixmor-ipo-a-retail-reit-opportunity/.

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