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Capital Market Round-Up: Five REITs File for New IPOs

American Realty Capital Continues its Recent Dominance of Capital Markets; Plus Additional Funding News from Bascom, Farallon, Greystone, Investco, Heitman, iStar and others
March 3, 2014
In one of the busiest weeks in recent memory for real estate activity in the capital markets, five REITs filed paperwork with the U.S. Securities & Exchange Commission preparing for initial public stock offerings seeking to raise more $3.4 billion. Three filings came from American Realty Capital, one from Griffin American Capital, and one from a new entity, ETRE Financial.

American Realty Capital

American Realty Capital New York Recovery REIT Inc. has hired Barclays Capital Inc. and RCS Capital, a division of Realty Capital Securities LLC, as financial advisors to assist the company in evaluating strategic alternatives following the successful closing of its $1.5 billion IPO.

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The company has decided to pursue a listing of its common stock on the New York Stock Exchange and shorten its name to "New York REIT Inc." If all goes according to plan, the REIT expects to have its stock listed on the Big Board by this summer.

The company received $240 million of additional commitments to its financing facility, including $100 million each from Barclays Bank PLC and RBS Citizens, N.A., and a $40 million commitment from SunTrust Bank. The additional commitments increases the company’s aggregate borrowings available under its credit facility to $630 million.

"We’ve built a high quality New York City portfolio acquired at an attractive time in the real estate cycle," said Michael Happel, executive vice president and chief investment officer of American Realty Capital New York Recovery REIT. "In addition, we have a pristine balance sheet and active acquisitions pipeline that positions us well for future growth. In our view, the public markets will be very receptive to our pure play strategy focused on New York City, one of the world’s premier real estate markets.”

In a separate action, American Realty Capital filed plans for a second New York City-focused REIT to operate as American Realty Capital New York City REIT. The new REIT, which is seeking to raise up to $750 million, plans to invest in office properties located in the five boroughs of New York City, focusing on Manhattan. It may also invest in retail spaces and amenities, as well as hospitality assets, residential assets and other property types located in New York City.

For those of you at home keeping track, this would be one of 13 publicly offered, non-traded REITs sponsored by the extremely active American Realty Capital.

And they're not done yet. In a third ARC deal, United Development Funding Income Fund V registered for a $750 million IPO offering. UDF V is a newly organized REIT that expects to originate and buy secured loans for the acquisition and/or development of single-family residential lots. It will also make direct investments in land for single-family lot development.

UDF V is advised by American Realty Capital Residential Advisors LLC, an affiliate of Nicholas Schorsch’s AR Capital, one of its co-sponsors. American Realty Capital will be responsible for coordinating the management of our day-to-day operations and for identifying and making investments.

Griffin-American Capital

Also this past week, the SEC declared effective Griffin-American Healthcare REIT III’s IPO of $1.9 billion.

Griffin-American Healthcare REIT III intends to acquire a portfolio of health care real estate, focusing primarily on medical office buildings, senior housing facilities, skilled nursing facilities and hospitals.

This is the third REIT for Irvine, CA-based Griffin American Capital, and both the two previous ones are focused on health care facilities.

Griffin Capital and affiliates have acquired or constructed more than 28 million square feet of space since 1995, and currently owns, manages, sponsors or co-sponsors a portfolio of more than 26.08 million square feet In 32 states, representing approximately $4.7 billion in asset value.

ETRE Financial

In a fifth filing, ETRE Financial LLC, a New York-based real estate financial services and technology company, filed paperwork with the U.S. Securities and Exchange Commission for an initial public offering of ETRE REIT, which will actually be a limited liability corporation formed to permit public investment in individual commercial real estate properties.

The twist is that each of the properties held by the LLC will be held as a separate real estate investment trust, with shares traded on the NASDAQ exchange.

In its IPO, ETRE REIT is looking to raise $53 million that will be used to finance its first purchase. ETRE has cut a deal to buy 1201 Connecticut Ave. NW, also known as the Longfellow Building, from Mack-Cali Realty Corp., in Washington, D.C. A final sales price has not been negotiated. Mack-Cali purchased the property for $32 million in 1999. The selling price is expected to be much higher.

CoStar News covered this story in more detail, which you can read here.

Additional Funding News

Bascom Group in Irvine, CA, closed its second fully discretionary real estate investment fund. The fund, Bascom Value Added Apartment Investors II LLC, which will provide up to $300 million of buying power including leverage, will be used to buy value-added multifamily property in 11 Western states. To date the fund has acquired Andalucia Apartments in Palm Springs, CA, - 175 units; Arcadia Cove in Phoenix, AZ, - 432 units; Campbell Plaza in Campbell, CA, - 121 units; The Terraces in Prescott, AZ, - 226 units; Broadstone Montecito in Las Vegas,- 336 units; and Huntington Villas in Huntington Beach, CA, - 114 units.

Farallon Capital Management in San Francisco completed fundraising for Farallon Real Estate Partners with commitments of $375 million. FREP is targeting undervalued income-producing office, multifamily, retail, and industrial properties.

Greystone, a New York-based real estate investment and development firm, and Quilvest & Partners, a global independent private equity investor, formed a joint venture to acquire multifamily assets across the U.S. Initial target markets for asset acquisition include areas in the Southeast, Mid-Atlantic and Midwest. They will seek to acquire multifamily properties that have a “value-add” component, including repositioning through light rehabilitation and improved management. The ideal acquisition targets are of 1980s vintage - or newer - and over 200 units in size.

Illinois Teachers’ Retirement System increased allocations within its $5.1 billion real estate portfolio to three of its external property managers by a total of $350 million. The goal is to increase the long-term real estate allocation to 14% of the entire investment portfolio from the current 11.7%. Capri Capital Partners, of Chicago, which currently manages $1 billion in TRS assets, will receive an additional $125 million. Invesco Real Estate, of Dallas, which currently manages $456.6 million in TRS assets, will receive an additional $125 million. Heitman LLC, of Chicago, which currently manages $1.2 billion in TRS assets, will receive an additional $100 million.

iStar Financial Inc. in New York partnered with a sovereign wealth fund to form a venture in which the partners plan to contribute up to an aggregate $500 million of equity to acquire and develop up to $1.25 billion of net lease assets over time. iStar will own approximately 52% of the venture and will be responsible for sourcing new opportunities and managing the venture and its assets in exchange for a promote and management fee.

The venture’s first investment is a 410,000-square-foot office and data campus outside of Washington DC net leased to AT&T through 2025. It was acquired by iStar for $94 million during the fourth quarter and was subsequently contributed to the venture.

Keep up weekly on national news, trends and property leads with the Watch List Newsletter, a weekly pdf that includes other news and leads not found on the CoStar Group web news pages. Sign up for the Watch List E-Mail Alert. A new issue is published Monday mornings.

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