In the past few months, a number of private firms have issued initial public offerings (IPOs) or announced they are mobilizing for public offerings in an attempt to scoop up what they anticipate to be a flood of distressed commercial real estate. And the movement doesn’t seem to be waning, with New York-based Marathon Real Estate Mortgage Trust and Brookfield Realty Capital announcing last week that they want to raise $500 million and $300 million, respectively.
More than 10 private equity groups targeting real estate have either filed or announced plans to file IPOs this summer. The most notable was Greenwich, Conn.-based Starwood Property Trust, which raised $800 million, making it the largest REIT IPO to date this year. The goal of these groups: To buy or originate debt used to finance commercial real estate. They acknowledge commercial opportunities in any number of sectors but say multifamily loans won’t be a specific focus.
In their filings with the SEC, most of these REITs only mention the word multifamily in relation to the kinds of properties that secure commercial loans that they may eventually pursue. Many of the companies launching these IPOs, however, (including Starwood) are seasoned multifamily investors.
For instance, Atlanta-based Invesco Mortgage Capital will buy multifamily but isn’t tuned into the sector. “Invesco Mortgage Capital invests in mortgage-backed assets, primarily Agency RMBS, non-Agency RMBS, and CMBS,” says Don Ramon, CFO for Invesco. “The CMBS assets could be multifamily but may also be secured by commercial office space. As such, it’s possible that we could invest in multifamily real estate, but that was not the focus of our IPO.”
Houston-based Hines plans to have a $3.5 billion IPO this year, but it doesn’t anticipate multifamily being a huge factor. “While distressed paper behind multifamily real estate would be a small part of our new Hines Global REIT, it’s probably not enough for emphasis,” says Kim Jagger, director of corporate communications for Hines.
If companies do go public to specifically chase multifamily debt or assets, Andrew J. McCulloch, an analyst for Green Street Advisors, a Newport Beach, Calif.-based consulting and research firm, thinks it may be a little while. “There’s very limited distress in the multifamily space [compared to other sectors],” he says. “I think these structures will eventually go after multifamily, but right now, it’s basically mortgage REITs that are forming, along with some on the hotel side and in retail as well.”
