Macquarie Said to Seek Bids of $3.5 Billion for Spirit Finance

Macquarie Group Ltd., Australia’s biggest investment bank, is seeking offers of about $3.5 billion for Spirit Finance Corp. in what could be the largest sale of a U.S. real estate investment trust in more than three years, said three people with knowledge of the talks.

At least three publicly traded REITs, including National Retail Properties, Lexington Realty Trust and Realty Income Corp., have been approached in recent weeks and are studying potential offers, said two of these people, who declined to be identified because the process isn’t public. Private-equity firms have also expressed interest in Spirit, the people said.

A deal for more than $3.5 billion would be the biggest takeover of a U.S. REIT since the $22 billion buyout of Archstone-Smith Trust by Tishman Speyer Properties LP and Lehman Brothers Holdings Inc. announced in May 2007, data compiled by Bloomberg show. Barclays Capital is helping sell Spirit, the people said.

“REITs and private-equity firms would have a lot of interest in a company like Spirit because their tenant quality makes cash flows predictable in an uncertain market,” said Ben Thypin, an analyst at Real Capital Analytics Inc. in New York. The sale may give buyout firms “confidence that they can unload their boom-era investments.”

Paula Hannaford, a Sydney-based spokeswoman for Macquarie, declined to comment. Spokespeople for National Retail and Lexington Retail didn’t return calls seeking comment. Spokeswomen for Realty Income and Barclays declined to comment.

REIT Buyouts

Macquarie today fell 1.2 percent to A$38.50 in Sydney trading at the 4:10 p.m. close, extending this year’s decline to 20 percent. The benchmark S&P/ASX 200 Index dropped 0.9 percent and has lost 10 percent this year.

Leveraged buyouts of REITs totaled $92 billion from 2005 to 2007, according to data compiled by Bloomberg. A successful sale of Spirit may signal to buyout firms that they may now be able to sell some of the properties. Since 2007, private equity firms have spent just $2.2 billion buying REITs.

Spirit, which owns or finances almost 1,200 retail properties in 45 states, focuses on sale-leasebacks with single tenant properties such as auto dealers, drug stores, supermarkets and movie theaters, according to Moody’s Investors Service.

The Scottsdale, Arizona-based REIT’s balance sheet at the end of 2009 listed assets of $3.5 billion and debt of $2.9 billion, according to Standard & Poor’s. REITs in the U.S. must distribute at least 90 percent of their taxable income to shareholders, and don’t pay corporate taxes on that amount.

A group led by Sydney-based Macquarie that included Icelandic lender Kaupthing Bank hf agreed to acquire Spirit in March 2007 in a deal valued at $3.5 billion, including approximately $1.9 billion of assumed debt, according to a press release at the time.

To contact the reporter on this story: Jonathan Keehner in New York at jkeehner@bloomberg.net.

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