Real Estate IPOs May Be Limited by REIT Acquisitions, Blair Says

Initial share sales by property owners may be limited this year as publicly traded real estate investment trusts acquire companies that planned to list stock, said Bryce Blair, head of AvalonBay Communities Inc.

“We’ll see far fewer IPOs than people think,” Blair, chairman and chief executive officer of Arlington, Virginia-based AvalonBay, said today at a conference in Manhattan. “It’s going to be more private selling to existing public, than private to public.”

REIT mergers and acquisitions are rising as companies seek combinations to increase revenue and cut costs. About $42 billion in global REIT-related deals have been announced this year, according to data compiled by Bloomberg. They include AMB Property Corp.’s pending purchase of ProLogis to create the world’s largest warehouse owner, valued at $16 billion when it was announced in January.

Two REITs have issued shares to the public this year, raising about $818 million, according to Bloomberg data. Summit Hotel Properties Inc., a Sioux Falls, South Dakota-based hotel owner, sold 26 million shares in February, raising about $254 million. American Assets Trust Inc., a San Diego-based owner of office and retail properties, raised $564 million in January with a sale of 27.5 million shares.

STAG Industrial Inc., a Boston-based warehouse owner, started its offering of 13.75 million shares yesterday, the company said in a statement.

Mergers and acquisitions “will come more from the private sector than the public sector,” David Neithercut, chief executive officer of Chicago-based Equity Residential, the largest publicly traded U.S. apartment owner, said at the conference sponsored by New York University’s Schack Institute of Real Estate.

Seven or eight real estate companies will go public in the next year, said Mike Kirby, director of research at Green Street Advisors, a Newport Beach, California-based property research company.

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