Blackstone Files for IPO of Shopping-Center Unit Brixmor

Brixmor Property Group, the second-largest U.S. shopping-center landlord, filed to go public, part of owner Blackstone Group LP’s plan to exit property investments after markets recovered from the financial crisis.

Brixmor didn’t disclose in a regulatory filing today the number of shares it will sell or the price it will seek. The New York-based company, organized as a real estate investment trust, may raise as much as $100 million in the initial public offering, a placeholder amount that will probably change. The stock sale probably “will raise $700 million or more,” according to Renaissance Capital LLC, a Greenwich, Connecticut-based IPO research firm.

Blackstone, the world’s biggest private-equity firm, hasn’t said whether it would sell any shares in the IPO. The company began telling investors in 2012 that it anticipated major divestitures within two years, raising the prospect of IPOs including the Hilton Worldwide Inc. hotel chain, and sales of office buildings acquired in the $39 billion purchase of Equity Office Properties Trust in 2007.

“There will continue to be a growing series of real estate realizations as we go forth over the next 12 to 18 months,” Blackstone President Tony James said today on a conference call to discuss the firm’s second-quarter earnings. The firm sold $2.1 billion of property assets last quarter, including shares of General Growth Properties Inc., the No. 2 U.S. mall landlord, he said.

Share Rally

Blackstone, based in New York, is taking advantage of a rally in shares of REITs that own and operate shopping centers. The Bloomberg REIT Shopping Center index is up about 10 percent from a low on June 20 after falling from a five-year high in May amid concern that rising interest rates would increase landlords’ costs.

Shopping-center REITs trade at a premium of about 5 percent to the price their assets would fetch in the private market, according to Cedrik Lachance, managing director at Newport Beach, California-based Green Street Advisors Inc.

“The REIT market is vibrant,” he said. “Blackstone’s been an enormous buyer of real estate in the U.S. in the past decade, and as its funds go through their life cycle, it’s appropriate to expect sales” such as Brixmor.

Blackstone plans to keep a majority stake in the company, its third-largest real estate holding, according to a filing with the U.S. Securities and Exchange Commission. Brixmor said its portfolio being offered in the IPO is made up of 522 shopping centers with 87 million square feet (8.1 million square meters) of space. The assets that form Brixmor’s core were acquired in a $9 billion purchase of U.S. shopping centers from Australia’s Centro Properties Group in 2011.

IPO Proceeds

Bank of America Merrill Lynch, Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo Securities are serving as joint book-running managers for the offering, according to the filing. The shares will trade under the symbol BRX.

Brixmor will use the proceeds from the offering primarily to repay debt. The company obtained a $2.75 billion credit facility from a group of banks on July 16, according to the filing.

Revenue rose 2.3 percent in the first quarter from a year earlier to $287.1 million, Brixmor said in the filing. The company’s net loss narrowed by almost half to $19.5 million from $37.9 million.

Pappagallo Hiring

Brixmor in May hired Michael Pappagallo as president and chief financial officer. He had been chief operating officer of New Hyde Park, New York-based Kimco Realty Corp., the biggest U.S. shopping-center landlord, which is valued at $9.2 billion. The hiring of a well-known executive of a public company was seen by some analysts as a sign that Blackstone was considering an IPO.

Shopping centers are typically home to supermarkets, drugstores or discount chains and tend to be open-air, compared with enclosed malls that have more-upscale retailers. Brixmor’s properties are anchored mainly by grocers such as Kroger Co. or discounters including TJX Cos.

Shopping centers have become more popular with investors as retail demand improves. Average occupancy at U.S. shopping-center REITs was 93.6 percent at the end of 2012, the highest in four years, and rents have grown for 12 straight quarters, according to Bloomberg Industries.

Brixmor’s occupancy across its portfolio was 90 percent as of March 31, unchanged from the previous three months, the company said on May 17. Kimco’s was 93.7 percent in the first quarter.

Before it's here, it's on the Bloomberg Terminal.