Spanish REIT Aims to Raise $2 Billion in IPO

Merlin Properties SA, a Spanish real estate investment trust, aims to raise about 1.5 billion euros ($2 billion) this month in what would be the largest initial public offering by a European REIT.

Merlin plans to sell as many as 150 million shares at 10 euros apiece and has received 600 million euros of commitments from investors including Moore Capital Management LLC, according to a prospectus published by the stock market regulator today. Shares will begin trading on June 30 in Madrid.

Investment in Spain by funds, private-equity firms and other financial-services companies more than doubled to 13.9 billion euros in 2013, according to Irea, a Madrid-based debt-restructuring firm. The country last year reduced tax burdens for REIT investors and Pacific Investment Management Co.’s Bill Gross, Quantum’s George Soros and hedge-fund manager John Paulson have all taken stakes in Spanish REITs over the last several months.

Merlin, internally managed by former directors of Deutsche Bank AG’s RREEF property company, will be more than double the size of Hispania Activos Inmobiliarios SA and Lar Espana Real Estate Socimi SA, two externally managed Spanish REITs that listed shares this year. Hispania has a market value of about 573 million euros and Lar is valued at 399 million euros.

Merlin’s IPO is expected to be the largest by a Spanish company since July 2011. The largest initial share sale by a European REIT was made by Retail Estates NV in 1998, according to data compiled by Bloomberg.

Separate Deal

Depending on the IPO’s success, Merlin will buy 100 percent of the share capital of Tree Inversiones Inmobiliarias SA, which owns commercial properties leased to Banco Bilbao Vizcaya Argentaria SA, Spain’s second-largest bank, according to the filing.

Merlin will invest in other prime commercial real estate assets, primarily in Spain, and may invest in Portuguese properties, according to the document.

Ismael Clemente will serve as Merlin’s chairman and chief executive officer and Miguel Ollero will be chief financial officer and chief operating officer. Both were directors of RREEF Spain and founded Magic Real Estate, which has 2.8 billion euros of assets under management. David Brush, former head of Europe for Brookfield Property Group, will be Merlin’s chief investment officer.

Credit Suisse Group AG will coordinate the sale and will be joint book-runner along with UBS AG and Deutsche Bank AG. Freshfields Bruckhaus Deringer LLP will act as legal adviser.

Investment Spree

The 13.9 billion euros invested in Spain last year was more than double the amount in 2012, according to Irea. About 37 percent went to real estate assets and the proportion is expected to increase this year, the firm said.

Merlin has the option of selling as many as 22.5 million additional shares to meet extra demand, the document showed. That represents 15 percent of the initial size of the offering.

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