The REIT Stuff

Another week, another “biggest [YOUR FAVORITE FLAVOR] IPO of all-time!” In a year with 247 IPOs (and proceeds of over $85B), some landmarks are to be expected. Yesterday saw a new one.

On Wednesday, Paramount Group Inc.’s IPO hit the market, and while it’s not the largest IPO of all-time (that’s still Alibaba) and it’s not the second largest MLP IPO of all-time (that’s still Shell), it is the largest REIT IPO of all time. And it also falls into place as the eighth biggest IPO of any kind over the past two years.

A little background on the type of IPO we’re discussing: a REIT is a company that is modeled after a mutual fund and owns and operates income-producing real estate. REITs were formed to provide exposure and liquidity to the real estate markets through equity investments. They allow corporations to avoid double taxation once specific criteria are met to grant REIT status. There have been 112 REIT IPOs total since 2001, with 2004 seeing the greatest number of deals and proceeds (23 raising $6.23B).

Paramount’s is only the 6th REIT IPO of 2014, following CBS Outdoor ($644M), Bluerock Residential ($50M), City Office REIT ($82M), Farmland Partners ($53M) and STORE Capital ($509M), and is by far the biggest, with proceeds of $2.3B. Not only has Paramount trumped the average deal size for the past two years ($277.8M) by more than eight times and, it’s also helped bump the first-day gain numbers as well. Prior to yesterday’s deal, REIT IPO’s first-day trading numbers hadn’t been great – they’d averaged first-day gains of just .6%. But Paramount’s 3.9% first-day gain brings that average up to 1.2%.

For more information on the Paramount Group IPO, check out the Ipreo Deal Alert.