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Friday, 18 May 2018

Blank-Check Companies, Another 2007 Throwback, Are Back

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Commercial Real Estate Direct Staff Report

Lee S. Neibart, who in 2007 had launched a blank-check company that ultimately became Retail Opportunity Investment Corp., has raised $345 million from the sale of common shares in another similar company.

He's formed the company, Trinity Merger Corp., with Sean Hehir, who is the venture's president and chief executive. He's also president and chief executive of Trinity Investments, a Hawaii investment manager that specializes in the hotel sector and last year formed a venture with Oaktree Capital Management to pursue hotel deals in Hawaii, California, Mexico and Japan.

Trinity Merger, like the Retail Opportunity predecessor when it was launched, NRDC Acquisitions Corp., owns no assets and generates no income. Instead, its goal is to use the capital it has raised to buy an existing operating company. It would target buying a company or a piece of a company with an enterprise value of $750 million to $2 billion. It would, of course, use debt financing to leverage the equity it's raised.

In its offering material, Trinity Merger said it's not bound to make a deal in the real estate sector, but given the backgrounds of Hehir and Neibart, who is the company's chairman, that's a likely outcome.

Its aim is to buy a business that would benefit from being public and use that as a platform for additional investments. It could use publicly listed common shares as currency, which could provide its targets with potential tax advantages.

Blank-check companies, otherwise known as special-purpose acquisition companies, or SPACs, were all the rage just before the Great Financial Crisis. At the market's peak in 2007, about 50 SPACs were launched, raising an estimated $10 billion of public equity. That was nearly a quarter of all initial public offerings for that year. Among the real estate players that launched such companies were iStar Financial, Grubb & Ellis Co. and NRDC.

Last year, according to a tabulation by law firm Latham & Watkins, 34 such companies were launched in the U.S., raising $9.9 billion.

Trinity Merger isn't the first with a real estate pedigree to jump into the sandbox in the latest go-around. Last year, Mike Fascitelli, the former president of Vornado Realty Trust, helped form Landscape Acquisition Holdings Ltd., raising capital on the London Stock Exchange for what it hopes will be a substantial acquisition in the real estate sector.

Neibart, who serves as chairman of Trinity Merger, is a 40-year veteran of the real estate industry. He is partner of Ares Real Estate Group and previously was partner of AREA Property Partners, which Ares had acquired in 2013.

He launched NRDC in 2007, raising $335 million of proceeds from its IPO. Unable to find a suitable acquisition candidate, the company converted to a REIT in 2010 and started pursuing investments in middle-market retail properties. It changed its name to Retail Opportunity in 2009. Its portfolio now totals 92 properties with 10.5 million square feet valued at $3.1 billion. It carries $1.6 billion of indebtedness.

Neibart has worked with Hehir on a number of deals over the past 20 years. The two have been involved in the acquisition of more than 50 hotels with 30,000 rooms globally.

Comments? E-mail Orest Mandzy, or call him at (267) 327-4281.



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  • Subject: Institutional Investment (INS)
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