Randomly Noted

Debt Coming Due In A Market Not Friendly To Refinancings

If you believe we are at, or near, a bottom in the commercial real estate market, Excel Trust has a deal for you. This real estate investment trust plans to raise between $240 million and $270 million in an initial public offering to go out and buy retail properties on the cheap.

What’s a little different about the Excel deal is that it has lined up 16 retail properties to buy upon completion of the IPO. Other REITs that have looked to take advantage of the distressed commercial real estate market raised the money first and then planed to go bottom fishing. So with Excel, you know which properties are being bought and can make an investment decision on that rather than investing in a blind pool.

The 16 properties are 93.5% leased and the company has a pipeline of other properties, too. Given the large amount of commercial mortgage backed securities coming due this year and next, Excel believes those will have a difficult time getting refinanced and therefore there will be even more sales at distressed prices. As Excel says in its offering documents, it believes it can buy “Class A” properties at “Class B” prices. Class A are defined as those in prime locations.

Excel is run by Gary Sabin, who has been in the real estate business for 30 years and has run a handful of successful real estate companies. Some of the properties being purchased by the REIT are being purchased from companies Sabin and other Excel managers have stakes in. The preliminary prospectus notes these transactions were not conducted at arms length.

Some of the proposed properties Excel has agreements to buy.