http://www.chicagorealestatedaily.com/cgi-bin/news.pl?id=35321
Inland kicks off $5-billion offering for new REI
By Alby Gallun, Sep. 01, 2009
(Crain’s) — Inland Group Inc. has launched a $5-billion stock offering for its fifth real estate investment trust, a move that could allow the Oak Brook-based real estate giant to capitalize on mounting troubles in the commercial property market.
Inland Diversified Real Estate Trust Inc. expects to buy a wide range of assets, including retail, apartment and office buildings, property loans and possibly even commercial mortgage-backed securities, according to the REIT’s prospectus. The Securities and Exchange Commission (SEC) approved the offering last week.
Inland Diversified aims to sell 500 million shares for $10 apiece. Like Inland Group’s previous stock offerings, Inland Diversified is selling its shares through a “blind pool” offering, meaning it has no assets yet and won’t start buying them until it raises money through the stock sale. The shares, which will be sold over a two-year period, won’t be traded on a stock exchange.
An Inland Group spokesman declines to comment, citing SEC regulations that prevent companies from speaking publicly while raising capital.
Inland Group Principal Robert Parks is chairman of Inland Diversified's board, and Inland Group veteran Barry Lazarus, who ran an earlier Inland Group REIT, Inland Retail Real Estate Trust Inc., is its president and chief operating officer.
Inland Group has been one of the real estate industry’s biggest fund-raisers, raking in $15.7 billion from investors over the past decade, most of it through unlisted REITs like Inland Diversified.
But its fund-raising pace slowed dramatically last year, as the global financial crisis gripped the economy and investors fled real estate. Inland Group’s previous REIT, Inland American Real Estate Trust Inc., terminated its offering in April after raising $8.2 billion, short of its $10-billion goal.
Related story: Inland REIT ends offering short of goal
Unlisted REITs raised $3.1 billion in the first half of the year, down from $5.3 billion in the year-ago period, says Spencer Jefferies, editor of the newsletter Direct Investments Spectrum. But that’s still a good number, he says, considering that Inland American, the nation’s biggest unlisted REIT, stopped selling shares in early April.
Unlisted REITs raised $10.1 billion in 2008 and $12 billion in 2007, when the commercial real estate market peaked. Though the REITs likely will fall well short of those levels this year, they are roughly on pace with the $6 billion to $7 billion raised annually earlier in the decade.
“They are doing amazingly well in terms of raising money in this environment,” Mr. Jefferies says.
With loan delinquencies and foreclosures on the rise, many investors who saw excessive risk in real estate several months ago may smell opportunity now.