Real Estate Statistics favor Safety Inc. IPO
Earlier this year,Safety Inc. filed for a $100 million IPO with the SEC. The company has not announced the terms for its IPO yet. As investors wait for that big announcement, analysts are saying that the company is likely to do well. They state that this is because the real estate market is doing well in general.
Investors have always been scared of putting their money in real estate. After all, they do remember how bad the market was after the 2008 recession. People lost millions to mortgage-related real estate firms during that time. If the current trends in real estate continue as they are doing now, however, investors may forgo that little risk for some long-term returns.
New-York Safety Inc. is hoping that this will be the case. Safety Inc. is a real estate investment trust (REIT) that was founded in 2017. The firm is a subsidiary of Istar Inc. and is managed by the SFTY Manager LLC group on Istar’s behalf.When Safety Inc. was incorporated, Istar stated that the newly formed REIT would ‘acquire and manage ground net leases.’ That may sound ominous, but it is not. Ground net leases are like the regular leases, only that they are for the land on which people build property. In fact, you could even consider them a type of royalty on land use. Ground net leases are also different from normal leases in that run for a long time, usually between half a century and 99 years.
Reasons why companies trade publicly vary fromcompany to company. For a REIT, the reason is quite simple. It wouldn’t be a REIT if didn’t trade otherwise.This is because the term REIT only applies to a real estate which publicly trades and gives its shareholders significant shares of the profit. REIT pay their shareholders in the form of dividends. Safety Inc. is set to enter the market later this year so that it can live up to its REIT tag. Safety Inc. will list on the NYSE under the stock label SFTY during the IPO. The firm did not disclose the number of common shares it would be selling, but rather that it hopes to make $100 million from the issuance.Safety Inc. will also sell off 45 million of its common shares to its parent company as the IPO deal closes. Barclays Capital, BofA Merrill Lynch, and JP Morgan will be the lead managers on the deal.
Safety Inc. expects to do well in its IPO for three reasons. The first is that most REITs outperform expectations in the debut issuances, so that is a positive sign for the management. Reason numbertwo that the company expects to get significant returns from the IPO is that investors like REIT IPOs and more so in favorable climates. REITs, after all, are low-risk investments that will keep their shareholders happy in the long term. Lastly, Safety Inc. operates in a market that is on the rise at the moment. The REIT holds leases to properties like healthcare centers and apartment complexes. Apartment REITs, according to analysts, already had 3.5% growth in 1Q17 and will continue to expand over time. This growth rate is a good sign for Safety Inc. as the company reported earnings of $22 million in 2016. If the growth rate holds, Safety Inc. could be looking at triple digit million dollar returns before long.