REIT Legal Experts See Potential IPO Activity from Unique Asset Classes

Despite a challenging environment for REIT IPOs, private companies that offer investors something unique are lining up as possible public market entrants this year, according to legal experts.

David Slotkin, co-chair of Morrison Foerster’s (MoFo) corporate finance and REIT practices, says the firm is actively working on a number of potential IPOs, but adds that overall, “markets are very volatile.”

Justin Salon, co-chair of the REIT practice and a partner in MoFo’s corporate finance practice, adds, “I think we’re all waiting to see how the market plays out. It looks to be a particularly tight time for IPOs.”

MoFo is currently working with companies in several unique asset classes, according to Slotkin. “There’s hope that the right, interesting story will still be able to get out into the market at the appropriate time… it’s going to depend on whether there’s a unique story to be told or some other compelling investment thesis,” he says.

The largest REIT IPO to date in 2018 has been VICI Properties Inc.’s (NYSE: VICI) $1.4 billion transaction. VICI owns a mixture of gaming, hospitality and entertainment destinations that are operated by Caesars Entertainment Corp.

To help companies that are considering a REIT IPO, MoFo recently updated its Quick Guide to REIT IPOs. It provides an overview of the path to a REIT IPO and addresses regulatory, tax and accounting considerations relevant to sponsors considering forming a REIT.

According to Salon, one of the biggest challenges for private companies considering an IPO is preparing for the Securities and Exchange (SEC) financial statement presentation.

“It may require pivoting and presenting things slightly differently than you have historically, or presenting financial and operational data that the company historically hasn’t needed to prepare,” Salon notes. Slotkin adds that private companies are often not prepared for the workload associated with preparing for an IPO, in addition to the day-to-day running of the business.

Challenges aside, Slotkin and Salon underscore the gratifying aspects of bringing a company public. “The most rewarding part is to work with really good business people, investment bankers and other lawyers to help craft a story that gets across what’s unique and interesting about each individual company,” Slotkin says.