IPO news: What to look for when Four Springs Capital goes public this week

A slew of companies have lined up for their IPOs this week. Four Springs Capital Trust, a self-managed REIT, is one of them. Here’s what to look for when this real estate company makes its market debut.

IPO details  

Four Springs Capital Trust is scheduled to go public on Thursday, January 20. It will begin trading on the New York Stock Exchange under the ticker symbol FSPR. The company will offer 18 million shares at a price range of between $13 and $15. The IPO will be managed by a group of underwriters led by Morgan Stanley and Goldman Sachs.

Company intro

In its regulatory filings, Four Springs describes itself as an internally managed REIT focused on acquiring, owning and actively managing a portfolio of single-tenant, income-producing industrial, medical, service/necessity retail and office properties throughout the US that are subject to long-term net leases. As of December 15, 2021, the company wholly owned, or had ownership interests in, 156 properties located in 32 states.

The company has a stable and diversified tenant base. As of December 15, 2021, its properties were 99.8% leased to 68 tenants operating in 37 different industries, with approx. 42.5% of its annualized base rent (ABR) on an expected post-syndication pro rata share basis from leases with tenants or lease guarantors that have an investment grade credit rating from a major rating agency or have a senior unsecured obligation that has been so rated.

As of December 15, 2021, the company’s portfolio contained 41 industrial properties that generated 40.7% of its ABR, 52 medical office properties that generated 21.8% of ABR, 61 retail properties that generated 30.2% of ABR and two single-tenant office properties leased to healthcare tenants that generated 7.3% of ABR.

Financials

In 2020, Four Springs reported total revenue of $72.8 million on a pro forma basis. Net loss attributable to common shareholders was $7.4 million, or $0.21 per share, for the year. For the nine months ended September 30, 2021, the company reported total revenue of $53.5 million on a pro forma basis. During this period, the company reported net income of $4.7 million, or $0.13 per share compared to a net loss of $15.5 million, or $8.37 per share, in the same period last year.   

Market opportunity

Four Springs states in its filings that Rosen Consulting Group (RCG) estimates the value of existing net lease properties to be in the range of a few trillion dollars. RCG utilizes an estimate of corporate-owned real estate as a proxy for potential expansion of the net lease property universe. RCG estimates this segment of corporate-owned and occupied real estate ranges in value between $1.5 trillion to more than $2 trillion as of September 30, 2021.

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