Las Vegas businessman Michael Shustek is seeking to raise as much as $100 million for his latest real estate investment trust through an initial public offering of stock and plans to list the shares on the Nasdaq exchange.
The Parking REIT, which invests in parking lots and garages around the U.S., will trade under the stock ticker PARK, according to documents filed last week with the Securities and Exchange Commission.
The company did not give a time frame for the completion of the stock sale or a price range. Proceeds from the sale will be used to pay down $9.1 million of debt and to purchase more property.
The Parking REIT owns 42 lots and garages in 17 states, according to the documents filed with the SEC last week. As of June 30, the REIT has assets worth $330 million and total debt of $166 million, most of which matures after 2022. The company has lost money in each of the past three years totaling about $11 million in part because of startup and transaction costs, according to the filing.
Shustek created The Parking REIT in 2017 by merging two parking-related funds he set up in 2012 and 2015. The businessman raised about $180 million from investors through several private placements that valued shares of The Parking REIT at $25 each.
The Parking REIT share offering comes at a tough time as the stock market suffers its biggest sell-off in more than half a year.
Only four REITs have held initial public offerings of stock in the first three quarters of this year compared with nine in the same period last year, according to the National Association of Real Estate Investment Trusts.
Secondary equity and debt offerings are also down compared with last year.
“The main reason publicly traded REITs are raising less capital in the public markets is that their acquisition activity is down due to high prices in the private commercial property market,” said Ron Kuykendall, a spokesman for the association.
REIT indexes have underperformed the S&P 500 this year through the end of September, according to the association.
Real estate investments trusts, or REITs, function much like a mutual fund except they typically hold a diversified portfolio of income-generating properties rather than dividend-paying stocks.
REITs must pay at least 90 percent of their income to shareholders in the form of dividends. The REITs do not pay taxes on the distributed income, which makes them attractive to investors, especially retirees, seeking a steady stream of income.
The Parking REIT announced in March that it was halting dividend payments. As the company has not been profitable since launching in 2015, the dividends it paid in previous years came through other sources like loans or capital.
REITs sometimes focus on a particular segment like commercial real estate, residential housing or warehouses. The Parking REIT claims to be the only one focused on parking lots and garages.
The Parking REIT says the parking industry is an attractive investment because demand will grow, it is resilient during recessions and requires little to no maintenance expense.
However, there is some concern that the rise of ride-sharing companies like Uber and Lyft will reduce car ownership and cut the need for parking. Walker Consultants forecasts U.S. parking demand to begin to decline in 2030 even as the nation’s population continues to grow.
The Parking REIT will be the third company Shustek has listed on Nasdaq.
The businessmen listed his hard money mortgage funds Vestin Mortgage Realty I and Vestin Mortgage Realty II on Nasdaq in 2006 after investors demanded their money back.
The shares of those funds have each lost more than 80 percent of their value, or more than $200 million, since then. They haven’t paid a dividend since 2008.
Shustek sold his stake in MVP Realty Advisors, the manager of The Parking REIT, to Vestin I and II in 2013. Vestin I and II have subsequently loaned MVP and its affiliates $23.5 million to help grow The Parking REIT.
The Vestin funds have written the value of those loans down because they say it is uncertain if The Parking REIT will be successful enough to generate fees for MVP to repay the debt, according to SEC filings.