April 5, 2012 / 2:27 PM / 5 years ago

Retail Properties of America shares rise in market debut

Traders listen for a price for the IPO of Retail Properties of America Inc. on the floor of the New York Stock Exchange, April 5, 2012.Brendan McDermid

(Reuters) - Shares of Retail Properties of America Inc (RPAI.N) rose as much as 11 percent in their market debut as improving retail conditions draw tenants back to spaces vacated during the economic downturn.

The retail real estate market, which suffered as many retailers filed for bankruptcy in the wake of the 2008 financial crisis, is now showing signs of recovery.

Many U.S. mall owners, particularly those with outlet malls, have been able to raise rents and boost occupancy.

"It's a good buy relative to the risk. By buying this stock, it's like betting that the economy will stabilize and become a little bit better," Francis Gaskins, a partner at IPODesktop.com said.

The real estate investment trust, which counts Best Buy (BBY.N), Wal-Mart (WMT.N), Stop & Shop, Bed Bath & Beyond (BBBY.O), Home Depot (HD.N) and Kohl's (KSS.N) among its 1,500 tenants, raised $254.4 million in the IPO.

"A lot of retail stores have closed but I think for the time being that wave is over. It's a broad and diversified company and the economy is not falling off the cliff like people thought it was going to a year and a half ago," Gaskins said.

Retailers reported strong same-store sales on Thursday, as improving job and stock markets have given shoppers more spending power.

Retail Properties of America, which owns and operates shopping centers in 35 U.S. states, said its retail operating portfolio was 90.4 percent leased as of December 31.

On Wednesday, it priced its offering of 31.8 million class A shares at $8 each. The Oak Brook, Illinois-based real estate investment trust, formerly known as Inland Western Retail Real Estate Trust, was looking to sell its shares at between $10 and $12 apiece.

For 2011, funds from operations -- a key measure of profitability for real estate companies -- was 195.1 million, a jump of 16 percent over the previous year.

A REIT is a real estate-linked company that can avoid paying U.S. corporate income taxes if it distributes at least 90 percent of its taxable income to shareholders.

JP Morgan, Citigroup, Deutsche Bank and KeyBanc Capital acted as lead underwriters for the offering.

Shares of the company closed up 9 percent at $8.75 on Thursday on the New York Stock Exchange.

Reporting by Tanya Agrawal in Bangalore; Editing by Supriya Kurane

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