Halfway to the Moon? Now Trending: Real Estate SPACS

A person using their phone and computer to check the status of their stocks - Cawley Commercial Real Estate

To the moon they say, followed by three Rocketship emojis, to articulate a stock gaining significant profits in a short amount of time. The stock market, now flooded with new retail investors, Bitcoin reaching never before seen all time highs, and increased volatility in the stock market seem to be creating opportunities for quick profit. Where there is money to be made, you can be sure prominent real estate figures will get involved.

A SPAC, or a special purpose acquisition company, is a shell corporation, formed by a group of investors, usually with expertise in a specific sector, that is listed on a stock exchange with the objective of acquiring a private company. This in turn takes the company public, while avoiding the lengthy initial public offering (IPO) process. SPACs have been around for decades, but are gaining popularity as of late. According to Yahoo Finance, SPACs have raised over $56 billion in 2021. Compare that to the $83 billion they raised during the entire year of 2020.

Sam Zell, Chicago born real estate icon, told CNBC in an interview, “If done well, it’s a very effective transaction.”

In the same interview, Zell said, “This is rampant speculation again, very much like the dot-com boom.”

Mr. Zell launched a SPAC in November of 2020.  He plans to focus on innovation in the industrial sector.

Simon Property Group, one of the largest retail property owners in the United States, created a SPAC which will focus on innovation in the retail property sector.

So what type of companies are these SPACs hoping to acquire? The common trend is property technology, aimed to solve technological inefficiencies that exist in our industry today. Real estate investors with additional capital are looking to invest their money in something new, and since they understand best what technology has the potential to be beneficial it seems they’re putting their money where their mouth is.

As always, be cautious when investing, do your due diligence and understand what the risks are. CCIV did not live up to expectations when it brought Lucid Motors public, so SPACs technically are a gamble. If you decide to invest in this trend, I will leave you with some final words from Reddit, “Sir, this is a casino.” But it isn’t Arlington Race Track because that shall be no longer.

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