The Wall Street Journal recently reported that NRDC Acquisition Corporation (Amex:NAQ), a blank-check company set up in 2007 by Richard Baker, son of real estate and retail tycoon Robert Baker, is looking to convert into a REIT, buying distressed retail properties such as supermarket-anchored strip malls. While I'm not a fan of blank-check companies, which trade on reputation rather than substance, this one's got half a chance of being successful. If it is, it's likely that more will follow down the same road.

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Armed with $400 million in investor capital, Baker has hired Stuart Tanz, formerly of Pan Pacific Properties, to operate the REIT. Although not formally approved, the move could be a timely one given the state of commercial real estate in this country.

A Stampeding Herd
Other blank-check companies are already moving forward with their own conversions, choosing to strike while the iron is hot. Capitol Acquisition Corp. (Amex:CLA) announced on September 17 that its investors would vote on merging with a newly established company, Two Harbors Investment Corp., that would invest in distressed residential mortgage-backed securities.

If approved, it would have $259 million at its disposal. In these markets, that could go a long way. You have to wonder why some of these blank checks didn't do this earlier when markets were even weaker.

Also jumping into the mortgage-backed securities game is Enterprise Acquisition Corp. (NYSE:EST), which is tentatively set to merge with Maryland-based Armour Residential REIT, Inc. Armour's Co-Chief Executive Officers Jeffrey Zimmer and Scott Ulm both have 20 years of experience or more in mortgage-backed securities.

According to Yaacov Gross, an attorney who specializes in REITs, the major concern for both of these blind pools is that "investors have to put a lot of faith in the acumen of the management team." Translation: a lot could go wrong.

New And Notable
Hicks Acquisition Corp. (Amex:TOH) announced in August that it was merging with Resolute Energy Corp. in a deal valued at $582 million. Upon completion of the deal, it will seek a listing on the New York Stock Exchange. Resolute has energy holdings in Utah, Wyoming and Alabama.

The man behind the merger is Tom Hicks, owner of the Texas Rangers, Dallas Stars and Liverpool Football Club. Hopefully for investors' sake that he's a better evaluator of business partners than he is of sports teams, because they're mediocre at best.

Another real estate deal taking place involves Prospect Acquisition Corp. (Amex:PAX), formed in the heady days of blank-check companies back in 2007. It's buying Beverly Hills real estate firm Kennedy-Wilson Inc. for almost $300 million, using the funds to buy distressed commercial real estate. Are we sensing a trend yet?

Lastly, where would we be without the prerequisite Chinese deal. Ideation Acquisition Corp. (Amex:IDI) is buying outdoor advertising firm SearchMedia for $177 million. Search Media has one of the largest billboard networks in China and projections suggest it will generate $88 million in revenue this year with $15 million in profits. SearchMedia shareholders will own 44% of the merged company. It too has potential.

Performance of Blank Checks Who Have Made Acquisitions

SPAC Acquired Company Return Since Deal
Chardan China Acquisition Corp. Origin Agritech (Nasdaq:SEED) (41.4%)
Marathon Acquisition Corp. Global Ship Lease (NYSE:GSL) (73.8%)
Hekmann Corporation (NYSE:HEK) China Water & Drinks (35.9 %)
Endeavor Acquisition Corp. American Apparel (AMEX:APP) (76.3%)
Services Acquisition Corp. Jamba Juice (Nasdaq:JMBA) (86.1%)

The Bottom Line
Some of the recent blank-check transactions make some sense, especially the NRDC and Ideation deals. Having said that, there's too much left to chance for me to buy into these stocks. (To learn more, see What Is A Blank Check Company?)

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