Equity One Inc. (EQY), a real estate investment trust (REIT) that owns, manages and develops neighborhood and community shopping centers in the U.S., has recently priced its equity offering of 5.0 million common shares at $19.42 each. The company will also grant the underwriters an option to purchase an additional 0.75 million shares to cover any over-allotments.
At the same time, MGN (USA), Inc., an entity affiliated with Equity One’s largest stockholder, has agreed to purchase directly from it an additional 1.0 million shares at $19.42 per share. The transaction would be consummated simultaneously with the public offering.
Barclays Capital Inc., the investment banking division of Barclays plc (BCS), is acting as the sole book-running manager for the offering. Equity One intends to utilize the net proceeds from the secondary offering to repay debt under its unsecured revolving credit facility.
As of March 31, 2011, Equity One owned 201 properties spanning 20.8 million square feet of space. The majority of the shopping centers owned by Equity One are anchored by pharmacies and large retail stores. The company has a diverse tenant mix – a hedge against tenant concentration risk, thereby ensuring a steady source of income.
In addition, bulk of the company’s portfolio is located in some of the most densely populated and high growth areas of the country with high barriers to entry. These include the metropolitan areas around Miami, Fort Lauderdale, West Palm Beach, Jacksonville, Orlando, Atlanta, Georgia, Boston and New York. Consequently, the shopping centers generate relatively strong sales backed by solid trade area demographics.
We have a ‘Neutral’ rating on Equity One, which presently has a Zacks #3 Rank translating into a short-term ‘Hold’ rating and indicates that the stock is expected to perform in line with the overall U.S. equity market for the next 1–3 months.
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