The proposed spin-off of Urban Edge Properties (“UE”), a subsidiary of Vornado Realty Trust (VNO), has moved a step ahead. The Board of Trustees of Vornado, the New York-based Equity Real Estate Investment Trust (“REIT”), has approved the spin-off of UE. This spin-off will create an independent and publicly traded company which will trade under the ticker symbol “UE” on the New York Stock Exchange (“NYSE”). Vornado, on the other hand, will continue to trade under the same ticker.
Per the deal, the outstanding shares of UE will be distributed among the common shareholders of Vornado and to the holders of common limited partnership units of Vornado Realty L.P. (“VRLP”). This distribution is expected to take place on Jan 15, 2015. Notably, shareholders of Vornado will receive one share of UE for every two units of Vornado held, as of the close of business on Jan 7, 2015.
This spin-off comes as part of Vornado’s decision to separate two businesses that have been together for legacy reasons but with no real operating synergies. Following this spin-off, Vornado can concentrate entirely on the office towers and retail shops in Washington and Manhattan. Going forward, we believe that such strategic sell-outs would offer the company the dry powder to invest in opportunistic acquisitions, which go a long way in enhancing its profitability.
In fact, Vornado had already revealed its intention to spin off UE back in Apr 2014. Just a week prior to this, more news related to this possible separation in Jan 2015 were released. (Read more: Vornado Expects Spin-Off Unit to Start Trade in January ).
Currently, Vornado has a Zacks Rank #3 (Hold). Investors interested in Equity-REITs may consider better-ranked stocks like Ashford Hospitality Trust, Inc. (AHT), Corrections Corporation of America (CXW) and Duke Realty Corporation (DRE). While both Ashford Hospitality Trust and Corrections Corporation of America sport a Zacks Rank #1 (Strong Buy), Duke Realty holds a Zacks Rank #2 (Buy).
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