Vornado Realty Trust VNO is considering the separation of its Washington as well as Street Retail business in a spin or a spin-merge move, according to Chairman Steven Roth’s letter to shareholders. The letter, filed with the Securities and Exchange Commission on last Friday, revealed that the company may also invite new investor(s) for the business.
As a matter of fact, Vornado’s Washington portfolio comprises 16.1 million square feet of office space in 59 properties as well as 7 residential properties with 2,414 units. Moreover, the company enjoys ownership of a premium 56-property, 2.5 million square feet street retail business in Manhattan.
In the recent years, Vorando’s Washington portfolio has suffered adverse impact from the Base Realignment and Closure (“BRAC”) that required the Department of Defense to shift to government-owned military bases from the company’s buildings. In addition to the BRAC related move-outs, the overall leasing environment in the region remains sluggish.
On the other hand, values have been rising for the Street retail assets. For Vornado, harvesting seems a better option than investing, amid high asset prices and unpredictability of acquisitions.
Notably, Vornado has been subject to criticism for venturing into too many sectors in the past. However, recently, the company has been focused on streamlining its business and successfully spun off majority of its strip-shopping centers into Urban Edge Properties (“UE”) in last January. UE has stake in 79 strip shopping centers, 3 malls and one Warehouse Park that were previously under Vornado’s ownership. The move enabled the company to channelize its resources toward core units.
Vornado currently has a Zacks Rank #3 (Hold). Investors interested in the REIT industry may consider stocks like Prologis, Inc. PLD, Piedmont Office Realty Trust Inc. PDM and SL Green Realty Corp. SLG. All these stocks carry a Zacks Rank #2 (Buy).
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