Vornado Realty Trust, the popular New York-based real estate investment firm, has announced that it will be combining its strip shopping businesses consisting of about 81 open shopping centers and four malls to create a new Real Estate Investment Trust (REIT).
The publicly traded REIT will operate with the title "SpinCo" and is expected to generate an estimated net operating income of $200 million in 2014 alone. The REIT's portfolio includes 85 retail properties with a total of 16.1 million square feet. The malls include Bergen Town Center in Paramus, N.J., Monmouth Mall in Eatontown, N.J., and two malls in the suburbs of San Juan, Puerto Rico, according to a press statement.
Jeffrey S. Olson, the head of Equity One Inc, will head SpinCo and Robert Minutoli, the executive vice president of Vornado's retail division, will serve as the chief operating officer.
"Vornado believes that SpinCo's portfolio will be well positioned to deliver both internal growth through active asset management and redevelopments and external growth through acquisitions and selective new developments. SpinCo's demographics are among the highest of its peers having average population within 3 miles of 149,000 and average household income of $71,000. SpinCo's average base rent is $18.75 per square foot as compared to the peer median of $15.66 per square foot," the statement reads.
Vornado will likely file for registration with the Securities and Exchange Commission by the second quarter of 2014. It will, however, retain 20 percent of its strip shopping assets, which won't be included in the REIT portfolio.
"Our objective is to de-conglomerate two very different businesses, by separating a great Northeastern strip shopping center business with great potential, leaving a unique, world class Manhattan and Washington business. These businesses have been together for legacy reasons, but have no real operating synergies," Steven Roth, chairman and CEO of Vornado, wrote in his annual letter to shareholders, according to Businessweek.
News of the new REIT comes just after Vornado settled a lawsuit with the New York attorney general after the company failed to comply with accessibility standards under the Americans with Disabilities Act.
An investigation revealed that about 20 New York shopping centers, including one in Vornado, failed to provide adequate access to parking for disabled people. Vornado agreed to upgrade the standards and amenities and pay $700,000 in penalties and fines, reports Law360.com.
"This agreement ensures that any barriers at Vornado's shopping centers will be removed, to the benefit of New Yorkers from all walks of life. I commend Vornado for agreeing to take the steps necessary to make their lots and garages fully accessible for all New Yorkers," Attorney General Eric Schneiderman said in a statement.
Vornado's shares closed at $98.15 on Friday.
