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Vornado Closes Urban Edge Properties Spin-Off: Is it a Buy? - Analyst Blog

Zacks Equity Research
Updated

Vornado Realty Trust (VNO) has finally accomplished the spin-off of Urban Edge Properties (“UE”). This new, independent, publicly company will start regular trading under the ticker symbol “UE” on the NYSE from today. UE has stake in 79 strip shopping centers, 3 malls and one Warehouse Park that were previously under Vornado’s ownership.

Shareholders of Vornado received one share of UE for every two units of Vornado held, as on the close of business on Jan 7, 2015. For fractional shares, the distributions would be made in cash. Notably, UE shares have traded on a “when issued” basis on the NYSE under the symbol “UE WI” since Jan 5, 2015, allowing shareholders the right to receive UE shares in this distribution. Vornado will, however, continue to trade under the same ticker symbol VNO.

The move comes as part of Vornado’s efforts to streamline its business. The company, which has been subject to criticism for venturing into too many sectors, would now be able to focus exclusively on office properties and retail shops in Washington and Manhattan.

On the other hand, UE is expected to unleash its potential of shopping centers and malls spanning over 15 million square feet across 10 states and Puerto Rico, with concentrations in New Jersey, New York and Pennsylvania.
 
The two businesses have been together for legacy reasons but with no real operating synergies. We believe the creation of two focused real estate investment trust (REITs) would help in efficiently leveraging the improving fundamentals of each asset type.

Vornado currently has a Zacks Rank #2 (Buy). Investors interested in the REIT industry may also consider stocks like Chatham Lodging Trust (CLDT), Host Hotels & Resorts, Inc. (HST) and Public Storage (PSA). All these stocks carry the same Zacks Rank as Vornado.


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Zacks Investment Research