NEW YORK CITY—Vornado Realty Trust is contemplating a spinoff of its suburban shopping center portfolio, which analysts have valued between $2 billion and $3 billion, the Wall Street Journal reported. Citing unnamed sources, the WSJ reported that VNO has discussed a possible deal with San Diego-based Retail Opportunity Investments Corp. that would give ROIC an East Coast presence.
This scenario would entail VNO spinning off the strip centers into a separate company, then merging it with ROIC. In a Reverse Morris Trust, the office and retail REIT’s shareholders would then take a majority stake in the combined company, thus helping VNO avoid a large tax payment.
VNO, which has been selling off its retail properties over the past few years, including the off-market $465-million sale of Springfield Town Center in Virginia earlier this month, is also exploring other scenarios for the 100-property, 15-million-square-foot portfolio, which is located mainly in the Northeast and Mid-Atlantic. It has tapped Morgan Stanley and Goldman Sachs as advisors, according to the WSJ report.
ROIC has a market value of about $1 billion and owns 54 shopping centers on the West Coast. VNO’s possible moves on its strip-center holdings come at a time when pricing on such properties has gone up 13% year over year, according to Green Street Advisors.