Equity One Inc. (EQY), a real estate investment trust (REIT) that owns, manages and develops neighborhood and community shopping centers in the U.S., has recently closed on the asset sale transaction involving the previously announced sale of 36 shopping centers spanning approximately 3.9 million square feet across the U.S. The properties were sold for $473.1 million to Blackstone Real Estate Partners VII.
The divested properties were predominately located in Atlanta, Tampa and Orlando, while some of them were also located in North Carolina, South Carolina, Alabama, Tennessee and Maryland. Equity One intends to utilize the proceeds from the asset sale primarily to reduce debt. The remainder of the proceeds would be used to fund redevelopment and development projects, and for future acquisitions and other corporate purposes.
The strategic decision to divest the shopping centers is part of the long-term ploy of the company to reposition its portfolio by shedding non-strategic assets and investing in higher growth markets, which would thereby enable it to upgrade its overall portfolio. Equity One is currently focusing on the urban retail markets of New York, Miami, Boston, San Francisco and Los Angeles.
As of September 30, 2011, Equity One owned 199 properties spanning 20.7 million square feet of space. The majority of the shopping centers owned by Equity One are anchored by pharmacies and large retail stores. The company has a diverse tenant mix – a hedge against tenant concentration risk, thereby ensuring a steady source of income.
Bulk of the company’s portfolio is located in some of the most densely populated and high growth areas of the country with high barriers to entry. These include the metropolitan areas around Miami, Fort Lauderdale, West Palm Beach, Jacksonville, Orlando, Atlanta, Georgia, Boston and New York. Consequently, the shopping centers generate relatively strong sales backed by solid trade area demographics.
We have a ‘Neutral’ rating on Equity One, which presently has a Zacks #3 Rank translating into a short-term ‘Hold’ rating. We also have a ‘Neutral’ recommendation and a Zacks #3 Rank for Regency Centers Corporation (REG), one of the competitors of Equity One.
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