Vornado Realty Trust (VNO) may soon look to dispose of its J.C. Penny and Lexingto Realty Trust holdings, in a move that would simplify the real estate investment trusts’s non-core holdings said Fitch Ratings.
The ratings agency said that the Sept.13 announcement that Steven Roth and Clifford Broser had resigned from the boards of J.C. Penney Company, Inc. and Lexington Realty Trust gives some indication that the VNO wants to rid itself of both holdings, sooner than later.
Roth is chairman and CEO of the REIT and Broser is a senior vice president in VNO’s acquisitions group.
VNO's holdings in JCP and LXP totaled less than $400 million and provided only $11 million in annualized cash contributions to EBITDA at Sept. 13, 2013; but shedding the two assets would go a long away in improving the REIT’s non-core portfolio.
These assets have been a concern for both shareholders and management and a factor driving share price performance , according to the Fitch report.
“Future sales of JCP and LXP, combined with the completed sales of VNO's interests in LNR Property LLC and non-core retail and Merchandise Mart properties, would leave interests in Toys 'R' Us, Inc. and Alexander's as the remaining noteworthy investments,” said Fitch.
For Vornado’s unsecured creditors the move is seen as positive because it drives the value of VNO up; and if VNO reinvests the capital into properties, the quality of the cash flow supporting the ratings would potentially improve.
“Management would be able to reallocate the resources spent on simplification back towards the basic blocking and tackling of acquisitions, redevelopment and portfolio management,” explained Fitch.