Vornado Realty Trust’s plan to spin off 81 strip shopping centers and four malls into a new publicly traded real estate investment trust won’t cause an “immediate credit fallout” for bonds exposed to these properties, said Barclays analysts in a report.
The strip shopping centers are located in the Northeast, with the malls consisting of the Bergen Town Center in Paramus, NJ; Monmouth Mall in Eatontown, NJ; and two malls in suburbs of San Juan, Puerto Rico. The 85 properties total 16.1 million square feet and had average occupancy of 95.5% at year-end 2013, according to a Vornado press release.
The $300 million Bergen Town Center is included in the WFCM 2013-BTC CMBS pool; the $130 million Monmouth Mall is included in the MSC 2006-T21 loan pool; the $120 million Montehiedra Town Center is included in the GG7 CMBS loan pool; and the Las Catalinas Mall is not securitized, according to a Barclays report.
Vornado joins several retail REITs have already announced similar spin-off plans. One recent transaction includes the spinoff by Simon Property Group, Inc. of its smaller malls and strip centers to Washington Prime Group, Inc.
Barclays said that the trend is driven by firms looking to improve underlying collateral quality and isolate lower credit quality (B/C) malls and smaller shopping centers.
Fitch said in a report earlier this month that “spinoffs by U.S. real estate investment trusts (REITs) will benefit unsecured bondholders by enabling issuers to focus on core holdings and improve strategic simplification."