Vornado Realty Approves Spinoff of Strip Mall Business Urban Edge Properties

It’s amazing how much stuff gets done on December 23rd because no one wants to work during the holidays. That includes corporate boards, such as the one at Vornado Realty Trust (VNO) which approved the spinoff of the majority of its retail strip malls, Urban Edge Properties. The distribution is expected to take place on January 15th to shareholders as of the 7th and VNO shareholders will receive one share of Urban Edge for every 2 VNO shares owned. The new company will trade on the NYSE under the ticker ‘UE’ and will operate as a REIT, meaning it will be distributing almost all of its income. The new company will be led by former Equity One (EQY) head honcho Jeffrey Olson, but VNO Chairman Steven Roth will serve on the board.

The spinoff has been in the works for a long time and will enable the commercial real estate behemoth to focus solely on its NYC and Washington office buildings and retail space. Apparently investors desire more focused and more pure play real estate portfolios. The new company will have 83 assets (79 malls) mostly throughout the Northeast and is expected to deliver about $200m of NOI, but the fundamentals of the business may be challenging. It’s worth noting that Simon Property Group (SPG) spun off of its mall business, the Washington Prime Group (WPG), earlier in 2014 and its performance has sagged, despite the accretive acquisition of Glimcher Realty.

For additional information on the spinoff, check out this investor presentation and the most recent Form 10.

Disclosure: Author holds no position in any stock mentioned.