Vornado weighs stripping off strip malls

Spinoff to shareholders would refocus commercial landlord on New York, D.C. holdings
March 12, 2014 02:30PM

Vornado Realty Trust is reportedly mulling a spinoff of the company’s suburban shopping centers into a separate company.

The commercial landlord would merge its strip malls with the San Diego-based Retail Opportunity Investments, sources familiar with the situation told the Wall Street Journal.

Shareholders would then receive a majority stake in the new company, a move that would spare Vornado the need to make a hefty tax payment.

Vornado has tapped Morgan Stanley and Goldman Sachs Group as advisors in determining the best scenario for the business, which is currently valued at between $2 billion and $3 billion, according to the Journal. The company could also decide to keep the shopping centers, though a spinoff would enable the company to focus primarily on its high-end office towers and retail holdings in Manhattan and Washington.

“They’d probably be rewarded by the market if they simplified further and focused more on their New York and D.C. portfolio,” Keith Pauley, a managing director with LaSalle Investment Management, which owns around 2.2 million Vornado shares, told the Journal.

The consideration of a spinoff comes after reported complaints from investors and analysts last year saying the company, one of the largest real-estate investment trusts in the U.S., was unfocused because it is operating in too many sectors. [WSJ]Julie Strickland