OMX Officemax Incorporated

Excel Trust, Inc. (EXL), a real estate investment trust (REIT) primarily focusing on retail assets, has recently acquired ‘The Promenade’ – a 729,921 square foot retail shopping center in Scottsdale, Arizona, for approximately $110 million. The acquisition was structured as an off-market transaction, which refers to a deal that occurs outside a formal market directly between two participating entities primarily through negotiations.

With the deal, Excel Trust assumed the existing mortgage loan secured by the property totaling approximately $52.2 million. The mortgage loan bears an interest rate at 4.8% and is scheduled to mature in 2015. The transaction was funded by the proceeds from the recently concluded equity offering.

The acquired property is located in one of the premium markets of the region with estimated average household incomes within a three- and five-mile radius of $116,607 and $114,260, respectively. The shopping center is the first acquisition by the company in the area, as it seeks to capitalize on the improving market fundamentals in Phoenix.

The mall is presently 97% leased and consists of premier retail and office space. The shopping center is anchored by leading retailers in the country, such as Nordstrom Rack – the clearance store of Nordstrom Inc. (JWN), OfficeMax Incorporated (OMX), and PetSmart, Inc. (PETM).

Since its inception, Excel Trust has grown its portfolio through strategic acquisitions to a gross asset value of approximately $500 million. The company targets high-quality regional community centers and neighborhood grocery-anchored centers, primarily anchored by leading retailers of the country. Excel Trust usually enters into long-term leases with its tenants, which insulate it from short-term market volatility.

Unlike larger retail REITs that focus on densely populated trade areas, Excel Trust has followed a mid-market model, scurrying to own some very attractive mid-tier shopping centers in both primary and secondary markets. The company has acquired properties in diverse markets such as Scottsdale, Arizona, Northern California and the Washington, D.C.

We currently have an ‘Underperform’ recommendation and a Zacks #5 Rank for Excel Trust, which translates into a short-term ‘Strong Sell’ recommendation and indicates that the stock is expected to perform well below the overall U.S. equity market for the next 1–3 months.

 
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