Federal Realty Expands in Bay Area - Analyst Blog
January 03 2013 - 1:25PM
Zacks
Federal Realty Investment Trust (FRT), a real
estate investment trust (REIT), recently acquired a property – East
Bay Bridge Shopping Center – located on the Emeryville and Oakland
border for $53.7 million. This strategic acquisition is in line
with the company’s aim of enhancing its retail dominance in the Bay
area.
Federal Realty, which bought the shopping center from TPG Capital,
also took on an existing mortgage loan worth $62.9 million secured
by the property. Texas-based TPG Capital, one of the largest
private equity investment firms globally, has acquired the shopping
center in 2010 for $505 million as part of a four-property
deal.
The acquired property complements Federal Realty’s 1.8 million
square feet of properties owned in the Bay Area. This includes 150
Post St. in San Francisco, Crow Canyon Commons in San Ramon as well
as Santana Row and Westgate Center in San Jose.
East Bay Bridge Shopping – spanning 438,000 square feet – is
located in a very supply constrained trade area in the densely
populated East Bay market. The center is positioned at the
intersection of several major highways and experiences significant
traffic counts of 216,000 cars per day to the south on I-580 and
288,000 cars per day to the west along I-580/I-880. The traffic
count is expected to increase with the completion of the expansion
of the Caldecott Tunnel this year.
Constructed in 1994, East Bay Bridge boasts a class of
industry-leading tenants such as Safeway Inc.
(SWY), Target Corp. (TGT) and The Home
Depot, Inc. (HD). The other noteworthy retailers at the
center include OfficeMax Incorporated (OMX),
Pacific Sales Kitchen and Bath, Sports Authority and Michael's. In
our view, the strategic acquisition will boost the company’s rental
revenue going forward, considering the upscale premium location of
the property and strong tenant base.
Federal Realty incurred around $1 million of closing costs related
to the acquisition, due to late closing of the transaction.
However, management expects the acquisition to be accretive to the
company’s earnings in early 2013 and provide long-term value
creation.
Federal Realty specializes in owning, managing, developing and
redeveloping retail, mixed-use and street-retail properties,
primarily in densely populated locations. Its community and
neighborhood shopping centers are anchored by supermarkets, drug
stores or high-volume, value-oriented retailers, which provide
consumer necessities.
As of September 30, 2012, the company's portfolio comprised
approximately 19.1 million square feet located primarily in the
Northeast and Mid-Atlantic regions of the United States, and
California.
Federal Realty is expected to release its fourth-quarter 2012
results on February 12, 2013. The Zacks Consensus Estimate for the
fourth quarter FFO (funds from operations) is currently pegged at
$1.11 per share.
Federal Realty currently has a Zacks #2 Rank (implying a short-term
Buy rating). However, we maintain our long-term Neutral
recommendation on the stock.
Note: FFO, a widely accepted and reported measure of the
performance of REITs is derived by adding depreciation,
amortization and other non-cash expenses to net income.
FED RLTY INV (FRT): Free Stock Analysis Report
HOME DEPOT (HD): Free Stock Analysis Report
OFFICEMAX INC (OMX): Free Stock Analysis Report
SAFEWAY INC (SWY): Free Stock Analysis Report
TARGET CORP (TGT): Free Stock Analysis Report
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