4/19/2012 | By Carisa Chappell
Weingarten Realty Investors (NYSE: WRI) will sell its 52-property industrial portfolio to DRA Advisors LLC so that it can focus exclusively on its community-based retail shopping centers.
Weingarten sold the properties for a total of $383.4 million. The transaction is expected to close within 60 days.
The industrial portfolio has comprised approximately 10 percent of Weingarten's net operating income, according to Drew Alexander, president and CEO of the firm. He said the company has been quietly working on selling its industrial assets for several months.
"It's something that's been rumored and encouraged for a while. We did it more through discreet inquires and did not widely market it to the entire world," Alexander said in an interview with REIT.com.
Although the company has been in the industrial business for 40 years, Alexander said it became increasingly obvious that investors prefer a pure-play company.
Weingarten will use the proceeds from the transaction to pay down outstanding amounts under its credit facility and repay a $200 million unsecured term loan. While the transaction will dilute Weingarten's FFO this year, Alexander said paying down debt should boost valuations of the company.
"More and more people are looking to REITs with more modular levels of leverage," he said.
Cedrik Lachance, senior analyst with Green Street Advisors, said the sale enhances the Weingarten franchise, because industrial-focused REITs have enjoyed an operational advantage over Weingarten.
"The industrial portfolio sale will allow Weingarten to focus on its core competency. The company has a reputation for being a keen operator in the retail sector and will benefit from the reduced distraction of the industrial assets," he said.
Going forward, Weingarten will concentrate its efforts on the neighborhood and community shopping centers that have made up the bulk of its portfolio, Alexander explained. Most of the retail centers are anchored by either a supermarket or national retailer, such as Wal-Mart or TJ Maxx.
"We've been in the retail world for 60 years, so we think we know it and understand it," Alexander said. "The economy has been in a bit of a troubled spot for a number of years. But the supermarket is our anchor and our retail centers have proven their resiliency and have stayed 90 percent (occupied) throughout the downturn."
Weingarten plans to growth through a judicious program of both acquisitions and new development, according to Alexander.
"It's challenging today to find good growth opportunities that make good economic sense. Consequently the value of our existing portfolio is even stronger," he said.
In addition to the sale of its industrial portfolio, Alexander said that Weingarten is also looking to sell some of its non-core assets and continue to focus on metropolitan areas in the states where it currently operates.
"We will continue to hone our portfolio and make it even stronger, but in the locations within those states in metropolitan areas," explained Alexander, adding that the sale of its industrial portfolio will help in those efforts.