Equity One on Acquisition Binge

Equity One Inc. ( EQY - Snapshot Report ) , a real estate investment trust (REIT) that owns, manages, and develops neighborhood and community shopping centers in the U.S., has recently acquired a four-property portfolio for an aggregate investment of $260 million. While three of the acquired properties are located in the New York Metropolitan Region, one is located in Bethesda, Maryland.

Equity One acquired a 78,820 square foot shopping center in Queens, New York, titled Clocktower Plaza for $56 million. The property, currently 100% leased, is anchored by a leading grocery store in the region.

In addition, the company purchased Darinor Plaza, a 152,025 square foot shopping center in Norwalk, Connecticut for $36 million; and 1225 Second Avenue, an 18,474 square foot retail condominium in New York City for $27.5 million. With the acquisition, Darinor Plaza would be the seventh shopping center owned by Equity One in the state of Connecticut. On the other hand, 1225 Second Avenue along with Clocktower Plaza would mark the sixth acquisition by the company in New York City.

At the same time, Equity One decided to acquire Westwood Complex, a 22-acre property in Bethesda, Maryland for approximately $140 million. The property offers significant opportunities for redevelopment and expansion with 214,767 square feet of retail space, a 211,020 square foot apartment building, and a 62-unit assisted living healthcare facility. The property is strategically situated in a dense, highly affluent market with 142,000 people living within a 3-mile range and with an average household income of $163,000.

The acquisitions are in sync with the long-term objectives of the company to own retail properties in urban markets with visible growth opportunities through contractual rent increases, below market rents and redevelopment options. As of June 30, 2012, Equity One owned 165 properties spanning 16.8 million square feet of space. These included 142 shopping centers, 11 development/redevelopment properties, seven land parcels, and five non-retail properties.

The majority of the shopping centers owned by Equity One are anchored by leading supermarkets, pharmacies and large retail stores. The company has a diverse tenant mix – a hedge against tenant concentration risk, thereby ensuring a steady source of income.

In addition, the bulk of the company’s portfolio is located in some of the most densely populated and highest growth areas of the country with high barriers to entry. These include the metropolitan areas around Miami, Fort Lauderdale, West Palm Beach, Jacksonville, Orlando, Atlanta, Georgia, Boston and New York. Consequently, the shopping centers generate relatively strong sales with solid trade area demographics.

We have a Neutral rating on Equity One, which presently has a Zacks #2 Rank that translates into a short-term Buy rating. We also have a Neutral recommendation and a Zacks #3 Rank (short-term Hold rating) for Regency Centers Corporation ( REG - Analyst Report ) , one of the competitors of Equity One.