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FRT Buys 2 Shopping Centers in NJ

Zacks Equity Research

Federal Realty Investment Trust (FRT) disclosed the buyout of a controlling stake in two shopping centers –The Grove at Shrewsbury and Brook 35 – in New Jersey. This retail real estate investment trust (:REIT) expended $161 million for the acquisition of these assets in the prosperous Monmouth County in New Jersey.

Federal Realty concluded the acquisition through a combination of cash, downREIT units, and the assumption of fixed rate debt of $68 million collateralized by the assets. The company noted that the acquisition will be accretive to its FFO per diluted share for full-year 2014.

These properties, which are positioned on the busy Route 35, span 285,600 square feet of space in total. They are located close to the Garden State Parkway and serve the flourishing NY Metro area including Shrewsbury, Fair Haven, Red Bank, Rumson, Little Silver and Middletown area of New Jersey.

In particular, The Grove at Shrewsbury caters to a population of over 138,000 in that trade area, having an average household income of $111,586. With over 40 national and regional tenants – such as Lululemon Athletica Inc. (LULU), Banana Republic and J.Crew – it is the much visited shopping center of the trade area.

On the other hand, Brook 35 serves the affluent coastal trade area with demographics of over 123,000 people having an average household income of $101,487. The property houses outlets of more than 25 renowned retailers such as Ann Taylor of Ann Inc. (ANN), Coach, Inc. (COH) and Banana Republic.

As a matter of fact, Federal Realty has been capitalizing on expansion opportunities in premium markets, which has income growth and long-term value creation potential. Thus, with solid trade area statistics, this above mentioned transaction is a strategic fit in this context. We expect the addition of such trophy assets to its high-end assets portfolio to boost its rental revenue going forward. Moreover, the enrichment of the tenant base of this Zacks Rank #2 (Buy) stock is also notable.

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