Washington Real Estate Investment Trust WRE, also known as WashREIT, recently announced that it has entered into two separate agreements with buyers to sell a total of eight retail assets.
The first agreement is for the sale of five retail assets, totaling nearly 800,000 square feet of space. The transaction is expected to close in late July and generate gross proceeds of nearly $485 million.
The second agreement is for sale of the company’s power center assets — Centre at Hagerstown, Hagerstown, MD; Frederick County Square, Frederick, MD and Frederick Crossing, Frederick, MD, covering nearly 850,000 square feet. Gross proceeds from this sale will likely be announced once the transaction closes.
Based on the company’s estimated 2019 net operating income (NOI) contribution from the eight assets, WashREIT projects blended sales capitalization rate to be nearly 6.2%. In fact, it trimmed the previously-projected 2019 NOI by nearly $16 million. For the full year, these assets were anticipated to contribute approximately $35.5 million.
On account of these transactions, WashREIT updated its 2019 core funds from operations (FFO) outlook. Specifically, it has lowered the core FFO per share guidance from $1.74-$1.78 to $1.68-$1.72.
Further, the company closed the sale of Quantico Corporate Center (925 and 1000 Corporate Drive) in Stafford, VA. It raised $33 million in gross proceeds from this transaction. The disposition is expected to reduce the projected 2019 NOI by nearly $2 million.
Dispositions aside, WashREIT has signed a contract to purchase an urban-infill, value-add multi-family asset in July, for around $70 million. If completed, it is likely to contribute $1.50-$1.75 million to the current-year NOI.
Regarding the previously-announced buyout of the seven-property Assembly portfolio, the remaining two Maryland assets will likely be acquired this week, for nearly $82 million. The multi-family portfolio is expected to contribute between $15.25 million and $15.5 million to the ongoing year’s NOI.
These transactions are expected to improve the company’s cash-flow strength and its operating platform. Furthermore, disposition of retail properties and focus on multi-family is a strategic fit as capital expenditures as a percentage of NOI is higher for retail properties.
Nonetheless, near-term earnings dilution from dispositions cannot be bypassed.
Over the past six months, shares of this Zacks Rank #3 (Hold) company have gained 14.2%, underperforming the industry’s growth of 19.7%.
Investors can consider better-ranked stocks from the same space like Host Hotels & Resorts, Inc. HST, Lamar Advertising Company LAMR and PS Business Parks, Inc. PSB, carrying a Zacks Rank of 2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Host Hotels & Resorts’ FFO per share estimates for 2019 moved marginally north to $1.82 over the past two months.
Lamar Advertising’s FFO per share estimates for the ongoing year have been revised slightly upward to $5.83 in 30 days’ time.
PS Business Parks’ current-year FFO per share estimate moved up marginally to $6.71 in the past month.
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