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Winthrop Restructures Portfolio

Zacks Equity Research

Mass.-based real estate investment trust (:REIT) – Winthrop Realty Trust (FUR) – recently disclosed a number of strategic measures aimed at restructuring its portfolio and improving its fundamentals.

These include buying of its joint venture (:JV) partner’s 50% interest in the mezzanine loan indirectly secured by an Ill.-based property for $30 million, a deal to buy a property in Oklahoma City, a sale agreement for a San Antonio property and the disposition of a Seabrook asset.

Details of the Deals

In particular, following the acquisition of its JV partner’s interest in the loan, Winthrop now has 100% stake in the mezzanine loan. The loan, which bears an annual interest of 15%, has an outstanding principal balance and accrued interest of around $56.2 million. Notably, Winthrop and its JV partner will continue to hold about 35% each indirect equity interest in that Illinois property – located at One South State Street, Chicago – which secured the mezzanine loan indirectly.

In addition, Winthrop penned a deal to buy a 184-unit garden apartment complex – Summit Pointe Apartments – in Oklahoma City, Oklahoma, through a JV. Upon the acquisition's closure, Winthrop projects estimated capital contribution to the JV to be around $4.8 million. The transaction is expected to complete in Sep 2013, upon fulfillment of customary closing conditions.

On the other hand, Winthrop, through its CDH CDO venture, entered into a sale agreement to divest a Texas-based asset – One Riverwalk – located in San Antonio. From this deal, which is slated to close by the end of this month, Winthrop is expected to reap about $4.4 million as net proceeds upon payment of the existing third-party debt.

The company also divested another Texas-based asset for gross sale proceeds of $3.3 million. This resulted in net proceeds of about $3.2 million that was higher than Winthrop's latest estimated net asset value range of $2.6–$2.9 million for the property.

Our Take

Winthrop is focused on riding the growth trajectory by capitalizing on opportunistic investments. The above-mentioned deals are part of such efforts. We expect these transactions to enhance its portfolio quality and drive bottom-line growth.

Winthrop carries a short-term Zacks Rank #3 (Hold). Other well-performing REITs include EastGroup Properties Inc. (EGP), Highwoods Properties Inc. (HIW) and Douglas Emmett Inc. (DEI). All these stocks carry a Zacks Rank #2 (Buy).

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Read the Full Research Report on FUR

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