(EXL) Excel Trust Sells Assets

Excel Trust, Inc. (EXL), a real estate investment trust (REIT) primarily focusing on retail assets, has recently sold six ‘triple-net’ leased assets for $39.6 million, generating a net profit of approximately $3.0 million. A ‘triple net’ lease is one under which the tenant pays all taxes, insurance, and maintenance for the properties, in addition to rent.

The properties that were sold included Walgreens in Corbin (South), Kentucky; Walgreens in Barbourville, Kentucky; Walgreens in Beckley, West Virginia; Walgreens in Princeton, West Virginia; Shop ‘n Save (SuperValu) in Ballwin, Missouri; and Jewel-Osco in Morris, Illinois.

The asset sale is part of the long term strategy of the company to purchase properties opportunistically at significantly low prices and sell them at a comparatively higher price at a later stage to profit from the price differential during this holding period.

Since its inception, Excel Trust has grown its portfolio through strategic acquisitions to a gross asset value of approximately $500 million. The company targets high-quality regional community centers and neighborhood grocery-anchored centers, primarily anchored by leading retailers of the country. Excel Trust usually enters into long-term leases with its tenants, which insulate it from short-term market volatility.

Unlike larger retail REITs that focus on densely populated trade areas, Excel Trust has followed a mid-market model, scurrying to own some very attractive mid-tier shopping centers in both primary and secondary markets. The company has acquired properties in diverse markets such as Scottsdale, Arizona, Northern California and the Washington, D.C.

We currently have an ‘Underperform’ recommendation and a Zacks #5 Rank for Excel Trust, which translates into a short-term ‘Strong Sell’ recommendation and indicates that the stock is expected to perform well below the overall U.S. equity market for the next 1–3 months. However, we have a ‘Neutral’ recommendation and a Zacks #2 Rank (short-term ‘Buy’) for Developers Diversified Realty Corp. (DDR), one of the peers of Excel Trust.

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