Vornado considers spinoff of suburban shopping centers

|By:, SA News Editor

"There's no good reason for an office company and a shopping-center company to be housed under the same roof," says Sandler O'Neill analyst Alexander Goldfarb, summing up a major investor gripe over Vornado Realty Trust (VNO).

Under consideration by Vornado would be the spinoff of its strip malls into a separate company which would then merge with Retail Opportunity Investments (ROIC). Vornado shareholders would take a majority stake in the combined company, avoiding the large tax bill that would come with an outright sale. Talks are continuing and no deal is assured, plus Vornado Chairman and CEO Steven Roth is known to take his time - often years - to pull the trigger on big deals.

Analysts value the business at $2B-$3B.

"They'd probably be rewarded by the market if they simplified further and focused more on their New York and D.C. portfolio," says LaSalle Investment Management's Keith Pauley.