Excel Trust - REIT Soars On Blackstone Acquisition News

On April 10, shareholders of Excel Trust, Inc.

woke up to the news that The Blackstone Group LP

had agreed to purchase this retail REIT for $1 billion in cash, or a 15 percent premium. This is the first major shopping center acquisition for Blackstone, since the announcement that former DDR Corp.

CEO Dan Hurwitz had stepped down from the power center focused REIT in December 2014, and formed Raider Hill Advisors to partner with Blackstone on retail portfolio strategies. The Excel portfolio of retail centers includes: grocery anchored, community centers, power centers, as well as free standing properties, and is now valued at ~$2 billion including debt. Tale Of The Tape - Excel Spikes Up ~15 Percent

During the past 52-weeks Excel had traded in a range from $11.16 to $14.32 per share, and had closed at $13.52 prior to the Blackstone $15.85 per share cash deal. Blackstone Sponsored Brixmor IPO Blackstone already has a much bigger dog in the U.S. grocery anchored shopping center space, $7.5 billion market cap Brixmor Property Group

which became publicly traded on Oct. 30, 2013.

Brixmor fit the classic Blackstone "Buy it, Fix it, Sell it" mold, and is still in the process of rolling over below market leases to take advantage of upgraded anchor tenants and drive organic growth.

Brixmor owns over 520 properties located in 38 states, predominately in the top 50 metro markets. Blackstone still owns approximately half of the Brixmor shares, down from ~79 percent at the time of the IPO. Blackstone - Excel: Deeper Dive Although Excel has had a relatively brief history as a public company, it has demonstrated the ability to grow profitably through accretive acquisitions.

Excel doesn't appear to fit the typical Blackstone acquisition profile, of buying troubled assets at the bottom of the real estate cycle; or companies that appear to be struggling and/or lack access to capital markets. What Is Blackstone Buying?

The Excel portfolio is overall ~94 percent leased, so while there is some upside, it is limited to just a few 100 bps. Excel - Capital Structure

Bottom Line Does Blackstone really need two retail shopping center brands or operating companies? At first glance, the easiest way to improve the bottom line at Excel would appear to be folding it in to the Brixmor platform, in order to rationalize G&A, lower Excel's cost of capital and take advantage of leasing synergies. Between former DDR boss Dan Hurwitz, Brixmor's management, and the executive team at Excel, Blackstone certainly has a large pool of talent to draw upon. Investor Takeaway There has been a limited supply of new shopping centers built in the U.S. since the Great Recession. When it comes to bricks and mortar retailers, grocery anchored, or necessity based shopping centers, have the least exposure to e-commerce competition. If Blackstone is willing to pay what amounts to a "retail" price to acquire Excel, this certainly appears to be a vote of confidence for this asset class.