GE Capital this week acquired 59% of Jacksonville, Fla.-based Regency Centers, the nation's largest owner of grocery-anchored neighborhood centers. And analysts, who predict a double-digit return should GE Capital gobble up the remaining 41%, say chances of a full buy-out are strong.
Under a “standstill” agreement, GE Capital has until July 14 to decide what to do with the rest of the Regency shares, but Salomon Smith Barney analyst Gary Boston says the Stamford, Conn.-based firm might well acquire Regency. “Long-term, GE Capital is probably not going to be in the business of being just a majority shareholder in a large publicly traded company,” Boston says. “If it's a business that they decide they want to be in, they'll probably take the whole thing.”
Immediately after the stock acquisition May 14, Salomon Smith Barney upgraded Regency shares from Outperform to Neutral and upped the target price from $29 to $31. GE Capital acquired the 59% interest in Regency through its outright acquisition of Security Capital Group, an international real estate operation company.
Now that the Security Capital acquisition is complete, GE Capital likely will focus its attention on Regency Centers, Boston says. “GE Capital will need to do some due diligence to determine whether they want greater exposure or not.”
Even if GE simply keeps its 59% stake in Regency, it is likely to see a total return in the low teens, Salomon analysts note in a written report on the deal.
Regency Realty Corp. ranked No. 14 on Shopping Center World's 2001 Top Owners survey with 27.1 million total sq. ft. of GLA owned.
Company officials were unavailable for comment for this story.