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Equity One Looks to Make Splash with Leadership Change

Equity One Inc. has grown to become a safe, reliable REIT in its eight years as a public company through a straightforward strategy of looking for portfolio deals in its core markets, especially in and around Florida. But faced with an increase in property prices, the company is switching gears. Equity has ramped up its ground-up development pipeline and has broadened its geographic scope in looking for portfolio acquisitions. With that change in focus, the company is making a leadership change for the first time in its history.

In a big move, Equity One has opted to tap Jeffrey Olson, Kimco Realty Corp.’s president of Eastern and Western regions, to be its new president and CEO. Olson will join the company January 1 and will officially assume his new posts in April.

Equity One is trying to build up its shopping center portfolio in the western U.S. and has a desire to develop new business lines, which plays to Olson’s track record at Kimco.

According to observers, Olson has built a strong reputation for his acquisition and negotiation skills. A former UBS analyst, he came to Kimco in 2002 under the mentorship of chairman Milton Cooper and is believed to have played a key role in several of the company’s strategic transactions, including its recent $4 billion buyout of Pan Pacific Retail Properties.

In the past four years, Olson has also directed asset management, leasing, re-development and construction programs for approximately 54 million square feet of Kimco’s retail space.

“When you look at the mold of someone like Milton Cooper, Jeff has many of the same strengths,” says Barry Vinocur, editor of Realty Stock Review. “He understands the concept of being the fiduciary for the shareholder. He’s got accounting background and analysis background and now he’s got the experience at Kimco. So this should be very good for Equity One.”

Olson will take the reins from the duo that has driven Equity One’s growth to date: chairman and CEO Chaim Katzman and president and COO Doron Valero. Katzman—who has been chairman and CEO since founding the company in 1992—will relinquish his CEO title to Olson while remaining as chairman. Valero, however, who has been with the firm for 13 years, will leave the company entirely effective January 1. Valero will stay on through the end of the year to help smooth the transition.

Equity One’s fundamentals are sound. Net income has grown by approximately 45 percent in the past two years, from $63.7 million in December of 2003 to $92.7 million in 2005. Return on investment capital has been a steady 11 percent over the past five years. But analysts believe that both Valero and current chairman of the board Chaim Katzman have led the company in the right direction, but simply lack the pizzazz of someone like Olson.

“In our view, Equity One’s stewardship is average,” Morningside analyst Ryan Dobratz wrote in his report, though he refused to discuss either Valero or Katzman in detail.

That team masterminded the buyouts of companies including Centrefund (U.S.) Realty Corp. United Investors Realty Trust and IRT Property Co. to vaulted the firm’s portfolio to 198 properties containing 20.4 million square feet.

Other analysts seem to be split on the move. Both Friedman Billings and JP Morgan upgraded their ratings of Equity One after news of the management change. Deutsche Securities, however, downgraded the firm.

Since Equity One announced the new appointment on August 7, its stock has jumped up slightly, from $23.41 at the close of the day on Friday to $23.74 on Monday and $23.79 yesterday.

– Elaine Misonzhnik

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