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Kimco Continues Portfolio Reshuffle in Q1

Zacks Equity Research

Kimco Realty Corp. (KIM) concluded transactions over $500 million in first-quarter 2014. This included a number of noteworthy acquisitions and divestitures and comes as part of the company’s portfolio restructuring activity.


Specifically, Kimco acquired 5 premium shopping centers (spanning over 900,000 square feet) for $216.0 million. The company bought Crossroads Plaza (Cary, NC) and Quail Corners (Charlotte, NC). Crossroads Plaza (93.1% occupied), a dominant power center, is anchored by renowned retailers such as Best Buy Co., Inc. (BBY), Five Below, Inc. (FIVE) and Petco. Also, Quail Corners (94.5% occupied) – a grocery-anchored shopping center – is housed by Harris Teeter.

Moreover, Kimco acquired the remaining 89% equity stake in 3 grocery-anchored properties for $93.2 million from an institutional joint venture (:JV) partner. This was in tune with the company’s strategy of decreasing the institutional JVs and partners count and bringing premium retail assets in its owned portfolio base.

Notably, since Kimco’s Investor Day in Sep 2010, it purchased a total of 87 premium properties (spanning 11.5 million square feet) for $2.1 billion in the U.S.


On the other hand, Kimco offloaded its ownership stake in 11 assets in its U.S. portfolio for a gross sales price of $63.7 million. Of the generated proceeds, Kimco’s share was $42.1 million. Notably, the company has sold 154 retail properties for a gross sales price of $1.2 billion, since the commencement of its U.S. non-strategic retail disposition program in Sep 2010. Kimco’s share of the reaped proceeds from the sale was around $740.3 million.

Moreover, in the Latin America Portfolio, Kimco vended 9-property retail portfolio in Mexico for a gross sales price of 2.9 billion Mexican pesos ($222 million) to a JV between Macquarie Mexican REIT and Grupo Frisa. The pro-rata share of that sale price was around 2.0 billion Mexican pesos ($153 million) for Kimco. After the disposition of these 9 properties, the company is left with 36 Latin American assets.

In Conclusion

Kimco’s successful efforts to improve its core portfolio through the divestiture of non-strategic assets and acquisition of high-quality properties are commendable. The move is aimed at improving the overall profitability of the company. Going forward, solid demand for its properties, its portfolio transformation initiative, along with easy access to capital, promises considerable upside potential.

Kimco is slated to announce its first-quarter 2014 results on May 7, after the closing bell. The Zacks Consensus Estimate for first-quarter funds from operations (:FFO) per share is pegged at 34 cents, representing year-over-year growth of 2.6%.

This retail real estate investment trust (:REIT) currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the retail REIT industry is Simon Property Group Inc. (SPG) having a Zacks Rank #2 (Buy).

Note: FFO, a widely accepted and reported measure of the performance of REITs is derived by adding depreciation, amortization and other non-cash expenses to net income.

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