Riding high on its portfolio transformation activities, Kimco Realty Corp. (KIM) disclosed third-quarter deals worth over $650 million. This includes a number of noteworthy acquisitions and divestitures accomplished in the quarter. Reflecting positive market sentiments, the shares gained 1% during Friday’s regular trading session on the NYSE.
Acquisitions
Specifically, Kimco acquired a 10-property shopping centers portfolio, valued at $275.8 million, from its existing joint venture (JV) with SEB Asset Management, marking the company’s third JV portfolio purchase in 2014. The deal comes as part of the company’s efforts to lower its property count in JVs.
Kimco, which earlier enjoyed 15% ownership stake in this property, took over the remaining 85% stake from SEB for a sum of $69.8 million. The acquisition included the assumption of $193.6 million mortgage debt.
The portfolio, covering 1.4 million square foot, is positioned in mature markets of the Mid-Atlantic region. It is mainly grocery-anchored with 95.4% occupancy. This portfolio boasts well known grocers like Safeway Inc. (SWY) and Giant Food as well as enjoys a lineup of reputed national retailers such as Bed Bath & Beyond Inc. (BBBY) and PetSmart, Inc. (PETM). This makes it a strategic buyout for Kimco.
Notably, so far in 2014, Kimco acquired 51 U.S. retail assets spanning 5.3 million square feet for $1.2 billion (including $465.3 million of mortgage debt).
Divestitures
On the other hand, Kimco offloaded ownership stake in 24 of its U.S. assets for a gross sales price of $263.6 million (including $35.2 million of mortgage debt). The company’s share was $205.4 million on a pro-rata basis. In 2014, the company has sold 50 retail properties for $512.9 million, including $72.4 million of mortgage debt, with its shares standing at approximately $384.9 million.
In the Latin American Portfolio, Kimco vended three assets in Mexico for a gross sales price of 1.5 billion Mexican pesos ($112.8 million). Kimco’s pro-rata share of that sale price was around 1.3 billion pesos ($101.3 million). The move was in line with the company’s aim of leaving the Latin American market and redeploying the proceeds in high-quality investments. So far in 2014, Kimco sold 16 retail properties in Mexico.
In Conclusion
Kimco is currently focusing on transforming its portfolio and simplifying the business model, which is commendable. Particularly, the company intends to concentrate its future investments on the neighborhood and community shopping center assets. It intends to strengthen its portfolio base in key markets of the U.S. and Canada, with demographics and household income levels higher than the national average.
For this, Kimco is shedding its non-strategic assets and redeploying the proceeds to acquire high-quality US shopping centers. We believe such efforts, along with solid demand for Kimco’s properties and easy access to capital, promises considerable upside potential.
Kimco is scheduled to announce its third-quarter 2014 results after the closing bell on Oct 28. The Zacks Consensus Estimate for funds from operations (FFO) per share for the stock is pegged at 35 cents.
This retail real estate investment trust (REIT) currently carries a Zacks Rank #3 (Hold).
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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