Retail real estate investment trust (REIT) – Kimco Realty Corp. KIM – announced the acquisition of Christown Spectrum for $115.3 million in the Phoenix-Mesa-Scottsdale, AZ metropolitan statistical area (MSA). This 850,000-square-foot destination power center is currently 94% occupied.
The purchase looks like a strategic fit due to the advantageous location of the property, presence of national and/or investment grade retailers as tenants, and scope for redevelopment and value creations.
In fact, apart from the advantages of the thriving and highly trafficked retail corner of West Bethany Home Road and North 19th Avenue, this power center enjoys accessibility and proximity to the second-busiest light rail station in Phoenix. Being one of the densely populated regions in Phoenix with a population of 437,000 within a 5-mile radius, this area allows the property to enjoy a high rate of footfalls.
Moreover, the property’s tenant lineup comprises a host of national and/or investment grade retailers. Big names like Wal-Mart Supercenter WMT, Costco COST and SuperTarget TGT serve as its anchor tenants.
Further, Kimco can add value to this property by developing several pads, expanding the leasable square footage and addressing the several below-market ground leases.
Importantly, Kimco is currently focusing on transforming its portfolio and simplifying its business model. For this, the company is shedding slower growth assets from non-strategic markets and joint ventures. It is concentrating its future investments on neighborhood and community shopping center assets, primarily focusing on key markets in the U.S. that have favorable demographics and higher household income levels.
As a result, between Sep 2010, when the company started its portfolio transformation, and third-quarter 2015 earnings release, Kimco has acquired 199 properties for a gross amount of $5.3 billion and sold 267 properties aggregating $2.5 billion. We expect such moves to drive Kimco’s bottom line over the long term. Nevertheless, near-term earnings dilution due to high disposition activity and an anticipated rise in interest rates in the coming months remain the concerns.
Kimco currently has a Zacks Rank #3 (Hold).
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