Retail real estate investment trust (REIT), Kimco Realty Corporation (KIM), continues to scale down its Latin American portfolio. Recently, the company announced the offloading of a 4-property Mexican shopping center portfolio through a purchase and sale deal to its local operating partner, Planigrupo, for $92 million (1.2 billion Mexican pesos). The move is part of Kimco’s efforts to overhaul its portfolio in order to improve the core business line.
The wholly-owned assets – La Nogalera in Saltillo, Plaza Universidad in Pachuca, Gran Plaza in Cancun and Plaza Bella Huinala in Monterrey – span a total of 1.1 million square feet. They are occupied by renowned companies such as HEB and Cinépolis, The Home Depot, Inc. (HD) and Wal-Mart Stores Inc. (WMT) affiliated Bodega Aurrera and Suburbia. The deal is slated to close in the fourth quarter of 2013, subject to customary conditions.
Kimco is particularly aiming to strengthen its North American portfolio and reshuffling its joint venture investments to achieve overall efficiency. In line with this, the company has been disposing its non-retail assets and investments as well as non-strategic retail assets to redeploy the capital in its core operations.
In this context, Kimco has been active in disposing its Latin American portfolio in recent times. In the current quarter, Kimco sold its 43% stake in a Guadalajara, Mexico-based asset Centro Sur shopping center, spanning 655,000 square feet, for $41 million (523 million Mexican pesos). Moreover, the company offloaded its 50% stake in a Chile-based 9-property shopping center portfolio, spanning 269,000 square feet, to its local operating partner for $50.2 million (25.3 billion Chilean pesos), including $33.1 million (16.8 billion Chilean pesos) of debt.
Additionally, during second-quarter 2013, Kimco had vended 9 assets of its Mexican shopping center portfolio (spanning 2.6 million square feet) to a local real estate operator for $274 million (3.35 billion Mexican pesos).
We commend Kimco’s efforts to improve its core business line. Last month, the company also came up with better-than-expected second-quarter 2013 results benefiting from strong operating portfolio performance. Kimco also raised the lower end of its previously issued adjusted funds from operations (FFO) per share guidance for the second time in the year. However, the competitive market and short-term headwinds for occupancy in the midst of an unsettled economic environment remain our concerns.
Kimco currently carries a Zacks Rank #3 (Hold). A better-performing retail REIT that is worth a look is Cedar Realty Trust, Inc. (CDR), which has a Zacks Rank #2 (Buy).
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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