Kimco Realty Corp. KIM has closed the second phase of its stake sale in 22 Canadian properties to RioCan Real Estate Investment Trust, its Canadian joint-venture (JV) partner.
The transaction included the sale of Kimco’s stake in three properties for $238 million. RioCan also assumed $104 million worth of Kimco’s shares of the existing in-place debt. The move came as part of Kimco’s strategy to rid its portfolio of non-core assets and JV stake for a more streamlined business model.
In addition, Kimco disposed its 50% stake in Tillicum Centre in Victoria, British Columbia at a net price of $58.9 million, along with potential future consideration. RioCan also assumed Kimco’s interest in the $32.5 million in-place mortgage financing.
As a matter of fact, in September, Kimco and RioCan revealed their decision to unwind their Canadian JV. The process of winding down the 15-year old JV, which had a total of 35 properties, has been scheduled to occur in several phases.
According to the announcement, Kimco had planned to dispose its stake in a portfolio of 22 properties for C$715 million, including debt assumption, to RioCan. Of these 22 properties, 19 were slated to be sold off in the same month itself, thereby generating cash proceeds of around $220 million for Kimco.
Currently, eight retail properties in the second group are being put up for sale by the partners. The third bunch includes three transitional properties that were previously under Target Corp.’s TGT occupancy, which will be considered later. Notably, earlier this year, Target had made its exit from the Canadian market.
For Kimco, we believe that the move is a strategic fit, given its current focus on transforming its portfolio and simplifying its business model. The company is shedding non-core assets, disposing JV stake and concentrating its future investments on neighborhood and community shopping center assets. It will primarily focus on key U.S. markets that have demographics and household income levels higher than the national average.
For RioCan, on the other hand, the purchase of stake in these assets would enhance its portfolio concentration in the six largest markets of Canada, particularly in the Greater Toronto area.
Kimco currently has a Zacks Rank #3 (Hold). Investors interested in the REIT industry may consider better-ranked stocks like Regency Centers Corporation REG and Simon Property Group Inc. SPG. Both these stocks have a Zacks Rank #2 (Buy).
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