Kimco's (KIM) Q3 Deals Exceed $360M, Reshuffle Continues

Riding high on its portfolio transformation activities, Kimco Realty Corp. (NYSE:KIM) announced third-quarter 2016 deals worth over $360 million. The company remains on track with its strategic 2020 Vision, making premium asset purchase in key metro markets in the U.S., joint-venture buyouts and progressing on its simplification efforts. Specifically, the company has been reducing the number of joint ventures and trimming its Canadian portfolio.

Q3 Activity

Kimco’s third-quarter acquisitions totaled 1.0 million square feet of space, worth $292.8 million, of which the company’s share was $263.4 million. Particularly, this included the previously declared partner buyout of a four-property joint-venture portfolio for a gross price of $169.0 million, and the acquisition of the Kentlands Market Square (NYSE:SQ) shopping center for $95 million. (Read: Kimco Buys JV Asset Stake, Kentlands Market Square)

On the other hand, Kimco’s third-quarter sales aggregated $150.7 million and included disposition of 12 shopping centers, totaling 1.4 million square feet. The company’s share of the sales price was $97.8 million.

Specifically, the company sold interests in five out of six remaining Canadian shopping centers for a gross sales price of USD $97.4 million. Kimco’s share of the sales price was USD $48.7 million. Additionally, seven unencumbered U.S. properties were disposed for a gross price of $53.3 million. The company’s share of the sales price was $49.0 million.

Kimco is well on track with its 2020 Vision which envisages the ownership of premium assets in major metro markets in the U.S. and trims its joint-venture portfolio.

In fact, the company’s 2016 shopping-center disposition guidance range is $1.0–$1.15 billion (Kimco’s share). Its share has already reached $918.6 million year to date from the disposition of 34 Canadian properties for USD $571.5 million and sale of 25 U.S. assets for $347.1 million. On the other hand, Kimco’s acquisition guidance is $450–$550 million (Kimco’s share) for 2016 and year to date, the company’s share totaled $451.9 million.

In Conclusion

Going forward, premium properties in high-growth areas, presence of well-capitalized retailers in its tenant roster, investments in high-quality neighborhood and community shopping centers and shedding of non-core assets augur well for Kimco’s growth. However, earnings dilution led by high disposition activity, along with competition from other players, are causes of concern.

Kimco currently has a Zacks Rank #3 (Hold). Investors interested in the retail REIT industry can also consider stocks like Equinix, Inc. (NASDAQ:EQIX) , EPR Properties (NYSE:EPR) and The Macerich Company (NYSE:MAC) . While Equinix sports a Zacks Rank #1 (Strong Buy), both EPR Properties and Macerich carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Equinix has a long-term growth rate of 16.90%, ahead of the industry average of 5.60%. EPR Properties' long-term growth rate of 7.1% is also above the industry average. On the other hand, Macerich is a steady performer, having beaten the Zacks Consensus Estimate in all four trailing quarters, with an average surprise of 3.61%.

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