Kimco Realty Issues Q2 Activity Update, Keeps Vending Assets

As part of its efforts to fine tune the company’s portfolio, retail REIT Kimco Realty Corp. (NYSE:KIM) announced second-quarter 2019 disposition of three properties and one land parcel aggregating 875,000 square feet for $103.7 million. The company’s share of these sales amounted to $65.8 million.

The dispositions include properties like Latham Farms, a 625,000-square-foot shopping center in Latham, NY, which was sold for $73.7 million and 22ndStreet Plaza, a 176,000-square-foot shopping center in Oakbrook Terrace, IL that was vended for $21 million. Further, a 74,000-square-foot parcel at Green Orchard in Walker, MI, was disposed for $6.5 million.

Notably, rapid shift toward e-retailing, store closures and retailer bankruptcies have emerged as pressing concerns for retail landlords, which include the likes of Simon Property Group (NYSE:SPG) , Kimco, Macerich Company (NYSE:MAC) and Taubman Centers, Inc. (NYSE:TCO) .

However, Kimco is on track with its 2020 Vision that envisages the ownership of high-quality assets, concentrated in major metro markets which offer several growth levers. In fact, despite transformation in the retail landscape, the company remains well poised to navigate through mall traffic blues with focus on service and experiential tenants, and omni-channel players.

Moreover, the company is focused on expanding its small shops’ portfolio. These shops basically comprise service-based industries, such as restaurants, salons and spas, personal fitness and medical practices. The shops enjoy frequent customer traffic and are Internet resistant. Amid limited new supply and favorable demographics, this diversification is likely to help Kimco limit operating and leasing risks.

Simultaneously, Kimco is shedding non-core assets and exiting from its joint-venture portfolio. In sync with this strategy, the company is making significant disposition of assets. In fact, Kimco disposed 12 properties and one land parcel so far this year for a gross sales price of $226.1 million, which aggregated 1.9 million square feet of space.

Further, with $145.3 million worth of properties currently under contract, Kimco is well on track with its planned dispositions for the year. The company’s share of the sales would be worth $86.6 million. For the full year, Kimco forecasts $200-$300 million in net dispositions, with a blended cap rate of 7.25% to 7.75%. While such efforts are encouraging for the long term, the dilutive effect on earnings from high disposition activity cannot be averted in the near term.

Shares of this Zacks Rank #3 (Hold) company have gained 27.2% so far in the year, outperforming the industry’s rally of 12.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.



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