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Retail real estate investment trust (REIT) – Kimco Realty Corp. (KIM - Analyst Report) has raised stake in one of its joint ventures (JV). The move has facilitated the company to gain ownership interest in 39 shopping centers, occupancy levels at which currently stand at 96%. This stake acquisition is in sync with Kimco’s current focus on improving its core business line and reshuffling its joint venture investments to achieve overall efficiency.

In particular, Kimco raised its stake to 33% from 18% in the Kimco-UBS (“KUBS”) JV. Concurrently, Blackstone Real Estate Partners VII acquired the remaining 67% stake in the JV from UBS Wealth Management North American Property Fund’s affiliates. The deals were based on a gross purchase price of $1.1 billion and included debt assumption of $631 million.

The tenant list of these shopping centers boasts of investment grade retailers such as Bed Bath & Beyond Inc. (BBBY - Analyst Report), The Home Depot, Inc. (HD - Analyst Report), and The TJX Companies, Inc. (TJX - Analyst Report). In addition to retailers, the portfolio is balanced with market leading grocers such as Safeway, Publix, Giant Food and Whole Food Markets.
Spanning 5.6 million square feet in aggregate and mainly positioned in New York, Virginia, Texas, Florida, California, and Maryland, KUBS’ portfolio consisting of 39-property shopping centers is strategically located in retail markets with high barriers to entry.  

Our Take

With the rise in stake in the JV, Kimco is well placed to ride on the growth trajectory going forward. Earlier in the month, the company invested $67 million to raise its stake in two ventures that helped it gain ownership in 70 shopping centers.

Last month, the company disclosed the acquisition of Marketplace at Factoria in the suburban Seattle community of Bellevue, Wash. Kimco, which earlier had a 50% ownership interest in this property, has now acquired the majority of its joint venture partner’s ownership interest in this property.

Kimco is simultaneously shedding its non-retail assets and investments as well as non-strategic retail assets and redeploying the capital to solidify its North American portfolio.

Hence, we remain upbeat on this Zacks Rank #3 (Hold) stock. However, stiff competition from other players in the market and short-term headwinds for occupancy in the midst of an unsettled economic environment remain our concerns.

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