Back to top

Analyst Blog

Retail real estate investment trust (REIT) – Kimco Realty Corp. (KIM - Analyst Report) recently closed the sale of InTown Suites company and its associated real estate assets -- the single largest residual non-retail investment of the company. It was vended to an affiliate of Starwood Capital Group for a gross sale price of $735 million, including $609 million of existing mortgage debt.

Through the sale of this non-retail investment, which had a book value of around $83 million, Kimco reaped $103 million as its share of proceeds. Notably, InTown Suites was owned by a joint venture, InTown Hospitality Investors LP, where Kimco held a 75% stake.

The move comes as part of Kimco’s current focus on improving its core business line, trimming its non-retail assets and investments as well as non-strategic retail assets, and reshuffling its joint venture investments to achieve overall efficiency.

Following this asset sale as well as other non-retail deals during the quarter, Kimco’s non-retail investments will represent less than 2% of its gross assets -- a significant improvement and the lowest level since the implementation of this program of non-retail investments’ monetization in 2010.

On the other hand, Kimco is redeploying the capital to improve its core business operations and solidify its North American portfolio. Alongside, it is raising stake in a number of its joint ventures.

Recently, Kimco raised its stake in one of its joint ventures that helped it gain ownership interest in 39 shopping centers, occupancy levels at which currently stand at 96%. Earlier, the company invested $67 million to raise its stake in two ventures that helped it gain ownership in 70 shopping centers. The tenant list of these shopping centers boasts 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).

Going forward, we expect this Zacks Rank #3 (Hold) stock to ride high on the growth trajectory, though competitive market and short-term headwinds for occupancy may somewhat impede the growth momentum.

Please login to Zacks.com or register to post a comment.