Kimco Realty Corp. ( KIM Quick Quote KIM - Free Report) , the owner and operator of open-air, grocery-anchored shopping centers and mixed-use assets, has properties in the drivable first-ring suburbs of its top 20 major metropolitan Sunbelt and coastal markets, which offer several growth drivers. Also, the company’s acquisition of the grocery-anchored shopping center owner — Weingarten Realty Investors — has helped it to benefit from an increased scale, density in the key Sun Belt markets and a broader redevelopment pipeline. The grocery component has been the saving grace of the retail REITs and 79.4% of Kimco’s annual base rent came from the grocery-anchored centers in the third quarter. With a well-located and largely grocery-anchored portfolio that offers essential goods and services, the retail REIT witnessed a decent leasing activity in the third quarter. Kimco signed 411 leases, aggregating 2.1 million square feet of gross leasable area. The favorable trend is expected to continue. The rent-collection figures were also healthy. The company collected approximately 98% base rents during the third quarter. Along with focus on the grocery and home-improvement tenants, Kimco emphasizes the mixed-use assets clustered in the strong economic metropolitan statistical areas. Particularly, KIM is targeting an increase in the net asset value through a selected collection of mixed-use projects, redevelopments and an active investment management. Also, retailers are utilizing these last-mile stores as the indispensable fulfilment and the distribution centers to serve the dense population close by, and outperform the pure e-commerce players on delivery time and cost efficiency. Also, the curbside pick-up, combined with click-and-collect options, will likely continue to gain attention amid the current environment and in the post-COVID era, and the company is focused to capitalize on such trends. Such efforts are likely to enhance Kimco’s competitive advantage in current times. Kimco has been making efforts to bolster its financial flexibility. The retail REIT had more than $2.4 billion of immediate liquidity at the end of the reported quarter, including full availability under its $2-billion unsecured revolving credit facility. Kimco’s consolidated debt maturity profile is 8.7 years. Kimco has 474 unencumbered properties, which represent around 87% of its properties and 88% of its total net operating income. Shares of Kimco have gained 17.8% over the past six months, outperforming its industry’s increase of 4.6%. Moreover, the recent estimate revision trend indicates a favorable outlook as the Zacks Consensus Estimate for the 2021 funds from operations (FFO) per share has been revised marginally upward in the past week. Given the progress on fundamentals and the upward estimate revisions, the stock has decent upside potential for the near term. Image Source: Zacks Investment Research
However, over the recent years, the retail real estate traffic has continued to suffer amid a rapid shift in the customers’ shopping preferences and patterns with online purchases growing by leaps and bounds. These have made retailers reconsider their footprint and eventually opt for store closures.
Also, retailers unable to cope with competition are filing bankruptcies. This has emerged as a pressing concern for the retail REITs like Kimco as the trend is curtailing demand for retail real estate space. The situation has been further aggravated amid the social-distancing requirements and higher e-commerce adoption due to the COVID-19 crisis. Currently, Kimco carries a Zacks Rank #3 (Hold). You can see . the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here Key Picks
Some key picks from the retail REIT sector include
Simon Property Group ( SPG Quick Quote SPG - Free Report) , Federal Realty Investment Trust ( FRT Quick Quote FRT - Free Report) and STORE Capital Corporation ( STOR Quick Quote STOR - Free Report) . Simon Property Group holds a Zacks Rank of 2 (Buy) at present. Its 2021 FFO per share is expected to increase 23.8% year over year. The Zacks Consensus Estimate for Simon Property Group’s 2021 FFO per share has been revised nearly 3.8% upward in a month. Its long-term growth rate is projected at 8.70%. Federal Realty holds a Zacks Rank of 2 at present. Its long-term growth rate is projected at 8.40%. The Zacks Consensus Estimate for Federal Realty’s 2021 FFO per share has been revised 4.1% upward in a month to $5.32. This suggests a 17.7% increase year over year. The Zacks Consensus Estimate for STORE Capital’s ongoing-year FFO per share has moved marginally north to $1.89 over the past week. STORE Capital’s 2021 FFO per share suggests an increase of 3.3% year over year. Currently, STOR carries a Zacks Rank of 2. Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.