Kimco Realty Corp. (KIM - Free Report) has provided an update of its Q2 transaction activity and reported that it has sold 17 shopping centers, aggregating 2.7 million square feet of space, in the quarter. With these dispositions, the company’s second-quarter sales volume has surpassed $330 million and for the first half of the year, the same aggregated $556 million. This retail REIT now remains on track to meet its full-year disposition target of $700-$900 million.
Specifically, the 17 shopping centers were sold off for $334.0 million, of which Kimco’s share of dispositions amounted to $319.3 million. The bunch of properties that were sold off included a 368,000-square-foot property in Springfield, MO — Primrose Marketplace — that was sold for $51.8 million, a 356,000-square-foot property in Chula Vista, CA — Broadway Plaza — for $58.5 million as well as a 269,000-square-foot center in Downers Grove, IL — Downers Park Plaza — for $26.7 million. The company also disposed a 145,000- square-foot property in Hoover, AL — The Grove — for $21.0 million which marked its exit from the state of Alabama.
The company witnessed solid demand for open-air shopping centers and the Q2 property sales’ blended cap rate came in line with its expected range of 7.5-8%.
Notably, mall traffic continues to suffer from the rapid shift in customers' shopping preference through online channels, resulting in store closures and retailers bankruptcies. These have cast a pall on retail REITs like Simon Property Group Inc. (SPG - Free Report) , GGP Inc. , Kimco Realty, Macerich Company (MAC - Free Report) and others, and their share prices have suffered in the past 12 months.
However, Kimco has been countering the challenges and the company 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. Particularly, the company is aimed at improving its portfolio mix and experiencing decent demand from high-growth category retailers, including off-price and home improvement.
In fact, amid transformation in the retail landscape, Kimco remains well poised to navigate through mall traffic blues, with focus on service and experiential tenants, and omni-channel players who generate 56% and 39% of annual base rent, respectively. Moreover, the company is aiming to expand 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 its operating and leasing risks.
However, in connection to its strategic efforts, Kimco is making significant disposition of the company’s assets. It disposed 38 shopping centers and four land parcels, aggregating 5 million square feet of space year-to-date for $556.1 million, of which, the company’s share of the sales price was $531.8 million. 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.
Kimco currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company’s shares have appreciated 17.2% in the past three months compared with its industry’s growth of 9.9%.
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