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Kimco Buys a Portfolio of 10 Shopping Centers from JV

Zacks Equity Research

Kimco Realty Corp. (KIM) announced the acquisition of a 10-property shopping portfolio valued at $275.8 million from its existing joint venture with SEB Asset Management. This marks the company’s third JV portfolio purchase in 2014.

The latest acquisition by the retail real estate investment trust (:REIT) comes as part of its efforts to transform its portfolio and simplify business through premium asset purchases and lowering of property count in its JVs.

Kimco, which earlier enjoyed 15% ownership stake in this property, has presently taken over the remaining 85% stake from SEB for a payment of $69.8 million. The acquisition includes the assumption of a $193.6 million mortgage debt.

The portfolio, spanning 1.4 million square foot, is positioned in mature markets of the Mid-Atlantic region. It is mainly grocery-anchored with 95.4% occupancy. Weis Markets, Inc. (WMK) and Safeway Inc. (SWY) rank among its anchors while The Kroger Co. (KR) is one of the shadow anchors. The portfolio also enjoys a lineup of reputed national retailers, which deems it a strategic buyout for Kimco.

Kimco’s current focus on portfolio restructuring and business streamlining is commendable. In 2014, the company has already added 25 JV properties to its wholly owned portfolio. These properties, with a gross value of $776.9 million, cover 3.2 million square feet.

Kimco’s plan to focus on key U.S. markets with demographics and household income levels higher than the national average, augur well for its growth. With an easy access to capital, the company remains well poised to ride on the growth trajectory.

Kimco is slated to announce its second-quarter results on Jul 29. The Zacks Consensus Estimate for FFO per share is currently pegged at 34 cents.

The company’s Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +2.94%. This, along with a Zacks Rank #3 (Hold), makes us confident of a positive earnings beat.

Note: FFO, a widely accepted and reported measure of the performance of REITs is derived by adding depreciation, amortization and other non-cash expenses to net income.

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