Kimco (KIM) Completes RPT Realty Buyout in an All-Stock Deal
Kimco Realty KIM has closed its earlier announced acquisition of RPT Realty (“RPT”) in an all-stock transaction, inclusive of the assumption of debt and preferred stock. The buyout adds to Kimco’s portfolio 56 open-air shopping centers encompassing 13.3 million square feet of gross leasable area to its existing portfolio of 527 properties. Of the 56 shopping centers, 43 are wholly owned.
Apart from expanding Kimco’s footprint of high-quality, grocery-anchored shopping centers in the drivable first-ring suburbs of its top major metropolitan Sunbelt and coastal markets, the transaction will likely result in earnings accretion from the initial cost savings synergies of roughly $34 million. Around 85% of the amount is expected to be realized in 2024.
The retail real estate investment trust (REIT) will also benefit in terms of increased scale in high-growth target markets, expanded partnership opportunities and preservation of balance sheet strength.
Per Conor Flynn, CEO of Kimco, “We are pleased to announce the successful completion of our acquisition of RPT, which will enable us to drive long-term growth and value creation for our shareholders in a leverage-neutral manner through embedded growth opportunities and economies of scale advantages.”
Per the agreement terms, RPT Realty shareholders will receive 0.6049 of Kimco common stock for each RPT share that they owned immediately prior to the effective time of the merger, along with cash in lieu of any fractional shares held.
RPT’s preferred shareholders will receive one depositary share for each 7.25% Series D Cumulative Convertible Perpetual Preferred Share they owned right before the merger. This represents around 1/1,000th of a share of Kimco's 7.25% Class N Cumulative Convertible Perpetual Preferred Stock (Kimco Class N Preferred Stock).
With respect to dividends, Kimco’s board of directors announced a “stub period” cash dividend of 14.097 cents per depositary share representing Kimco Class N Preferred Stock. The dividend will be paid out on Jan 16 to shareholders on record as of Jan 5, 2024.
Kimco’s latest buyout is part of its ongoing efforts to expand its grocery-anchored shopping center portfolio that offers essential goods and services. The necessity-driven nature of this portfolio makes it resilient during periods of economic downturns and provides a stable source of income. Hence, the company’s acquisition of RPT Realty seems like a strategic fit and will likely help it inch closer to its target of achieving 85% of its annual base rent from its grocery-anchored centers by 2025.
In August 2023, Kimco acquired Stonebridge at Potomac Town Center, a 504,000-square-foot, grocery-anchored lifestyle center in Woodbridge, VA, for $172.5 million. The 96% occupied center is strategically located at the intersections of I-95, Dale Boulevard, Route 1 and Opitz Boulevard and benefits from 5.5 million annual visits. This is likely to boost sales, making the buyout a prudent move.
Shares of the Zacks Rank #3 (Hold) company have gained 26.9% in the past three months compared with the industry's growth of 19.3%.
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Stocks to Consider
Some better-ranked stocks from the retail REIT sector are TANGER INC SKT and Urban Edge Properties UE, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Tanger Factory Outlet Centers’ 2023 FFO per share has been raised 1.6% in the past two months to $1.94.
The Zacks Consensus Estimate for Urban Edge Properties’ 2023 FFO per share has moved 5% upward in the past month to $1.25.
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.
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