Kimco Sheds Mexico Assets - Analyst Blog

Retail real estate investment trust (REIT), Kimco Realty Corporation KIM continues to narrow down its exposure to the Latin American assets with completion of the sale of a 9-property retail portfolio in Mexico. The properties, which enjoy 90% occupancy, span 2.1 million square feet of space.

These assets were sold for 2.9 billion Mexican pesos ($222.0 million) to a joint venture between Macquarie Mexican REIT and Grupo Frisa. It included a debt of 475.9 million Mexican pesos ($36.3 million). The pro-rata share of that sale price was around 2.0 billion Mexican pesos ($153 million) for Kimco.

Kimco anticipates reaping a gain of $20.0 million on sale (prior to any currency impact). It might receive additional payment upon meeting specific occupancy and rental growth thresholds 18 months following closure.

Currently, Kimco intends to concentrate its future investments around the neighborhood and community shopping center segment, primarily focusing on the North American market. It is well on track to improve its business operations and is shedding its non-retail assets and investments as well as non-strategic retail assets.

In recent times, the company has aggressively pruned its Latin American portfolio and redeployed the proceeds to acquire high quality U.S. shopping center assets in its key markets, with demographics and household income levels higher than the national average.

In 2013, Kimco disposed 112 Latin American assets and garnered $360.3 million from it. After the disposition of these 9 properties, the company has 36 properties in its Latin America shopping center portfolio that comprise 5.9 million square feet of space in total. The company plans to shed these assets and therefore, is negotiating deals for these dispositions.

We expect such moves to benefit Kimco's bottom line in the long term. Moreover, going forward, solid demand for its properties, its portfolio restructuring activity, along with easy access to capital, promises considerable upside potential.

Kimco currently has a Zacks Rank #3 (Hold). Moreover, investors interested in the retail REIT industry may consider stocks like Acadia Realty Trust AKR, General Growth Properties, Inc. GGP and Simon Property Group Inc. SPG. All these stocks carry a Zacks Rank #2.