Kimco to Buy 66.7% Blackstone Stake in Kimstone Assets - Analyst Blog

Kimco Realty Corp. (KIM) is set to gain full ownership of the 39-property Kimstone portfolio by acquiring the remaining 66.7% stake of its partner, a subsidiary of Blackstone, in the same portfolio.

The move takes the company a step closer to its simplification goal. The portfolio would be purchased at a price of $925 million, including mortgage debt assumption of around $426.7 million.

Spanning 5.6 million square feet with a high occupancy (97%), this portfolio comprises grocery-anchored shopping centers and dominant power centers concentrated in the core markets of New York, Virginia, Texas, Florida, California and Maryland.

Four signature assets – 280 Metro Center in the San Francisco Bay Area of Colma, CA; Airport Plaza in Long Island community of Farmingdale, NY; Dulles Town Crossing in Sterling, VA; and Stafford Marketplace in Stafford, VA – are part of this portfolio as well. These properties boast several reputed tenants like Bed Bath & Beyond Inc. (BBBY), Nordstrom Rack (JWN) and Wal-Mart Stores, Inc. (WMT).

Kimco needs to shell out around $512.3 million for this stake acquisition that is expected to be completed in the first quarter of 2015. The funding needs would be met through proceeds reaped from the U.S. and Latin American property dispositions, along with funds available under its current $1.75 billion revolving credit facility.

As a matter of fact, Kimco is currently focusing on transforming its portfolio and simplifying its business model. For this, on one hand, the company is shedding slower-growth assets from non-strategic markets and lowering its property count in joint ventures. On the other hand, it is strategically investing in premium properties and adding them to its wholly owned portfolio base.

As part of that move, the company, on top of this pending Kimstone deal, bought the residual stake in 33 properties from its JV allies at $697.6 million (pro-rata) since the beginning of 2014.

Moreover, these 39 premium properties enjoy three-mile average household income level of $92,000 and an average base rent per square foot of $15.83, both figures surpassing Kimco's current portfolio averages. Hence, this portfolio buyout comes as a strategic fit.

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