Kimco Realty Corporation (NYSE:KIM), the biggest shopping center REIT, has owned community shopping centers for over fifty years. Like those of most shopping center REITs, Kimco’s share prices dropped by 10.3 percent during the first half of 2015. The sector’s average return was almost -10 percent. Kimco looks like it is closely tracking its peers.
Being larger has the benefits of diversified portfolios across different regions, a strong balance sheet, easier access to cheaper credit and investment grade credit rating. The company extracts value from its existing partnership and enters into consortium to buy its own grocery banners.
Although Kimco has been present in Canada and Latin America via joint ventures, its NOI comes mostly from the United States. Operationally, the total portfolio occupancy reached 95.7 percent in Q1 2015 — a more-than-100-basis-point increase over Q1 2014. US portfolio average rent per square foot has increased by 6.2 percent in Q1 2015 vs. Q1 2014 as leasing spreads widened, driven by stronger rental rates for new leases.
Kimco feels less threatened by e-commerce than do other players. Management alleges that 93% percent of its annualized base rent is Internet-resistant because they sell necessity products and services like food. They also underline that some online trends have benefited them. Online-focused companies like Dick’s have been opening brick-and-mortar stores to increase brand recognition.
Kimco has been disposing of properties that show below-par performance compared with the rest of the portfolio, preferring to remain in higher-household-density, average-household-income and higher-population areas. The North American portfolio’s average household income is 20 percent above the national average.
The company is trading close to the sub-sector’s median dividend yield of 4.0 percent and median price-to-FFO of 16.4×. It is also trading near its four-year historic norm. If you are seeking a large-cap shopping center with a fair entry point, consider Kimco.
Source: Kimco Realty Corporation, Fast Graphs
Written by Heli Brecailo
Disclaimer: This newsletter is not engaged in rendering tax, accounting, or other professional advice through this publication. No statement in this issue is to be construed as a recommendation to buy or sell any security or other investment. Please do your own due diligence before making any investment decision. Some information presented in this publication has been obtained from third-party sources considered to be reliable. Sources are not required to make representations as to the accuracy of the information, however, and consequently the publisher cannot guarantee accuracy.
Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.