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Kimco Closes Wilton River Park Deal - Analyst Blog

Posted: 3/12/2013 6:15:00 PM
Referenced Stocks: GPS;KIM;PEI;SBUX;SVU

Kimco Realty Corp. ( KIM ) recently closed the purchase of Wilton River Park located in Connecticut. The company, which accomplished the first phase of the acquisition in Aug 2012, acquired the remaining part of Wilton River Park that spans 283,000-square-foot. Kimco made a total investment of $82 million, including $57 million of mortgage debt, for this deal.

A Premium Property

The deal is a strategic fit and brings on board well known national retailers such as Gap ( GPS ), Starbucks ( SBUX ) and True Value Hardware, fashion boutiques Snappy Gator and Chou Chou, and the 4-screen Bow Tie Cinemas.

With a strong mix of retailers, the acquisition of Wilton River Park will benefit Kimco's shopping center portfolio quality. The property offers locational advantage to Kimco as it is situated in the upscale market of Lower Fairfield County and is situated close to both New York City and the Long Island Sound. Notably, within three-miles of Wilton River Park, the average household income is $241,000.

Phased Acquisition

Kimco had acquired Wilton Campus Shops in the initial phase in Aug 2012. A 97% occupied retail center - Wilton Campus Shops - is anchored by the national grocer Stop & Shop.

Moreover, to gain complete ownership over the complex, the company recently penned the purchase of Wilton Executive Campus and Shoppes for $42 million, including the assumption of $36 million of mortgage debt. Spanning 187,000-square-foot, this mixed-use center is next to Wilton Campus Shops and has access to all roads and parking.

As a matter of fact, the complete ownership offers Kimco more flexibility with respect to leasing and development and helps in reaching an optimal tenant mix and efficient commercial space utilization.

Our Take

With a geographically diversified portfolio, concentrated mostly in high-income, high-growth areas, Kimco is a leading owner and operator of neighborhood and community shopping centers in the U.S.

The company is currently focusing on its core business activities to tide over the volatility in the market. In Jan 2013, the company disclosed its participation in the consortium to acquire 5 grocery banners totaling 877 locations from SUPERVALU Inc. ( SVU ) and a tender offer for up to 30% percent of the outstanding SUPERVALU shares.

We believe such acquisitions provide solid upside potential for top-line expansion of the company, and hence we remain encouraged.

In addition, it has a strong balance sheet with easy access to capital to allow continued growth. However, stiff competition from other players in the market undermines its growth potential to some extent.

Kimco currently retains a Zacks Rank #3 (Hold). However, you may wish to consider another REIT stock - Pennsylvania Real Estate Investment Trust ( PEI ) -- which carries a Zacks Rank #1 (Strong Buy).

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