Kimco Realty KIM has marked the completion of its previously announced acquisition of RPT Realty (“RPT”) in an all-stock transaction, inclusive of the assumption of debt and preferred stock. This milestone integration entwines 56 open-air shopping centers encompassing 13.3 million square feet of gross leasable area into Kimco’s portfolio of 527 properties. Of the 56 shopping centers, 43 are wholly owned.
The buyout doesn’t only broaden 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; it also sets the stage for earnings accretion from the initial cost savings synergies of roughly $34 million. Approximately 85% of the amount is expected to materialize in 2024.
The retail real estate investment trust (REIT) is also set to benefit from increased scale in high-growth target markets, expanded partnership opportunities, and preservation of balance sheet strength.
Conor Flynn, CEO of Kimco, expressed, “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.”
According to 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.
In terms of 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 pursuit of RPT Realty is part of its strategy 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, providing a stable source of income. Consequently, the acquisition of RPT Realty appears to be a strategic fit, potentially propelling the company 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 center, strategically located at the intersections of I-95, Dale Boulevard, Route 1 and Opitz Boulevard and benefiting from 5.5 million annual visits, is expected to boost sales and prove to be a prudent investment.
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 Watch
For investors interested in the retail REIT sector, some better-ranked stocks include TANGER INC SKT and Urban Edge Properties UE, each sporting a Zacks Rank #1 (Strong Buy). 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. Likewise, 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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