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Kimco Adds Santee Trolley Square

Zacks Equity Research

Kimco Realty Corp. (KIM) announced the addition of the Santee Trolley Square in suburban San Diego to its portfolio. Particularly, the company purchased a 50% ownership interest of its institutional partner in Santee Trolley Square for $98 million.

A Premium Property

Spanning 311,000-square-foot, this San Diego property is 98% occupied and is burdened with a $48.5 million mortgage. It houses several well known national retailers like The TJX Companies Inc. (TJX), Bed Bath & Beyond (BBBY), and Target Corp. (TGT).

Its tenant list also includes industry leading restaurateurs such as Darden Restaurants Inc. (DRI), Starbucks Corporation (SBUX), Brinker International Inc. (EAT) and Chipotle Mexican Grill Inc. (CMG).

Moreover, Santee Trolley Square offers locational advantage to Kimco as it is well connected to major roadways and Trolley lines. This premium shopping center not only enjoys a strong footfall of 103,000 residents who reside nearby (within three miles), but draws crowd from outside its community.

Along with this acquisition, Kimco’s tally of properties owned in the San Diego-Carlsbad-San Marcos metropolitan statistical area (MSA) comes to 21.

Our Take

Given the current uncertainty in the capital markets, Kimco has modified its business strategy to focus on core retail competencies. The company intends to concentrate its future investments on the neighborhood and community shopping center segment, primarily focusing on the North American market.

During the fourth quarter of 2012, Kimco acquired nine new properties with City Heights Retail Village, Savi Ranch and Metro New York Grocery portfolio being the noteworthy ones. We believe such opportunistic acquisitions provide solid upside potential for the top-line expansion of the company and hence we remain encouraged.

Kimco currently retains a Zacks Rank #4 (Sell). However, considering its fundamentals and the current operating environment, we maintain our long-term Neutral recommendation on the stock.

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