Kimco's Grocery-Anchored Shopping Center Empire Tops 100M SF

Kimco, by far the leading REIT that owns and operates grocery-anchored shopping centers, has hit a benchmark as it enters 2024 that underlines its dominance in the robust open-air retail sector: its portfolio now spans more than 100M SF.

The Jericho, NY-based REIT, which built its portfolio with properties in first-ring suburbs of major metropolitan markets, rapidly is expanding its Sun Belt holdings and zeroing in on assets that offer the potential for development as mixed-use centers.

Kimco, which has established a goal of generating 15% of its NOI from mixed-used properties by 2025, has secured several assets in recent acquisitions that will put it within reach of the target.

One of the crown jewels of Kimco’s $2B acquisition of RPT Realty’s 13.3M SF portfolio, a merger announced in August that closed this week, was Mary Brickell Village, a grocery-anchored mixed-used center in Miami’s Brickell City, a $1B luxury development that opened in 2016.

Kimco’s separate acquisition of Stonebridge at Potomac Town Center, a 500K SF grocery-anchored shopping center in the DC metro, includes 50 acres of land the REIT is eyeing for a mixed-used expansion. Kimco leveraged the strength of its cash flow to reel in Stonebridge for $173M in cash at a cap rate close to 7%.

Kimco’s has pivoted to the Sun Belt as it seeks assets in markets that don’t pose the heavy barriers to entry for new supply and development that are common in Northeast and Mid-Atlantic markets. Adding assets in the Sun Belt was a prime focus of Kimco’s $3.9B acquisition of Weingarten Realty in 2021.

The RPT deal, which adds 56 open-air shopping centers to a portfolio that now totals 583 properties, strengthens Kimco’s focus on Sun Belt centers, increasing the firm’s presence and scale in markets with strong population growth. Kimco CEO Conor Flynn estimates that 70% of RPT’s portfolio aligns with the REIT’s key strategic markets.

Kimco’s growth strategy also envisions expanding its joint venture with GIC, the Singapore-based sovereign wealth fund, which played a pivotal role in the laying the groundwork for the RPT mega-deal. GIC, which has committed to invest $500M in open-air shopping centers in the U.S., acquired a minority stake in five RPT-owned shopping centers prior to RPT’s acquisition by Kimco.

Flynn touted the strength of Kimco’s grocery-anchored portfolio in the REIT’s most recent earnings call at the end of October.

“In an environment marked by virtually no new supply, strong demand from new, recurring, traditional, and non-traditional anchor and small shop tenants, along with the resilient consumer, we continue to produce strong operating results,” Flynn said, during the call.

“Our small shop occupancy reached an all-time high of 91.1% as demand for our portfolio continues. Our strong positive leasing spreads of 34.9% for new leases and 8.8% for renewal and options reflects the pricing power of our high-quality portfolio. Our combined spread of 13.4% is the highest in six years,” the CEO said.

Kimco signed leases totaling 2.1M SF in Q3. The key metric of anchor occupancy stood at more than 97%, a figure that would have been higher due to the ongoing process of “recapturing” space from box stores vacated by Bed, Bath & Beyond.

Flynn reported that Kimco has re-leased seven of the boxes at a positive spread of 54%. “The remaining 12 Bed Bath boxes are all in negotiation and continue to benefit from the favorable supply and demand dynamic for well-located retail,” he said.