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Shares of Kimco Realty KIM have gained 30.9% in the past six months compared with its industry’s rally of 15.6%.
This Jericho, NY-based retail real estate investment trust (REIT) is well-poised to benefit from its portfolio of premium shopping centers, predominantly grocery-anchored, in the drivable first-ring suburbs within key major metropolitan Sunbelt and coastal markets. Its focus on developing mixed-use assets and a healthy balance sheet position bode well for long-term growth.
Last month, the company reported third-quarter 2024 funds from operations (FFO) per share of 41 cents, beating the Zacks Consensus Estimate by a penny. The metric grew 7.5% from the year-ago quarter. Results reflected a year-over-year rise in revenues.
Analysts seem bullish on this Zacks Rank #2 (Buy) company. The Zacks Consensus Estimate for its 2024 FFO per share grew one cent in the past week to 42 cents.
Image Source: Zacks Investment Research
Let’s find out the factors behind the surge in the stock price.
Strategic Location of KIM
Kimco’s properties are located in the drivable first-ring suburbs within key major metropolitan Sunbelt and coastal markets. Particularly, 82% of the annual base rent (”ABR”) comes from its top major metro markets. Given the strategic location of its properties, it is likely to witness healthy demand in the near term, boosting leasing activity.
KIM’s Diversified Tenant Base
Kimco enjoys a diverse tenant base, led by a healthy mix of essential, necessity-based tenants and omni-channel retailers. National/regional tenants accounted for 81% of KIM’s pro rata ABR as of the end of the third quarter of 2024. Given the strength of its retailers with a developed omnichannel presence, the company is likely to be able to generate stable cash flows.
Focus to Develop Grocery-Anchored Centers & Mixed-Use Assets
During uncertain times, the grocery component saved the grace of the retail REITs. As of Sept. 30, 2024, Kimco achieved 84% ABR from the grocery-anchored portfolio from 78% in 2020. KIM has set a target to reach 85% of its ABR from this segment.
In the third quarter of 2024, Kimco witnessed 55 consecutive quarters of positive leasing spreads, indicating solid pricing power across its high-quality portfolio. Given the necessity-driven nature of the company’s grocery-anchored portfolio, it is likely to continue witnessing healthy leasing activity in the upcoming period and remains well-positioned to tide over challenging times.
The company also emphasizes mixed-use assets clustered in strong economic metropolitan statistical areas. The mixed-use assets category is benefiting from the recovery in both the apartment and retail sectors.