Tags: Kimco | KIM | REIT | stocks

Kimco: Right Company, Wrong Time

By    |   Monday, 12 Sep 2011 10:58 AM

Kimco Realty (KIM), a real estate investment trust (REIT), touts itself as the largest U.S. owner of neighborhood and community shopping centers. As of June 30, the company owned stakes in 946 shopping centers totaling 138 million square feet of leasable space in 44 states, Puerto Rico, Canada, Mexico, and South America.

Experts agree that Kimco is a well-run company. But now isn’t a good time to be in the retail business. Unemployment remains stubbornly high at 9.1 percent and consumers continue to shrink their burdensome debt obligations.

Lower retail spending means less income for stores, which means retailers already at Kimco properties won’t be able to afford higher rents and fewer stores will open at the company’s locations.

Economic issues aside, Kimco is a strong company. Unlike some other shopping center owners, it has a heavy emphasis on co-investments. That gives it an opportunity to take part in profitable investments it wouldn’t be able to make on its own.

The firm garners fees to run the co-investment funds and manage the properties and usually purchases a 15 percent to 20 percent stake in its joint ventures. That means Kimco needs to expend less of its own capital to grow.

Clean balance sheet

Kimco has cleaned up its balance sheet since the financial crisis and continues to shed non-core assets. That sets the company up for strong gains once the consumer sector rebounds.

In the second quarter, its recurring funds from operations, a key indicator for REITs, gained 5 percent from a year earlier to $121.4 million.

Standard & Poor’s analyst Robert McMillan has a hold rating on Kimco shares. “As one of the largest owners and operators of neighborhood and community shopping centers in the U.S., with a broad array of established relationships, KIM should generate above-average rent growth over the long term,” he writes.

“Near-term, though, we think an expected drop in development, stemming from the weak economy and tight credit, will limit the shares.” The company next reports around Nov. 2.

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Kimco Realty (KIM), a real estate investment trust (REIT), touts itself as the largest U.S. owner of neighborhood and community shopping centers. As of June 30, the company owned stakes in 946 shopping centers totaling 138 million square feet of leasable space in 44 states,...
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Monday, 12 Sep 2011 10:58 AM
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