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Solid Results for America's Largest Shopping Center Landlord

Tickers in this article: COST HD KIM TGT TJX

Other notable recycling activities for Kimco -- a trend toward reducing the company's circle of competence -- are best explained by Henry during the latest earnings call:

"During 2012, we sold 68 shopping center properties in the U.S., which in general read or not in our key long-term markets, were represented lower quality assets. At the same time, during 2012, we acquired 24 additional shopping centers with generally excellent demographics, strong tenants and long-term growth. We are committed to continuing quarter-by-quarter to upgrade our portfolio, focusing on larger properties within our key markets. The sale of the remaining non-strategic and non-retail investments will provide the capital to acquire additional high-quality retail assets."

Picking Up Some Integrated Assets

Kimco recently announced that it was under an agreement with Blackstone (BX) and UBS Wealth Management-North America Property Fund to purchase around $1.1 billion in assets: 40 high-quality shopping centers containing approximately 5.6 million square feet. Kimco is already the operating partner in the deal and the company announced that it was increasing its 18% ownership interest to 33%. Nothing like putting more "skin in the game," especially when you know the players already.

In addition, Kimco previously announced that it was acquiring a fractional interest in just under 900 SUPERVALU grocery stores across 5 established grocery brands. The established buying partnership is considered to be a "pure real estate play" for Kimco and the obvious synergies should provide the company with an attractive risk-adjusted role. As Milton Cooper, Kimco's co-founder and co-Chairman explains (on the latest earnings call):

"Our role in the SUPERVALU transaction is as a real estate partner. We have been retained and have a fee arrangement, but our principal job is to help in the monetization of surplus real estate aspects of the transactions that require real estate expertise. And I suspect that out of that activity, there will be opportunities for acquisitions, and it should be accretive."

On the international front, Kimco's Canadian integration has performed exceptionally well driven by high occupancies and growing retailer demand. Kimco plans to open its first Target store (in a JV with RioCan) and this will be the first of 25 Target store openings per quarter in Canada. As Henry explained on the earnings call: "(This) should be transformational in the Canadian retail industry. With nine new scheduled Targets in our Canadian joint ventures, we are confident of both income and occupancy growth."

Kimco is a Buy

Kimco is currently trading at $21.55 per share with a current dividend yield of 3.90%. The company increased its dividend by 5.6% in 2012 and I expect to see further growth in 2013. Based upon my NAV pricing, Kimco appears to be trading at a discount of around 7%.