Kimco Buys Out Blackstone in 39-Property Portfolio

By Keith Loria, Contributing Editor

Kimco Realty Corp. has acquired the remaining 66.6 percent interest in the 39-property Kimstone portfolio that it originally owned with a joint venture partner, a subsidiary of Blackstone Real Estate Partners VII, for $925 million.

According to the deal, Kimco will pay approximately $512.3 million to acquire BREP’s interest. The sale price also includes the assumption of approximately $426.7 million in mortgage debt.

“It’s a portfolio we were very familiar with since we already had an existing equity stake in it. We manage these properties and we consider these primarily institutional-grade in our core markets,” David Bujnicki, Kimco’s vice president, investor relations and corporate communications, told Commercial Property Executive. “We feel very strongly about them. They have surrounding demographics at or above our existing portfolio.”

The 5.6-million-square-foot portfolio consists of well-located, grocery-anchored shopping centers and power centers in strong demographic areas that have high barriers to entry, such as New York, Virginia, Texas, Florida, California, and Maryland. Currently, it is approximately 97 percent occupied.

“Given where cap rates and pricing are for open market and brokered third-party deals, it’s been very aggressive pricing and we felt much more comfortable acquiring a property we were familiar with,” Bujnicki added. “The portfolio includes four signature assets that we have high regard for and we still think there is further value creation and upside in the portfolio through redevelopment and re-tenanting.”

The four signature assets consist of 280 Metro Center, a 228,000-square-foot power center located in the San Francisco Bay area of Colma, Calif. This 95-percent-occupied center is supported by a well-known list of anchors that includes Nordstrom Rack, Marshalls and Bed Bath & Beyond; Airport Plaza, a 437,000-square-foot power center, located in Long Island’s popular Farmingdale. This 97-percent-occupied center features an anchor roster that includes Home Depot, PetSmart, Bed Bath & Beyond, and TJ Maxx and Regal Cinemas as a shadow anchor; Dulles Town Crossing, a 799,000-square-foot, fully occupied power center located in Sterling, Va., anchored by Walmart, Lowes Home Center, Sam’s Club, Nordstrom Rack, Bed Bath & Beyond, TJ Maxx, Best Buy and Cost Plus; and Stafford Marketplace, a 331,000-square-foot, fully occupied grocery anchored shopping center located in Stafford, Va. and anchored by Shoppers Food, Ross Dress for Less, TJ Maxx, Michaels, Bed Bath & Beyond, and PetSmart.

The active pipeline already includes the replacement of an old Borders space with Nordstrom Rack in Reno, Nev. and the redevelopment of a specialty grocer at the Franklin Park Shopping Center in Spokane, Wash. Additionally, in Airport Plaza, there’s the opportunity for development and they are close to inking a highly regarded client for the new space.

“We’ve been emphasizing two things with our strategy: simplification of our business model, including the reduction in the number of properties and joint venture partners, so this is right down the fairway, as well as transforming our portfolio to owning the highest and best quality properties,” Bujnicki concluded. “Now that we can own these on our balance sheet, we believe this checks the box on both pieces of the strategy.”

In addition to this deal, Kimco has acquired the remaining interests in 33 properties from its joint venture partners at a pro-rata amount of $697.6 million throughout 2014