Kimco Forms JV with Canadian Pension Fund to Buy U.S. Shopping Centers

Prime neighborhood shopping centers will be the target of a new joint venture between New Hyde Park, N.Y.-based Kimco Realty Corp. and the Toronto-based Canada Pension Plan Investment Board. The partnership has kicked off with a $370 million investment that includes Kimco's contribution of a 2 million-square foot portfolio of five properties.

April 22, 2010
By Barbra Murray, Contributing Editor

Prime neighborhood shopping centers will be the target of a new joint venture between New Hyde Park, N.Y.-based Kimco Realty Corp. and the Toronto-based Canada Pension Plan Investment Board. The partnership has kicked off with a $370 million investment that includes Kimco’s contribution of a 2 million-square foot portfolio of five properties.

The Kimco assets now held by the joint venture were part of a 21-property portfolio the REIT acquired in November 2009 from DRA PL Retail Real Estate Investment Trust in an $875 million deal involving $175 million in cash, $564 million of mortgage debt and $50 million of perpetual preferred stock. Three of the five shopping centers are located in California: the 411,000-square-foot Morena in San Diego, the 345,000-square-foot Redhawk Town Center in Temecula and the 100,000-square-foot Rancho San Diego in El Cajon. Oakwood Plaza, an 870,000-square foot property in Hollywood, Fla., and the 338,000-square-foot Pentagon Centre in Pentagon City, Va., complete the group. All five of the properties boast locations in well-established neighborhoods and tenant rosters featuring popular national discount retailers for anchor tenants–characteristics the joint venture will seek in its new acquisitions of single assets and multi-property portfolios.

As per terms of the new partnership agreement, Kimco, which will serve as the operating partner, will hold on to a 55 percent interest in the joint venture, leaving the Canadian pension fund to acquire the remaining 45 percent stake.

With the rush to snap up properties now that the commercial real estate market has–or so most industry experts say–hit bottom, the formation of alliances like Kimco’s joint venture with CPPIB may very well become a trend.

“It makes lots of sense for large pools of capital such as that controlled by the Canada Pension Plan to partner with the operating platforms offered by Kimco and many other REITs,” Jim Sullivan, Managing Director with real estate research and consulting firm Green Street Advisors Inc., told CPE. “I expect that we’ll see many more similar partnerships in a variety of property types over the next couple of years.”

In March, Glimcher Realty Trust closed a joint venture with The Blackstone Group involving two Glimcher shopping malls accounting for 2.5 million square feet; the transaction, valued at $320 million, included the partnership’s assumption of $215 million in existing debt on the properties.

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