Kimco Realty, North America’s largest publicly traded owner and operator of open-air, grocery-anchored shopping centers, plans to acquire fellow shopping center real estate investment trust (REIT) RPT Realty in a deal valued at $2 billion.
The all-stock transaction, announced Monday, will add RPT’s 56 open-air shopping centers to Jericho, New York-based Kimco’s portfolio of 528 properties, which includes shopping centers and mixed-use developments. RPT’s portfolio includes 43 wholly owned shopping centers and 13 shopping centers owned through a grocery-anchored joint venture, encompassing 13.3 million square feet of gross leasable area. The deal also will bring RPT’s 6% stake in a 49-property net lease joint venture to Kimco.
“This transaction presents another exciting opportunity for our company to deepen our presence in key Coastal and Sun Belt markets, while accelerating our growth at an attractive valuation,” Kimco CEO Conor Flynn said in a statement. “Approximately 70% of RPT’s portfolio aligns with our key strategic markets. Furthermore, their substantial pipeline of signed-but-not-yet-open leases and 20% or greater mark-to-market leasing spread across the portfolio will drive higher growth for the combined company. The transaction is immediately accretive to FFO [funds from operations], and the addition of these properties further positions Kimco as the country’s premier owner and operator of open-air, grocery-anchored shopping centers and mixed-use assets.”
Currently, 72% of RPT’s annualized base rent (ABR) comes from grocery- or grocery component-anchored tenants. Those retail chains include Publix, Walmart, The Fresh Market, Aldi, BJ’s Wholesale Club, Whole Foods Market, Kroger, Dollar Tree, CVS Pharmacy, Walgreens, Target, Wegmans Food Markets, Shaw’s, Giant Food, Sprouts Farmers Market, Plum Market, Remke Markets and Dierbergs Markets. Kimco said specific markets where RPT would boost its presence include Boston, Atlanta and Tampa.
New York-based RPT reported that, through the second quarter, the company has added 17 grocers to its portfolio and has seen its grocers’ sales volumes rise more than 45% since 2019. In its Q2 report, RPT also noted that potential grocery backfill tenants from closed Bed Bath & Beyond and Buy Buy Baby stores at 12 locations include Meijer, Trader Joe’s, Aldi and The Fresh Market.
With RPT, Kimco will enter the Midwestern market—including Ohio, Indiana, Illinois, Michigan, Wisconsin, Minnesota, Missouri, Kentucky and Tennessee—as well as add a new location in New Hampshire and build on existing properties in Florida, Georgia, Colorado and Texas. RPT’s assets that align with Kimco’s key target markets are almost 90% grocery-anchored, Kimco said, adding that over time it expects to divest some Midwest properties in RPT’s portfolio that it deems non-core to its strategy.
The RPT acquisition also aligns Kimco’s plan to expand its grocery-anchored properties from 82% of ABR now to 85% by fiscal 2025. Amazon/Whole Foods, Albertsons, Ahold Delhaize USA and Kroger are among the company’s top tenants by ABR. In its Q2 report, Kimco said grocery sales in its shopping centers average $770 per square foot, and recurring traffic at its grocery properties is 2.4% higher year over year versus non-grocery properties.
Kimco also cited trends favoring grocery-anchored, open-air shopping centers. They include retailers targeting “first ring” suburban locations closer in to neighborhoods, as well as going “off mall” by targeting open-air centers; store proximity as online grocery pickup gains share; and stores playing an increasing role in online order fulfillment (such as with Target). Chains on the expansion path, Kimco said, include Trader Joe’s, Aldi, Sprouts, Whole Foods, Costco Wholesale, 99 Ranch Market and The Fresh Market, along with Target and Dollar Tree.
Kimco and RPT said the transaction is slated to close in early 2024, pending RPT shareholder approval and other customary closing conditions.
“After carefully considering the merits of this transaction, we believe that aligning with Kimco, a leader in the grocery-anchored shopping center space, is in the best interest of our stakeholders, given the multiple synergies that can be realized as a combined company,” RPT Realty President and CEO Brian Harper stated.