Alex Rodriguez
Director, GRS Group
(404) 863-5237
[email protected]
It looks like Albertsons’ purchase of Rite Aid isn’t going through after all.
Rite Aid shareholders reportedly didn’t support the acquisition, which would have given Albertsons 2,500 drugstores and made it a larger player in that sector of retail. It follows a failed attempt by Walgreens to purchase 2,000 Rite Aids.
One interesting aspect of the Albertsons-Rite Aid deal is the involvement of retail REIT Kimco Realty. It was reported that Kimco owned about 10 percent of Albertsons shares that were once valued at about $685 million, which would have given it more liquidity to pay down debt and bolster its shopping-center redevelopment program.
But it sounds as though the failure of the Albertsons deal won’t take Kimco too far off its current positive track. It reportedly has the best debt profile of all REITs. Additionally, its redevelopment strategy for its portfolio of 475 shopping centers, mostly grocery-anchored, seems to be in full force. It is now concentrating on the revamp of its assets on both coasts and selling off properties in the Midwest, which are more liable for tenant vacancies. Kimco is said to be on track to dispose of $800 million in assets this year that aren’t in its core portfolio, which should help with its cash flow. On the horizon, the REIT reportedly has $2 billion in redevelopment opportunities, some of which could include adding mixed uses to centers.
Kimco’s second quarter was strong for the most part. Its net income saw a jump of 16.1 percent quarter over quarter, from $131.9 million to $150.9 million. Its portfolio’s occupancy was also at 96 percent, a 50-basis-point rise year over year. Though FFO was down during the quarter, it stayed flat year over year for the last six months, at $330.1 million. So far this year, Kimco has sold $556.1 million.
Given the fact that Kimco is essentially a blue-chip operator of retail real estate, its success is not surprising. After all, grocery-anchored shopping centers, which the REIT primarily owns, are considered prime commercial real estate right now, due to their resilience to Amazon and other online shopping channels.
With all of that taken into consideration, it doesn’t look like Kimco is going to be in that bad of a spot based on the Albertsons dealing following through, but never count out a counter bid that could boost the REIT’s liquidity.
About GRS Group:
GRS Group is a leading provider of commercial real estate (“CRE”) services worldwide. With offices across the United States, Europe, and affiliates around the globe, GRS Group provides local market knowledge with a global perspective for institutional real estate investors, occupiers and lenders worldwide. The GRS Group team has evaluated and advised on over $1 trillion in CRE transactions.