Zacks Commentary

Kimco Realty Corp. (KIM), a leading real estate investment trust (REIT), has recently obtained an unsecured term loan worth $400 million to increase its liquidity. The loan is scheduled to mature in April 2014, and includes an accordion feature by virtue of which the company can increase the debt maturity by three additional one-year periods to April 2017 at its own discretion.

The term loan bears an annualized interest rate at LIBOR plus 105 basis points, which is based on Kimco Realty’s present credit rating. The company expects to utilize the proceeds from the loan to repay its existing debt.

Earlier in first quarter 2012, Kimco Realty had completed the divesture of 15 assets for $215.4 million. This included the sale of 13 non-core assets, 2 joint-venture properties, and the repayment of $83.7 million in mortgage debt.

The strategic efforts were aimed at increasing the liquidity of the company. Over the years, Kimco Realty has established a track record of conservative capital management and has historically maintained strong investment-grade debt ratings. Furthermore, the company has continuous access to capital through debt or equity financing, that provide the necessary resources to expand and develop its business. 

With a geographically diverse portfolio concentrated mostly in high-income, high-growth areas, Kimco Realty is the largest publicly traded owner and operator of neighborhood and community shopping centers in the U.S.

The company generally signs long-term leases with high credit tenants, which limits the downside risk and provides a steady source of income. Given the current uncertainty in the capital markets, Kimco Realty has also modified its business strategy to focus on core retail competencies. The company intends to concentrate its future investments on the neighborhood and community shopping center segment, primarily focusing on the North American market.

We maintain our long-term Neutral recommendation on Kimco Realty, which currently has a Zacks #3 Rank that translates into a short-term Hold rating. We also have a long-term Neutral recommendation and a Zacks #2 Rank (short-term Buy rating) for Simon Property Group (SPG), one of the competitors of Kimco Realty.