I don't think it's a coincidence that shopping center REIT pioneer Kimco Realty Corp. (NYSE: KIM ) stock hit a 52-week high after its June 2014 REITWeek presentation. Investors seemed quite pleased that after the last few years of recycling capital, Kimco appears to be closing in on the final few rounds of transformative transactions.
In fact, this whole retail REIT sub-sector has been performing well:
So far in 2014, Mr. Market has crowned Regency Centers (NYSE: REG ) as the winner, with Kimco Realty being a close second in total returns. Brixmor (NYSE: BRX ) is the new kid on the block having been cultivated and pruned by Blackstone Group prior to its November 2013 IPO debut.
Blackstone has recently been both a buyer and seller in this space
Despite still owning a major interest in Brixmor, Blackstone has once again teamed up with competitor DDR, Corp (NYSE: DDR) as partner for the purchase of 76 former American Realty Capital Properties multi-tenant shopping centers for just under $2 billion.
Back in October 2013, DDR acquired 30 power centers from a Blackstone JV where DDR had previously only owned a 5% interest. Simultaneously, Blackstone and DDR announced last October the JV acquisition of seven prime shopping centers initially with Blackstone L.P. VII owning 95% and DDR owning 5%.
Blackstone's real estate mantra is: Buy It, Fix It, Sell It -- taking a global perspective. I strongly feel the fact that Blackstone still sees an opportunity in U.S. neighborhood shopping centers is an important clue for investors moving forward.
Clearly it is all about quality and not quantity!
Fellow Fool, Reuben Brewer recently pointed out how Kimco has been morphing as a public company, doing what recent IPO Brixmor did while being privately owned by Blackstone. Kudos to the Kimco management team for executing its capital recycling plan in plain view of investors. Kimco Realty has been shedding dead weight both in the U.S. and in Latin America to be positioned to better compete in the omni-channel retail world of the future.
Kimco's addition by subtraction formula has been well received by Wall Street investors. This June 2014 REITWeek slide does an excellent job of summarizing the progress:
The vast majority of the dispositions have been in Mexico and South America, while acquisitions have been higher quality centers in targeted U.S. markets. This has resulted in the higher occupancy, average base rents, and upgrades in the demographics for the entire portfolio.Kimco's dividends are a great reflection of progress since 2009
How about Regency Centers?
Investors in Regency have seen a lot of green during the first half of 2014. I feel this is primarily due to:
No surprises here, the addition by subtraction mantra can be seen hard at work for Regency Centers shareholders as well. The theme of upgrading both the portfolio and balance sheet appears to be the not-so-secret sauce for success in this sector.
First and foremost, private equity powerhouse Blackstone Group backing both Brixmor and DDR efforts in the multi-tenant community center retail space, speaks volumes to me. However, the fact that competitors Kimco Realty and Regency Centers are leading the pack so far in 2014 is quite intriguing. There seems to be a lot of smart money betting on your grocery related spending habits.
Investors looking to get rich slowly from both dividends and growth should take a long look at the shopping center where they go several times a week to buy groceries, fill prescriptions, and bring home a pizza. These investments are so obvious, that they might be easy to overlook!
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