At the start of 2011, Kimco Realty (NYSE:KIM) owned over 950 income-producing properties. Just a few months earlier, the company laid out a plan to trim down and refocus around core markets. Nearly four years later, and about 100 fewer properties, that plan is still playing out. This is close to the same thing that Brixmor Property Group (NYSE:BRX) did in the protective embrace of Blackstone Group (NYSE:BX) before coming public late last year.

Not an overnight sensation
Kimco Realty has been a big player in the "strip" mall space for a long time. Although the industry prefers terms like community centers and neighborhood shopping centers, you know them as the place where you buy your groceries, get a haircut, launder your clothing, and fill a prescription. These malls are mundane and boring, but they provide for basic needs and frequent visits. It's a great asset class.

(Source: Anthony92931, via Wikimedia Commons)

However, that doesn't mean that every strip mall is equal. In fact, in 2010, Kimco identified 152 of its over 950 properties that were in "challenged markets," had "stubborn vacancy," were "small, single use" properties, were in "secondary/tertiary locations," or generally had "limited growth" prospects. It started the process of selling. By January, Kimco had worked its portfolio down to around 850 properties.

That's the same plan that Brixmor undertook in mid 2011 when it was bought by Blackstone Group. This strip mall owner was saddled with debt and had been competing with better financed peers by undercutting on leases. That left it with below market rents and, thus, properties that weren't seeing the proper investment to maintain their value.

Blackstone, which still has a large equity interest in Brixmor, stepped in and quickly started to shake things up. The plan: cut debt and streamline the portfolio by pruning out the least desirable properties. Over 230 of the Brixmor's 717 properties were put up for sale. Being owned by Blackstone at the time, Brixmor could be more aggressive than publicly traded Kimco. The big transition at Brixmor only took a couple of years.

What you want? Baby I got it!
Today Brixmor is lean and mean and refocused around its core properties, and that leaves it with built-in growth because it still has below market leases. When I interviewed Brixmor CEO Michael Carroll a few months ago he explained that the average lease rate is around $12 per square foot. New leases signed in 2013 averaged $13.69 per square foot, however, and new leases signed during the fourth quarter averaged over $15.00 per square foot. That's built-in growth and where Brixmor's focus is for the near term.

(Source: IlliniGradResearch, via Wikimedia Commons)

Brixmor was in the less-than-enviable position of having to use sale proceeds to pay down debt, though. Kimco wasn't in that situation, so it has been "recycling" sale proceeds. The company recently announced the purchase of 24 New England properties for $270 million. Included in the portfolio are 17 strip malls in the Boston area. That's a core market, the type of market around which Kimco is refocusing.

Unlike Brixmor, where the big transition is largely complete, Kimco remains a work in progress. The art is a steadily improving portfolio of assets in prime locations. In other words, the 17 Boston area properties are likely to stick around, but maybe some of the other seven won't live up to expectations. Kimco will "recycle" those, selling them or other underperforming properties to help fund future purchases that hold more promise. That reduces the amount of money the company needs to raise from the public markets.

Two flavors, same theme
If you like the idea of owning properties that draw regular visitors, Brixmor and Kimco are both desirable companies. They have both undertaken big portfolio overhauls but are, at this juncture, in slightly different places. For those looking for slow and steady, Brixmor's built-in growth via repricing below market leases is a good fit. If you can handle a little more risk, Kimco's more aggressive "recycling" program is probably the right path.