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Kimco JV acquiresKonover Property Trust

Hoping to grow its management and advisory business, Kimco Realty Corp. acquired Raleigh, N.C.-based Konover Property Trust late last week. On Friday, Konover shareholders approved the $285 million deal, which turned control of the company’s 5 million-sq.-ft. portfolio over to a joint venture between Kimco and Prometheus Southeast Retail Trust. Kimco paid $35.5 million for 45% ownership of the 36-center portfolio. New York-based Prometheus — a division of Lazard Freres & Co., already owned 66% of Konover’s shares.

Renamed Kimsouth Realty Inc., the new, privately held corporation will be based in Maryland. The centers in Kimsouth Realty’s portfolio average 143,000 sq. ft. and are mostly neighborhood and community centers anchored by the likes of Food Lion, Publix and Kohl’s. All but one of the centers are in the Southeast, with 14 located in North Carolina.

According to Merrill Lynch vice president Steve Sakwa, the Kimsouth portfolio’s low average occupancy rate of 85% represents a growth opportunity for Kimco, which will collect management fees on the properties. "Assuming that the occupancy at the Kimsouth portfolio can be raised from 85% to 90%, and assuming that average rents for non-anchor space is $11, this increase would represent an increase of $1.2 million to Kimco or slightly higher than, $0.01 per share," he wrote in a recent report on the transaction. Sakwa says Kimco will also attempt to boost the portfolio’s profitability through expense reductions and strategic sales.

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