Kimco Realty (KIM) to Acquire RPT Realty (RPT) in $2B All-Stock Transaction
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Kimco Realty® (“Kimco” or the “Company”) (NYSE: KIM), North America’s largest publicly traded owner and operator of open-air, grocery-anchored shopping centers and a growing portfolio of mixed-use assets, and RPT Realty (“RPT”) (NYSE: RPT), a publicly traded owner and operator of a national portfolio of open-air shopping center destinations principally located in top U.S. markets, today announced a definitive merger agreement under which RPT will be acquired by Kimco in an all-stock transaction valued at approximately $2 billion, including the assumption of debt and preferred stock. Upon closing, Kimco expects to have a pro forma equity market capitalization of approximately $13 billion and a total enterprise value of approximately $22 billion.
Under the terms of the merger agreement, RPT shareholders will receive 0.6049 of a newly-issued Kimco share for each RPT share they own, representing a total consideration of approximately $11.34 per RPT share based on Kimco’s closing share price on August 25, 2023. This represents a 19% premium to RPT’s closing share price on August 25, 2023. At closing, Kimco stockholders and RPT shareholders are expected to own approximately 92% and 8% of the combined company, respectively. The board of directors of Kimco and the board of trustees of RPT both unanimously approved the transaction. The transaction is expected to close in the beginning of 2024, subject to RPT shareholder approval and other customary closing conditions.
“This transaction presents another exciting opportunity for our Company to deepen our presence in key Coastal and Sun Belt markets, while accelerating our growth at an attractive valuation,” said Conor Flynn, CEO of Kimco. “Approximately 70% of RPT’s portfolio aligns with our key strategic markets. Furthermore, their substantial pipeline of signed, but not yet open leases and 20% or greater mark-to-market leasing spread across the portfolio, will drive higher growth for the combined company. The transaction is immediately accretive to FFO and the addition of these properties further positions Kimco as the country’s premier owner and operator of open-air, grocery-anchored shopping centers and mixed-use assets.”
Brian Harper, President and CEO of RPT, added, “Since joining RPT five years ago, the team and I have worked tirelessly to create long-term stakeholder value by curating the portfolio towards Coastal and Sun Belt markets, while delivering exceptional leasing results and prudently managing the balance sheet. After carefully considering the merits of this transaction, we believe that aligning with Kimco, a leader in the grocery-anchored shopping center space, is in the best interest of our stakeholders, given the multiple synergies that can be realized as a combined company. We also believe this transaction delivers an attractive share price premium that offers our shareholders the opportunity to participate in a larger, more liquid and diversified company that is well positioned to deliver long-term value.”
The transaction will add 56 open-air shopping centers, including 43 wholly-owned and 13 joint venture assets, comprising 13.3 million square feet of gross leasable area, to Kimco’s existing portfolio of 528 properties. In addition, the Company will acquire RPT’s 6% stake in a 49-property net lease joint venture. Beyond strengthening Kimco’s presence in its key markets, today’s transaction is expected to provide embedded growth opportunities, including those associated with redevelopment. Kimco has identified a limited group of Midwest properties within RPT’s portfolio that it views as not consistent with its strategy that it expects to divest over time.
Adam Gallistel, Head of Americas Real Estate for GIC, said, “Our longstanding and successful joint venture with RPT has provided GIC a unique opportunity to own high-quality, grocery-anchored shopping centers with a distinguished organization. We are thankful to Brian Harper and the entire RPT team for many years of successful partnership. Looking ahead, we’re excited to combine GIC's extensive history of real estate investing with Kimco's deep expertise as a leading owner and operator of open-air shopping centers and mixed-use assets in the U.S., to continue delivering on the strong long-term opportunities in this space."
Summary of Strategic Benefits
The acquisition is expected to result in a number of benefits, including:
- Earnings Accretion and Net Operating Income (NOI) Growth Opportunities: The transaction is expected to be immediately accretive to key financial and operating metrics, including initial cost savings synergies of approximately $34 million. Kimco is well positioned to unlock embedded value in the portfolio by increasing portfolio occupancy, marking leases to market, realizing the 330-basis point spread in RPT’s existing signed not open lease pipeline, and creating value through future redevelopment opportunities to drive future NOI growth.
- Increased Scale in High-Growth Target Markets: RPT’s assets that align with Kimco’s key target markets are nearly 90% grocery-anchored, based on pro-rata annual base rent, and provide a strong NOI growth profile. These assets will further enhance Kimco’s strategic presence in Sun Belt and Coastal markets that benefit from positive demographic and migration trends. The addition of Mary Brickell Village in Miami offers significant value creation potential through leasing and tenant remerchandising, mixed-use redevelopment, as well as expanding Kimco’s Signature Series® portfolio.
- Expanded Partnership Opportunities: RPT’s existing joint venture relationships, the largest of which is GIC, a leading sovereign wealth fund, provide significant opportunity for continued growth via investments in grocery-anchored shopping centers and mixed-use assets.
- Maintains Balance Sheet Strength: The Company believes that the transaction will be leverage neutral, preserving financial flexibility and capacity to invest while creating additional value.
Leadership and Organization
There are no anticipated changes to Kimco’s executive management team or board of directors. RPT is expected to align the timing of its regular quarterly dividend payments to Kimco’s during the pendency of the acquisition. The transaction is generally expected to be non-taxable to shareholders of both companies.
J.P. Morgan is acting as financial advisor and Wachtell, Lipton, Rosen & Katz is acting as legal advisor to Kimco. Lazard is acting as financial advisor and Goodwin Procter LLP is acting as legal advisor to RPT. ICR, LLC is serving as communications advisor to Kimco. Prosek Partners is serving as communications advisor to RPT.
Presentation and Conference Call
The companies will host a joint conference call on August 28, 2023 at 8:30 AM ET to discuss the proposed transaction. The conference call-in number is 1-877-704-4453 (Domestic) or 1-201-389-0920 (International), or interested parties can join the live webcast of the conference call by accessing the Investor Relations section of each company’s website at www.kimcorealty.com or www.rptrealty.com.
A presentation providing additional details about the transaction and replay of the conference call will be posted when available on the respective companies’ websites under the Investor Relations sections.
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