Kimco Realty, North America’s largest public owner of grocery-anchored shopping centers, is moving into 2024 with a portfolio expanded to nearly 600 properties including centers in the fast-growing Sun Belt and coastal markets.

The completion of the $2 billion purchase of RPT Realty gives Jericho, New York-based Kimco 56 open-air shopping centers, 43 of which are wholly owned, containing a total of 13.3 million square feet to its existing portfolio of 527 properties. The all-stock deal is expected to result in initial cost-savings of about $34 million, of which roughly 85% is expected to be realized this year, Kimco said.

Kimco, a real estate investment trust, announced last year it was buying New York-based RPT in the latest in a series of deals centered on the consolidation of companies that primarily own grocery-anchored shopping centers. Kimco acquired Weingarten Realty Investors in August 2021 for $3.87 billion. Last year, two other retail REITS merged when Regency Centers completed its $1.4 billion acquisition of Urstadt Biddle Properties.

While Kimco's portfolio is primarily concentrated in the first-ring suburbs of several major metropolitan markets, including those in high-barrier-to-entry coastal areas, it has been rapidly expanding in Sun Belt cities and also has a growing portfolio of mixed-use properties through redevelopments.

The open-air, grocery-anchored shopping centers that are Kimco and RPT's bread-and-butter have become a darling of investors. Supermarkets boost retail destinations by generating regular foot traffic, and open-air centers have gained popularity with shoppers since the pandemic, according to brokers and analysts.

Ross Cooper, Kimco's president and chief investment officer, discussed the importance of the RPT deal during Kimco's third-quarter earnings call in October. "This is another clear example of utilizing our platform to negotiate a highly favorable cap rate for a well-regarded portfolio of primarily grocery-anchored centers. Similar to the timing on the Weingarten transaction, we view this as another unique window during which the competition is limited and we can take advantage.

During the call, Kimco CEO Conor Flynn described the current retail landscape as a tight market with low vacancy rates. "In an environment marked by virtually no new supply, strong demand from new, recurring, traditional, and non-traditional anchor and small shop tenants, along with the resilient consumer, we continue to produce strong operating results," Flynn said.

When the acquisition was announced Kimco said it had identified a limited group of Midwest RPT properties that it expected to sell over time. On Tuesday, Kimco didn't mention any centers it might look to sell. But company officials were asked about possible divestitures last fall.

"We’re going through the integration process, the pre-merger integration process right now," Cooper said during the earnings call. "So we’re formulating our strategy, but we’re very encouraged by the direction of the RPT portfolio and what we’re seeing," he said. "And as we get to the merger and beyond it, we’ll be much more specific about the strategy and plan there."

On Tuesday Flynn continued to emphasize the acquisition's benefits, especially the way it deepens the REIT's presence and increases its scale in growing markets that are experiencing positive demographic and migration trends. For example, Kimco's acquisition of Mary Brickell Villiage in Miami from RPT offers the potential for leasing and tenant re-merchandising and mixed-use redevelopment, according to the REIT.

Kimco is also looking to expand RPT's existing joint venture with GIC, one of three sovereign wealth funds that manage the assets of the government of Singapore, to generate growth through investment in grocery-anchored shopping centers and mixed-use properties.

Before the RPT acquisition, Kimco owned interests in U.S. shopping centers and mixed-use assets that totaled roughly 90 million square feet.

J.P. Morgan acted as exclusive financial adviser and Wachtell, Lipton, Rosen & Katz acted as legal adviser to Kimco in connection with the acquisition. Lazard acted as the exclusive financial adviser and Goodwin Procter acted as legal adviser to RPT.