Kimco Realty Acquires Two Louisville Grocery-Anchored Centers for $295 Million

Kimco Realty (NYSE: KIM) announced Nov. 2 the $295 million acquisition of Paddock Shops and Shelbyville Road Plaza, two grocery-anchored, open-air shopping centers in Louisville, Ky.'s East End. The centers are anchored by Trader Joe's and The Fresh Market and total more than 741,000 square feet.

Combined with Festival at Jefferson Court, an existing Kroger-anchored center in the company's portfolio, the purchases bring Kimco's Louisville holdings to three grocery-anchored centers totaling 911,000 square feet, according to the Jericho, N.Y.-based company.

Deal Details: Paddock Shops and Shelbyville Road Plaza

Paddock Shops is a 351,000-square-foot lifestyle center at 4055 Summit Plaza Drive in northeast Louisville, which Kimco described as the market's premier retail corridor. The property is 94% leased and is anchored by Trader Joe's. It will become part of Kimco's Lifestyle Collection, the company's group of signature open-air and mixed-use centers.

Shelbyville Road Plaza is a 390,000-square-foot center in St. Matthews, the established retail hub of the Louisville metro. It is 92% leased and anchored by The Fresh Market. The $295 million price equates to roughly $398 per square foot across the two centers' combined footprint.

National tenants across the two properties include REI, Total Wine & More, Pottery Barn, West Elm, ULTA Beauty, Nordstrom Rack, Burlington, Ross Dress for Less and Old Navy. According to Placer.ai, each center draws more than 4 million annual visits. Paddock Shops' shopper base has a median household income of approximately $122,000, nearly double the statewide figure, and roughly 60% of shoppers hold a bachelor's degree or higher.

Kimco Realty's Capital Recycling Strategy

Kimco acquired the centers at a blended going-in cap rate of approximately 6%, more than 100 basis points above the roughly 5% average cap rate on the company's 2026 dispositions. The acquisition was primarily funded with 1031 exchange proceeds from those 2026 sales and is leverage-neutral, the company said.

"We sold lower-growth assets and reinvested the proceeds into higher-growth opportunities that strengthen our presence in a market we find very attractive," said Conor Flynn, Chief Executive Officer of Kimco Realty. "These centers also offer meaningful embedded upside through the recapture of below-market leases and the opportunity to further enhance the tenant mix with dynamic brands and specialty retailers."

Kimco said net operating income was underwritten to grow approximately 4% per year over the next 10 years, supported by below-market rents on a number of leases and a remerchandising opportunity. On a weighted basis, the two centers are approximately 93% leased.

Louisville Retail Market Conditions

According to Cushman & Wakefield data cited by Kimco, Louisville's shopping center vacancy rate is 3.9%, compared with 6% nationally. The market ranks among the top 10 major U.S. markets for occupancy, and no new shopping center space is under construction.

"Paddock Shops and Shelbyville Road Plaza are exactly the kind of centers we want to own: grocery-anchored, in the strongest trade areas of a supply-constrained market," Flynn said.

Ross Cooper, President and Chief Investment Officer of Kimco Realty, said Louisville is a market the company has targeted. "We see significant opportunity to leverage our One Kimco platform to expand occupancy, drive rent growth and unlock additional value at both properties," Cooper said. "Owning Paddock Shops, Shelbyville Road Plaza and Festival at Jefferson Court makes us the first call for retailers entering or expanding in Louisville."

Outlook

With the transaction, Kimco has added scale in one of Louisville's primary retail corridors while redeploying proceeds from lower-yielding dispositions into centers acquired at a higher initial yield. The company's growth underwriting centers on recapturing below-market leases and remerchandising the centers within a market with low vacancy and no new retail construction.

Sources

• Kimco Realty press release, "Kimco Realty Acquires Two Dominant Grocery-Anchored Centers in Louisville": https://investors.kimcorealty.com/news/detail/607/kimco-realty-acquires-two-dominant-grocery-anchored-centers-in-louisville