Kimco Realty Corp., a New Hyde Park-based owner of more than 500 shopping centers across the country, has a large stake in Alberstons Companies’ plan to buy Rite Aid.
Kimco, a publicly-traded real estate investment trust, had a 9.74 percent ownership interest in Albertsons, a private grocery store chain, as of Dec. 31. The original cost of the investment was $140 million.
Albertsons, the owner of Safeway and other supermarkets, said Tuesday that it will buy pharmacy chain Rite Aid in a cash and stock deal. The combined company will seek to have its shares traded on the New York Stock Exchange.
Kimco said it plans to sell its Albertsons stake after the deal is complete.
“It was our expectation that we would be able to monetize our investment in Albertsons through 2020 as it was a critical component in helping Kimco reduce leverage [debt], and fund development and redevelopment activity,” said David Bujnicki, senior vice president of investor relations and strategy at Kimco. He added that the deal “would help strengthen the company’s balance sheet and facilitate long-term growth.”
Kimco will treat its investment in Albertsons as a “marketable security,” an accounting change that would recognize the change in market value of the new Alberstons-Rite Aid business in Kimco’s net income statements.
The planned Rite Aid acquisition “underscored how we continue to benefit from our highly successful investment in Albertsons,” Kimco chief executive Conor Flynn said in a statement. “Upon completion, we will have a clear indication of the resulting market value of our stake.”
Proceeds from a sale of its investment could also help Kimco in its recently approved stock buyback program, officials said.
Albertsons-owned grocery stores represented Kimco’s fifth largest tenant, Bujnicki said. “We have a total of 40 locations and they represent 1.8 percent of our annual base rent.”
Rite Aid is Kimco’s 42nd largest tenant, Bujnicki said. The company rents 27 locations from Kimco and represents one half of one percent of Kimco’s annual base rent.