Kite Realty Group closed on the sale of a shopping center portfolio and a Phoenix retail property for roughly $475 million in the fourth quarter as it looks to shift away from large sites to smaller, grocery-anchored destinations.
Indianapolis-based Kite discussed its recent transactions and its strategy when it reported its earnings Tuesday. CEO and Chairman John Kite reiterated the real estate investment trust's goal of divesting some power centers — large outdoor shopping venues with multiple big-box retailers — and adding more neighborhood and community retail centers and mixed-use properties to its holdings.
That reflects Kite's long-term game plan of improving its rent growth and reducing its exposure to at-risk tenancy, namely from large anchor stores.
"We continue to want to execute on this idea of moving away from the larger-format centers and into more of the neighborhood grocery and lifestyle mixed use — again, with a focus on embedded rent," Heath Fear, Kite's chief financial officer, said on the earnings call.
The REIT sold a portfolio of eight properties totaling 2.1 million square feet for gross proceeds of $429 million to DRA Advisors of New York, according to CoStar data. The biggest center was Central Texas Marketplace in Waco, Texas, at about 430,000 square feet.
The others were Belle Isle Station, Oklahoma City; International Speedway Square, Daytona Beach, Florida; Pavilion at King’s Grant, Concord, North Carolina; Peoria Crossings, Glendale, Arizona; Portofino Shopping Center, Shenandoah, Texas: Shops at Park Place, Plano, Texas; and Watauga Pavilion, Watauga, Texas.
Additionally, Kite sold Paradise Valley Marketplace in Phoenix for $45 million. JMS Capital of Phoenix was the buyer, according to CoStar.
This year Kite expects to make roughly $110 million in acquisitions related to 1031 exchanges in the first half of the year. In a 1031 exchange, real estate investors who sell a business property and reinvest the proceeds into a new "like-kind" property can defer their capital gains and depreciation recapture taxes.
Those anticipated sales are expected to be offset by about $115 million of noncore property sales later in 2026. Kite said that City Center in White Plains, New York, is one of the retail centers it plans to sell.