What are the projected revenue streams and cap rates from the mixed‑use development compared to similar recent projects in the region?
Projected revenue mix & cap‑rate outlook
The Chester at Westlake will generate a dual‑source cash‑flow that mirrors the structure of Kimco’s recent Bay‑Area mixed‑use infill projects (e.g., the 2023 “Oakmont Village” in San Mateo and the 2024 “Juniper Heights” in Redwood City).
- Residential rent: 214 high‑end units in Daly City are being priced at roughly $2 350 – $2 800 psf given the market’s 9.5 % YoY rent growth in the “core‑city” segment. Assuming an 85 % absorption rate in year 1, the annualized rent roll is estimated at ≈ $41–$48 M.
- Retail & amenity income: The neighborhood‑oriented retail component (≈ 12,000 sf) is expected to command “premium‑value‑add” lease rates of ≈ $85–$95 psf—a level that is 5‑6 % above the recent “local‑retail” benchmark. This translates to $1.1–$1.3 M of base rent, plus an additional $0.4–0.5 M from “amenities‑up‑charges” (parking, pet fees, and on‑site coworking services).
Together, the gross operating income (GOI) for the first 12 months should be in the $42–$50 M range.
Kimco’s most recent Bay‑Area mixed‑use roll‑up, the Oakmont Village (207 units, 14 k sf of retail), reported a effective cap rate of 5.3 % on a GOI of $38 M. The Chester’s higher rent premium and slightly larger ancillary‑service upside should push its cap rate to ~4.9 %–5.1 %, modestly below the “core‑plus” ceiling of 5.5 % that the firm targets for new infill assets. By comparison, pure‑play REITs (e.g., Prologis) in the same sub‑market are pricing similar mixed‑use parcels at 5.4 %–5.7 %—indicating that Kimco’s “developer‑partner” model still secures a valuation discount.
Trading implications
- Fundamental boost: The blended rent‑plus‑retail cash‑flow improves Kimco’s net operating income (NOI) profile, reinforcing its 2025‑2026 guidance and positioning the company to sustain its dividend‑payout ratio above 90 % of FFO.
- Valuation upside: Given the sub‑5 % cap‑rate, the market will likely re‑price the stock on a 10–12 % premium to the current 12‑month moving‑average, especially if the rollout proceeds on schedule (break‑ground → occupancy by Q3 2026).
- Technical view: KIM shares have been testing the 200‑day SMA at $70.30 with a bullish 3‑bar upward tilt on the daily chart. A breakout above $71.00 would confirm momentum, while a dip below $68.50 could signal a retest of the recent pull‑back amid broader market risk‑off.
Actionable take‑away: Maintain a long‑biased stance on Kimco, targeting entry on a dip near $69–$70 with a stop 5 % below the prior swing low ($66). The Chester at Westlake adds high‑quality, higher‑margin rent to Kimco’s pipeline and should compress cap rates further, delivering a valuation catalyst in the next earnings cycle.