10-K405: Annual report [Sections 13 and 15(d), S-K Item 405]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]

For the fiscal year ended December 31, 1997

OR

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from _________ to ____________

Commission file number 1-10899

Kimco Realty Corporation
(Exact name of registrant as specified in its charter)

Maryland 13-2744380
(State of incorporation) (I.R.S. Employer Identification No.)

3333 New Hyde Park Road, New Hyde Park, NY 11042-0020
(Address of principal executive offices) Zip Code

Registrant's telephone number, including area code (516)869-9000 Securities
registered pursuant to Section 12(b) of the Act:

Name of each exchange on
Title of each class which registered
Common Stock, par value $.01 per share New York Stock Exchange

Depositary Shares, each representing
one-tenth of a share of 7-3/4% Class A
Cumulative Redeemable Preferred Stock,
par value $1.00 per share. New York Stock Exchange

Depositary Shares, each representing
one-tenth of a share of 8-1/2% Class B
Cumulative Redeemable Preferred Stock,
par value $1.00 per share. New York Stock Exchange

Depositary Shares, each representing
one-tenth of a share of 8-3/8% Class C
Cumulative Redeemable Preferred Stock,
par value $1.00 per share. New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:


None

(Title of class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The aggregate market value of the voting stock held by nonaffiliates of the
registrant was approximately $1.14 billion based upon the closing price on the
New York Stock Exchange for such stock on February 27, 1998.

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.

40,416,795 shares as of February 27, 1998.



1 of 135

DOCUMENTS INCORPORATED BY REFERENCE

Part II incorporates certain information by reference to the following exhibits
to this annual report on Form 10-K: Exhibit 3.4, Articles Supplementary relating
to the Registrant's 8-3/8% Class C Cumulative Redeemable Preferred Stock;
Exhibit 3.3, Articles Supplementary relating to the Registrant's 8 1/2% Class B
Cumulative Redeemable Preferred Stock; Exhibit 4.4, Certificate of Designations
relating to the Registrant's 7 3/4% Class A Cumulative Redeemable Preferred
Stock; Exhibits 4.5, 4.6 and 4.7, Indenture, First Supplemental Indenture and
Second Supplemental Indenture, respectively, each relating to the Registrant's
public bond issues, and Exhibit 10.4, Credit Agreement relating to the
Registrant's revolving credit facility.

Part III incorporates certain information by reference to the Registrant's
definitive proxy statement to be filed with respect to the Annual Meeting of
Stockholders expected to be held on May 28, 1998.

Index to Exhibits begins on page 34.

2

TABLE OF CONTENTS

Form
10-K
Report
Item No. Page
- -------- ----
PART I

1. Business ........................................................... 4

2. Properties ......................................................... 13

3. Legal Proceedings .................................................. 15

4. Submission of Matters to a Vote of Security Holders ................ 15

Executive Officers of the Registrant ............................... 24

PART II

5. Market for the Registrant's Common Equity
and Related Shareholder Matters .................................. 25

6. Selected Financial Data ............................................ 26

7. Management's Discussion and Analysis of Financial
Condition and Results of Operations .............................. 28

8. Financial Statements and Supplementary Data ........................ 31

9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure .............................. 31

PART III

10. Directors and Executive Officers of the Registrant ................. 32

11. Executive Compensation ............................................. 32

12. Security Ownership of Certain Beneficial Owners and
Management ....................................................... 32

13. Certain Relationships and Related Transactions ..................... 32

PART IV

14. Exhibits, Financial Statements, Schedules and Reports on
Form 8-K ......................................................... 33


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PART I

Item 1. Business

General Kimco Realty Corporation (the "Company") is one of the nation's largest
owners and operators of neighborhood and community shopping centers. As of
February 1, 1998, the Company's portfolio was comprised of 339 property
interests including 273 neighborhood and community shopping center properties,
two regional malls, 62 retail store leases, one leased parcel of undeveloped
land and one distribution center comprising a total of approximately 41.7
million square feet of leasable space located in 37 states. The Company believes
its portfolio of neighborhood and community shopping center properties is the
largest (measured by gross leasable area, "GLA") currently held by any
publicly-traded real estate investment trust ("REIT"). The Company is a
self-administered REIT and manages its properties through present management,
which has owned and operated neighborhood and community shopping centers for
more than 30 years. The Company has not engaged, nor does it expect to retain,
any REIT advisors in connection with the operation of its properties.

The Company's executive offices are located at 3333 New Hyde Park Road, New Hyde
Park, New York 11042-0020 and its telephone number is (516)869-9000. Unless the
context indicates otherwise, the term the "Company" as used herein is intended
to include subsidiaries of the Company.

History The Company began operations through its predecessor, The Kimco
Corporation, which was organized in 1966 upon the contribution of several
shopping center properties owned by its principal stockholders. In 1973, these
principals formed the Company as a Delaware corporation, and in 1985, the
operations of The Kimco Corporation were merged into the Company. The Company
completed its initial public stock offering (the "IPO") in November 1991, and
reorganized as a Maryland corporation during 1994.

The Company's growth through its first fifteen years resulted primarily from the
ground-up development and construction of its shopping centers. By 1981, the
Company had assembled a portfolio of 77 properties that provided an established
source of income and positioned the Company for an expansion of its asset base.
At that time, the Company revised its strategy to focus on the acquisition of
existing shopping centers because it believed generally that available financial
returns did not justify the risks of continued ground-up development of
properties. Furthermore, the Company's management believed that existing
properties with below market-rate leases were available in the market at
attractive prices. The Company considers such properties to offer greater
leasing flexibility in the event space becomes available or should there be an
overcapacity of space in the local economy. The Company also believes that
opportunities exist to create value through the redevelopment and re-tenanting
of existing shopping centers. As a result of this change in strategy, the
Company has developed only two of the 262 property interests added to its
portfolio since 1981, as compared with 68 of the 77 properties owned prior to
that time.

Investment and Operating Strategy The Company's investment objective has been to

increase cash flow, current income and consequently the value of its existing
portfolio of properties, and to seek continued growth through (i) the strategic
re-tenanting, renovation and expansion of its existing centers, and (ii) the
selective acquisition of established income-producing real estate properties,
and properties requiring significant re-tenanting and redevelopment, primarily
in neighborhood and community shopping centers in geographic regions in which
the Company presently operates. The Company intends to consider investments in
other real estate sectors and in geographic markets where it does not presently
operate should suitable opportunities arise.

The Company's neighborhood and community shopping center properties are designed
to attract local area customers and typically are anchored by a supermarket,
discount department store or drugstore tenant offering day-to-day



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necessities rather than high-priced luxury items. The Company may either
purchase or lease income-producing properties in the future, and may also
participate with other entities in property ownership through partnerships,
joint ventures or similar types of co-ownership. Equity investments may be
subject to existing mortgage financing and other indebtedness or such financing
or indebtedness may be incurred in connection with acquiring such investments.
Any such financing or indebtedness will have priority over the Company's equity
interest in such property. The Company may make loans to joint ventures in which
it may or may not participate in the future.

While the Company has historically held its properties for long-term investment,
and accordingly has placed strong emphasis on its ongoing program of regular
maintenance, periodic renovation and capital improvement, it is possible that
properties in the portfolio may be sold, in whole or in part, as circumstances
warrant, subject to REIT qualification rules.

The Company emphasizes equity real estate investments, but may, in its
discretion, invest in mortgages, other real estate interests and other
investments. The mortgages in which the Company may invest may be either first
mortgages, junior mortgages or other mortgage-related securities.

The Company may legally invest in the securities of other issuers, for the
purpose, among others, of exercising control over such entities, subject to the
gross income and asset tests necessary for REIT qualification. The Company may
acquire all or substantially all of these securities or assets of other REITs or
similar entities where such investments would be consistent with the Company's
investment policies. In any event, the Company does not intend that its
investments in securities will require it to register as an "investment company"
under the Investment Company Act of 1940.

The Company seeks to reduce its operating and leasing risks through
diversification achieved by the geographic distribution of its properties and a
large tenant base. At December 31, 1997, the Company's single largest
neighborhood and community shopping center accounted for only approximately 1.9%

of the Company's annualized base rental revenues and only 1% of the Company's
total shopping center GLA. At December 31, 1997, the Company's five largest
tenants include Venture, Kmart Corporation, Kohl's, Walmart and TJX Companies,
which represent approximately 11.7%, 4.1%, 3.4%, 2.7% and 2.2%, respectively, of
the Company's annualized base rental revenues.

The Company intends to maintain a conservative debt capitalization with a ratio
of debt to total market capitalization of approximately 50% or less. As of
December 31, 1997, the Company had a debt to total market capitalization ratio
of approximately 24%.

The Company has authority to offer shares of capital stock or other senior
securities in exchange for property and to repurchase or otherwise reacquire its
common stock or any other securities and may engage in such activities in the
future. At all times, the Company intends to make investments in such a manner
as to be consistent with the requirements of the Internal Revenue Code of 1986,
as amended (the "Code"), to qualify as a REIT unless, because of circumstances
or changes in the Code (or in Treasury Regulations), the Board of Directors
determines that it is no longer in the best interests of the Company to qualify
as a REIT.

The Company's policies with respect to the aforementioned activities may be
reviewed and modified from time to time by the Company's Board of Directors
without the vote of the stockholders.

Competition As one of the original participants in the growth of the shopping
center industry and one of the nation's largest owners and operators of
neighborhood and community shopping centers, the Company has established close
relationships with a large number of major national and regional retailers and
maintains a broad network of industry contacts. Management is associated with
and/or actively participates in many shopping center and REIT industry
organizations. Notwithstanding these relationships, there are numerous
commercial developers and real estate companies that compete with the Company in
seeking properties for acquisition and tenants who will lease space in



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these properties.

Capital Resources Completion of the Company's IPO, which resulted in net cash
proceeds of approximately $116 million, permitted the Company to significantly
deleverage its real estate portfolio and has made available the public debt and
equity markets as the Company's principal source of capital for the future. A
$100 million, unsecured revolving credit facility established in June 1994,
which is scheduled to expire in June 2000 and an additional $150 million interim
unsecured revolving credit facility, established in March 1998, scheduled to
expire in June 1998, have made available funds to both finance the purchase of
properties and meet any short-term working capital requirements. It is the
Company's intention to extend the term of the $150 million interim revolving
credit facility and establish it as a continuing part of the Company's total

unsecured revolving credit availability. The Company has also implemented a $150
million medium-term notes program (the "MTN program") pursuant to which it may
from time to time offer for sale its senior unsecured debt for any general
corporate purposes, including (i) funding specific liquidity requirements in its
business, including property acquisitions and redevelopment costs, and (ii)
better managing the Company's debt maturities. (See Note 7 of the Notes to
Consolidated Financial Statements included in this annual report on Form 10-K.)

Since the IPO, the Company has completed additional offerings of its public
unsecured debt and equity raising in the aggregate over $1.15 billion for the
purposes of repaying indebtedness, acquiring interests in neighborhood and
community shopping centers and for expanding and improving properties in the
portfolio.

It is management's intention that the Company continually have access to the
capital resources necessary to expand and develop its business. Accordingly, the
Company may seek to obtain funds through additional equity offerings or debt
financings, including an increase in the Company's unsecured revolving credit
facility, in a manner consistent with its intention to operate with a
conservative debt capitalization policy.

The Company anticipates that cash flows from operations will continue to provide
adequate capital to fund its operating and administrative expenses, regular debt
service obligations and all dividend payments in accordance with REIT
requirements in both the short-term and long-term. In addition, the Company
anticipates that cash on hand, borrowings under its revolving credit facilities,
issuance of equity and public debt, as well as other debt and equity
alternatives, will provide the necessary capital required by the Company.

Inflation and Other Business Issues Many of the Company's leases contain
provisions designed to mitigate the adverse impact of inflation. Such provisions
include clauses enabling the Company to receive payment of additional rent
calculated as a percentage of tenants' gross sales above predetermined
thresholds ("Percentage Rents"), which generally increase as prices rise, and/or
escalation clauses, which generally increase rental rates during the terms of
the leases. Such escalation clauses include increases in the consumer price
index or similar inflation indices. In addition, many of the Company's leases
are for terms of less than 10 years, which permits the Company to seek to
increase rents upon renewal to market rates. Most of the Company's leases
require the tenant to pay an allocable share of operating expenses, including
common area maintenance costs, real estate taxes and insurance, thereby reducing
the Company's exposure to increases in costs and operating expenses resulting
from inflation. The Company periodically evaluates its exposure to short-term
interest rates and will, from time to time, enter into interest rate protection
agreements which mitigate, but do not eliminate, the effect of changes in
interest rates on its floating-rate loans.

As an owner of real estate, the Company is subject to risks arising in
connection with the underlying real estate, including defaults or nonrenewal of
tenant leases, environmental matters, financing availability and changes in real
estate and zoning laws. The success of the Company also depends upon trends in
the economy, including interest rates, income tax laws, governmental




6


regulations and legislation and population trends.

Operating Practices Nearly all operating functions, including leasing, legal,
construction, data processing, maintenance, finance and accounting, are
administered by the Company from its executive offices in New Hyde Park, New
York. The Company believes it is critical to have a management presence in its
principal areas of operation; accordingly, the Company also maintains regional
offices in Boca Raton and Orlando, Florida; Philadelphia, Pennsylvania; and
Dayton and Cleveland, Ohio. A total of 107 persons are employed at the Company's
executive and regional offices.

The Company's regional offices are generally staffed by a manager and the
support personnel necessary to both function as local representatives for
leasing and promotional purposes and to complement the corporate office efforts
to ensure that property inspection and maintenance objectives are achieved. The
regional offices are important in reducing the time necessary to respond to the
needs of the Company's tenants. Leasing and maintenance personnel from the
corporate office also conduct regular inspections of each shopping center.

The Company also employs a total of 61 persons at several of its larger
properties in order to more effectively administer its maintenance and security
responsibilities.

Management Information Systems Virtually all operating activities are supported
by a sophisticated computer software system designed to provide management with
operating data necessary to make informed business decisions on a timely basis.
These proprietary systems are continually expanded and enhanced by the Company
and reflect a commitment to quality management and tenant relations. The Company
has integrated an advanced mid-range computer with personal computer technology,
creating a management information system that facilitates the development of
property cash flow budgets, forecasts and related management information.

Qualification as a REIT The Company has elected, commencing with its taxable
year which began January 1, 1992, to qualify as a REIT under Sections 856
through 860 of the Code. If, as the Company believes, it is organized and
operates in such a manner so as to qualify and remain qualified as a REIT under
the Code, the Company generally will not be subject to Federal income tax,
provided that distributions to its stockholders equal at least the amount of its
REIT taxable income as defined under the Code.

Recent Developments

Shopping Center Acquisitions -

In January 1997, the Company purchased the Target Shopping Center located
on Sagamore Parkway North in Lafayette, IN. This 177,000 square foot center is
anchored by Target Stores and was acquired for approximately $4.1 million.

In April 1997, the Company acquired the Carrollwood Commons shopping center

located at Ehrlich Road and North Dale Mabry Highway, in Tampa, FL for
approximately $14.1 million. This shopping center has 110,000 square feet of GLA
and is anchored by Staples and Ross Stores.

In June 1997, the Company purchased Shady Oaks Shopping Center, Woodforest
Shopping Center and Hammond Aire Plaza located in Ocala, FL, Houston, TX, and
Baton Rouge, LA, respectively. These properties were acquired in separate
transactions for an aggregate purchase price of approximately $34.6 million.
Shady Oaks Shopping Center, located at the intersection of S.R. 200 and Shady
Oaks Road comprises 251,000 square feet of GLA and is anchored by Kmart
Corporation, Service Merchandise and Kash N' Karry. Woodforest Shopping Center,
which comprises 113,000 square feet of GLA at the intersection of Wood Forest
Boulevard and Uvalde Road, is anchored by HEB Pantry Food and Palais Royal.
Tenants at Hammond Aire Plaza, which comprises 264,000 square feet of GLA at the
intersection of Old Hammond Highway and Airline Highway, include Marshalls,
Steinmart and Taylor Office Supply.


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In September 1997, the Company acquired the Crossroads Center located on
Frontage Road in Florence, SC for approximately $7.3 million. This 114,000
square foot shopping center is anchored by Staples and Hamricks.

In October 1997, the Company purchased Mountainside Plaza and Maplewood
Plaza located in Phoenix, AZ and Coral Springs, FL, respectively. These
properties were acquired in separate transactions for an aggregate purchase
price of approximately $20.5 million, including the assumption of approximately
$8.1 million of mortgage debt encumbering the Mountainside Plaza property.
Mountainside, which comprises 124,000 square feet of GLA at the intersection of
Chandler Boulevard and 40th Street, is anchored by Safeway and Walgreens.
Tenants at Maplewood Plaza, which comprises 86,000 square feet of GLA at the
intersection of Ramblewood Drive and University Drive, include TJ Maxx and
Blockbuster Video.

In November 1997, the Company acquired the Festival at Manassas and
Acadiana Square shopping centers located in Manassas, VA and Lafeyette, LA,
respectively, in separate transactions for an aggregate purchase price of
approximately $19.5 million. The Festival at Manassas is a 118,000 square foot
center located at the intersection of Sudley Road and Portsmouth Drive and is
anchored by Super Fresh Grocery and Blockbuster Video. Acadiana Square shopping
center is a 148,000 square foot center located at the intersection of U.S.
Highway 167 and Ambassador Caffery Parkway and is anchored by SteinMart, TJ Maxx
and Office Max.

In December 1997, the Company acquired The Gallery Shopping Center,
Tri-Cities Square Shopping Center, Greenridge Shopping Center and North Rivers
Market located in Greenville, SC, Mount Dora, FL, Staten Island, NY and North
Charleston, SC, respectively. These properties were acquired in separate
transactions for an aggregate purchase price of approximately $41.6 million,
including the assumption of approximately $5.9 million of mortgage debt
encumbering the Greenridge Shopping Center property. The Gallery Shopping

Center, which comprises 91,000 square feet of GLA on Haywood Road, is anchored
by Baby Superstore. Tri-Cities Square Shopping Center, located on Eurora Road
and US Highway 441, comprises 111,000 square feet of GLA and is anchored by
Kmart. The Greenridge Shopping Center, which comprises 101,000 square feet of
GLA at the intersection of Arthur Kill Road and Richmond Avenue, is anchored by
Waldbaums Supermarket and CVS Drug Stores. North Rivers Market, which comprises
196,000 square feet of GLA at the intersection of Rivers Avenue and Northbrook
Boulevard, is anchored by TJ Maxx, Marshalls and Phar-Mor.

Retail Properties Acquisition -

In August 1997, certain subsidiaries of the Company acquired certain real
estate assets from Venture Stores, Inc. ("Venture") consisting of interests in
49 fee and leasehold properties totaling approximately 5.9 million square feet
of leasable area located in Illinois, Missouri, Texas, Oklahoma, Kansas, Indiana
and Iowa (collectively, the "Venture Properties Acquisition"). The aggregate
price was approximately $130 million, consisting of $70.5 million in cash and
the assumption of approximately $59.5 million of existing mortgage debt on
certain of these properties. The mortgage debt bears interest at 10.54% per
annum and cannot be repaid without penalty, until its maturity on July 1, 2000.
In addition, the Company was granted (i)an option to acquire two other
properties for $4.5 million, (ii) an option to acquire up to 11 additional
properties should certain conditions be satisfied and (iii) rights of first
refusal, for a period of five years, to acquire 31 additional properties
containing 4.2 million square feet of leasable area. The transaction also
included approximately 573,000 square feet of retail space substantially
occupied by other retailers and approximately 165,000 square feet of available
non-Venture retail space. Simultaneously with this transaction, the Company
entered into a long-term unitary net lease with Venture covering all premises
occupied by Venture on these properties. As a result of this transaction,
Venture was the primary or sole tenant at 60 of the Company's locations
representing approximately 11.7% of the Company's annualized base rental
revenues as of December 31, 1997.

In January 1998, Venture filed for protection under Chapter 11 of the



8


United States Bankruptcy Code. The Company has not received notice that Venture
will be delinquent in the payment of any rents due. There can be, however, no
assurance that Venture will continue to pay rents as they become due or that the
trustee in bankruptcy will not reject the leases under which Venture is bound.

Irrespective of Venture's current financial status, management believes that the
Venture Properties Acquisition represents a unique strategic opportunity for the
Company, based on the significant intrinsic value in the underlying real estate
assets as a result of (i) attractive geographic locations, (ii) current below
market-rate leases and (iii)the opportunity to lease-up the remaining 165,000
square feet of vacant non-Venture retail space. In addition to its intrinsic
real estate value, the Venture Properties Acquisition also provides the Company

with (i) strong initial yields, (ii) increased geographic diversification and
(iii) options to acquire additional properties. Accordingly, the Company
believes that it could replace any defaulted or discharged leases with leases
that are on no less favorable terms than the leases currently in place.

The Company, as a regular part of its business operations, will continue to
actively seek properties for acquisition which have below market-rate leases or
other cash flow growth potential.

Property Redevelopments -

The Company has an ongoing program to reformat and re-tenant its properties to
maintain or enhance its competitive position in the marketplace. During 1997,
the Company substantially completed the redevelopment of 7 shopping centers in
its portfolio, including properties located in Plainview, NY; Lexington, KY;
Charles Town, WV; Norriton, PA; Westmont, NJ; Coral Springs, FL and Dayton, OH
at a total cost of approximately $26.3 million. The Company is currently
involved in redeveloping several other shopping centers, most notably its
properties in N. Miami, FL, Richboro, PA, Winston-Salem, NC, and Grove Gate, FL.
Approximately $3.7 million was expended during 1997 related to these
ongoing projects. Each redevelopment represents an opportunity for the Company
to capitalize on its leasing, site planning, design and construction expertise.
The Company anticipates its capital commitment toward these and other
redevelopments during 1998 will be approximately $30 million. These projects,
which are currently proceeding on schedule and in line with the Company's
budgeted costs, are expected to contribute to growth in the Company's funds from
operations in the future.

Property Disposition -

During June 1997, the Company disposed of a property in Troy, OH. Proceeds from
the disposition totaling approximately $1.6 million, together with an additional
$8.3 million cash investment, were used to acquire an exchange shopping center
property located in Ocala, FL.

Kimco Select Investments -

Kimco Select Investments, a New York general partnership ("Kimco Select"), was
formed in 1997 to provide the Company, through its 90% ownership interest, the
opportunity to make investments outside of its core neighborhood and community
shopping center business. Although potential investments may be largely
retail-focused, Kimco Select may invest in other asset categories. Kimco Select
will focus on investments where the intrinsic value in the underlying assets may
provide potentially superior returns relative to the inherent risk. These
investments may be in the form of direct ownership of real estate, mortgage
loans, public and private debt and equity securities that Kimco Select believes
are undervalued, unoccupied properties, properties leased to weak or bankrupt
tenants and other assets.

Kimco Select is managed by David M. Samber, formerly President and Chief
Operating Officer of the Company, who owns the remaining 10% ownership interest
in Kimco Select. The Company has made an initial commitment of $35 million
towards investments by Kimco Select and may increase its commitment as
management deems appropriate.



9


During 1997, Kimco Select through a joint venture investment, acquired an
interest in a multi-story building in Eastwick, PA. This 39,000 square foot
property, and a 53,000 square foot property in Upper Darby, PA previously
acquired, have been redeveloped as ambulatory care facilities, anchored by Mercy
Health Corporation, a leading regional health care system and contain
complementary retail space. The acquisition and redevelopment costs related to
these two properties totaled approximately $10 million.

Kimco Select also acquired (i) various first mortgage loan participations, (ii)
certain public bonds, and (iii) a joint venture interest in an entity which owns
an office building in Miami, FL. The aggregate acquisition cost
related to these investments was approximately $4.6 million.

Financings -

Debt. During 1997, the Company issued an aggregate principal amount of $100
million of unsecured notes under its MTN program. These unsecured notes are
comprised of (i) a $30 million ten-year note bearing interest at 7.46% and
maturing in May 2007, (ii) a $20 million twelve-year note bearing interest at
7.56% and maturing in May 2009, (iii) a $20 million ten-year note bearing
interest at 6.96% and maturing in July 2007 and (iv) a $30 million twelve-year
note bearing interest at 7.06% and maturing in July 2009. (See Note 7 of the
Notes to Consolidated Financial Statements included in this annual report
on Form 10-K.)

In June 1997, the Company amended its $100 million, unsecured revolving credit
facility with a group of banks to provide, for a reduction (i) by .25% (25 basis
points) in the spread above the LIBOR rate or money-market rate, whichever is
applicable, paid on borrowings under the facility and (ii) by .02% (2 basis
points) in the annual fee payable on a certain portion of the facility which
remains unused from time to time. In addition, certain administrative and
extension fees were also reduced. The facility term was also extended one year
and is now scheduled to expire on June 30, 2000.

Equity. During September 1997, the Company completed a primary public stock
offering of 4,000,000 shares of common stock at $35.50 per share. The net
proceeds from this sale of common stock, totaling approximately $134.5 million
(after related transaction costs of approximately $7.5 million) have been used
primarily for the acquisition of neighborhood and community shopping centers.
(See Note 11 of the Notes to Consolidated Financial Statements included in this
annual report on Form 10-K.)

Subsequent Events

Property Acquisitions / Disposition -

In January 1998, the Company acquired seven neighborhood and community shopping
center properties comprising approximately 632,000 square feet of GLA in the

Denver, CO market for approximately $43.6 million, including the assumption of
$4.2 million of mortgage debt. These properties are primarily anchored by
supermarket or drugstore tenants, including Safeway, Cub Foods and Phar-Mor.

In addition, the Company, through its affiliate Kimco Select, acquired interests
in three retail properties in the Chicago, IL market comprising approximately
516,000 square feet of GLA for an aggregate purchase price of approximately
$23.7 million. These properties include approximately 70,000 square feet of
showroom space and adjoining warehouses of approximately 100,000 square feet at
each location. Simultaneous with this transaction, the Company leased to
Heilig-Meyers, the country's largest furniture retailer, the showroom portion of
each property under individual long-term leases. The Company is currently
planning the redevelopment of the warehouse portion of each property.

The Company disposed of a property in Pinellas Park, FL during January 1998.
Cash proceeds from the disposition totaling $2.3 million will be used to acquire
an exchange shopping center property.




10


Price REIT Merger -

On January 13, 1998, the Company and The Price REIT, Inc., a Maryland
corporation ("Price REIT") signed a definitive agreement to merge, (the
"Merger"). Pursuant to the terms of the Agreement and Plan of Merger dated
January 13, 1998, as amended March 5, 1998 (the "Merger Agreement"), Price REIT
will be merged into a newly formed wholly-owned subsidiary of the Company.

The transaction is intended, for financial accounting purposes, to be accounted
for as a purchase. Under the terms of the Merger Agreement each share of Price
REIT common stock will be exchanged for a combination of the Company's common
stock and Kimco depositary shares (the "Class D Depositary Shares"), each
depositary share representing a 1/10 of a share interest in a new issue of
Kimco 7.5% Class D Cumulative Convertible Preferred Stock (the "Class D
Convertible Preferred Stock") having an aggregate value of at least $45 based
on the "Kimco Average Price" (as defined herein) and the liquidation preference
of the Class D Depositary Shares (collectively, the "Merger Consideration").
The Merger, which is expected to be completed in mid-1998, is subject to
customary closing conditions, including certain regulatory approvals and the
approval of the issuance of the Merger Consideration by the stockholders of the
Company and the approval of the Merger by the Stockholders of Price REIT.

The Merger Agreement provides for a pre-closing adjustment to the number of
shares of the Company's common stock and Class D Depositary Shares issuable per
share of Price REIT common stock in order to ensure that Price REIT stockholders
will receive at least, and possibly more than, $45 in the Company's securities
per Price REIT share. Specifically, in the event that the average closing price
of the Company's common stock (the "Kimco Average Price" as defined herein)
ending on and including the seventh trading day immediately preceding the date

of the Company's 1998 annual meeting of stockholders plus $10 is less than
$45, the amount of Class D Depositary Shares will be increased up to a maximum
of $11.25 of Class D Depositary Shares (based on a liquidation preference of $25
per Class D Depositary Share) to arrive at a value of $45. To the extent that
the issuance of $11.25 of Class D Depositary Shares would still result in less
than $45 of combined value, the number of shares of the Company's common stock
issuable per Price REIT share will be increased in order to arrive at a total of
$45 delivered in the Company's securities. However, the Company may elect to
terminate the Merger Agreement in the event its Average Price (the "Average
Price", as defined herein) during a specified calculation period or the closing
price on the scheduled closing date or on either of the two days prior to the
scheduled closing date is less than $32.

In the event that the "Kimco Average Price" (as defined herein) plus $10 is
greater than $45, each share of Price REIT common stock would continue to be
converted into one share of the Company's common stock and the amount of Class D
Depositary Shares will be decreased by 50% of the amount by which the Kimco
Average Price referred to above plus $10 exceeds $45. However, Price REIT
stockholders will never receive less than $9 of Class D Depositary Shares. Thus,
as a result of the merger, Price REIT stockholders will obtain the benefit of
50% of the increase in value of the Company's common stock as reflected in the
Kimco Average Price between $35 and $37, and 100% of any increase above $37.

As used herein, the "Kimco Average Price" shall be the average of Average Prices
(as defined herein) of the Company's common stock for fifteen (15) randomly
selected trading days within the thirty (30) consecutive trading days ending on
and including the seventh trading day immediately preceding the date of the
Company's 1998 annual meeting of stockholders. As used herein, the "Average
Price" for any date means the average of the daily high and low prices of the
Company's common stock on the New York Stock Exchange (the "NYSE") as reported
in The Wall Street Journal, or if not reported thereby, by another authoritative
source. The random selection of trading days shall be made under the joint
supervision of the financial advisors retained by the Company and Price REIT in
connection with the transactions contemplated hereby.

The dividend rate on the Class D Depositary Shares will be 7.5 % per annum, or,
if greater, the dividend on the shares of the Company's common stock into which
a Class D Depositary Share is convertible plus $0.0275 quarterly. The Class D
Depositary Shares will be convertible into the Company's common stock


11


at a conversion price of $40.25 per share at any time by the holder and may be
redeemed by the Company at the conversion price in shares of the Company's
common stock at any time after the third anniversary of the Merger if for any 20
trading days during a rolling 30 day consecutive trading-day period the
Company's common stock closing price exceeds $48.30, subject to certain
adjustments. The Class D Depositary Shares are expected to be listed on the
NYSE.

The Merger Agreement also provides that each party will be entitled to a

Break-Up Fee in the amount of $12,500,000 or reimbursement of expenses up to
$2,000,000 in the event the agreement is terminated under various circumstances.
The Company has also agreed that if it elects to terminate the Merger Agreement
because its common stock price closes below $32, Price REIT will be entitled
to receive $6,250,000.

Financings -

In March 1998, the Company obtained an additional $150 million interim unsecured
revolving credit facility to both finance the purchase of properties and meet
any short-term working capital requirements. This facility is scheduled to
expire in June 1998, however, it is the Company's intention to extend the term
of this facility and establish it as a continuing part of the Company's total
unsecured revolving credit availability.

KC Holdings, Inc.

To facilitate the Company's November 1991 IPO, forty-six shopping center
properties and certain other assets, together with indebtedness related thereto,
were transferred to subsidiaries of KC Holdings, Inc. ("KC Holdings") a newly
formed corporation that is owned by the stockholders of the Company prior to the
IPO. The Company, although having no ownership interest in KC Holdings or its
subsidiary companies, was granted ten-year, fixed-price options to reacquire the
real estate assets owned by KC Holdings' subsidiaries, subject to any
liabilities outstanding with respect to such assets at the time of an option
exercise. As of February 27, 1998, KC Holdings' subsidiaries had conveyed
fourteen shopping center properties back to the Company and had disposed of ten
additional centers in transactions with third parties. The members of the
Company's Board of Directors who are not also shareholders of KC Holdings
unanimously approved the purchase of each of the fourteen shopping centers that
have been reacquired by the Company from KC Holdings. (See Notes 9 and 13 of the
Notes to Consolidated Financial Statements included in this annual report on
Form 10-K.)

The Company manages 18 of KC Holdings' 22 shopping center properties pursuant to
a management agreement. KC Holdings' other four shopping center properties are
managed by unaffiliated joint venture partners.

Acquisition Option -

The Company holds 10-year acquisition options which expire in November 2001 to
reacquire interests in the 22 shopping center properties owned by KC Holdings'
subsidiaries. The option exercise prices are fixed and payable in shares of the
Company's common stock or, in the event payment in the form of common stock
could jeopardize the Company's status as a REIT, an equivalent value in cash. If
the Company exercises its options to acquire all the remaining shopping center
properties, the maximum aggregate amount payable to KC Holdings would be
approximately $11.1 million, or approximately 316,000 shares of the Company's
common stock (assuming shares valued at the closing price on the NYSE of $35.13
per share as of February 27, 1998). The Company would acquire the properties
subject to any existing mortgage indebtedness and other liabilities on the
properties. The acquisition options enable the Company to obtain any
appreciation in the value of these properties over the option exercise prices,
while eliminating the Company's interim exposure to leverage and operating

risks.

The option exercise prices for the shopping center properties are generally
equal to 10% of KC Holdings' share of the mortgage debt which was outstanding



12


on the properties at the date of the IPO. If, however, the market value of the
Company's common stock at the time an option is exercised is less than $13.33
per share (the IPO price), then the option exercise price will decline
proportionately (subject to maximum reduction of 50%).

The 22 shopping center properties subject to the acquisition options are held in
8 subsidiaries of KC Holdings. Thirteen of these properties are subject to a
single lease and/or a single cross-collateralized mortgage and are therefore
held by a single subsidiary. Four of the properties, which are owned in two
separate joint ventures and managed by unaffiliated joint venture partners, are
held by two additional subsidiaries, and the remaining five shopping center
properties are each held by separate subsidiaries. The Company may exercise its
acquisition options separately with respect to each subsidiary.

The acquisition options may be exercised by either (i) a majority of the
Company's directors who are not also stockholders of KC Holdings, provided that
the pro forma annualized net cash flows of the properties to be acquired exceed
the dividend yield on the shares issued to exercise each option, or (ii) a
majority of the Company's stockholders who are not also stockholders of KC
Holdings.

KC Holdings' subsidiaries may sell any of the properties subject to the
acquisition options to any third party unaffiliated with KC Holdings or its
stockholders, provided that KC Holdings provides the Company with a 30-day right
of first refusal notice with regard to such sale. KC Holdings may cause such a
selling subsidiary to distribute any sale proceeds to KC Holdings or its
stockholders, provided that the option exercise price with respect to such
subsidiary is reduced by the amount that is distributed, and further provided
that no amount may be distributed so as to cause the option exercise price for
any subsidiary to be reduced to less than $1.

Each of KC Holdings' subsidiaries may pay dividends to KC Holdings to the extent
of net operating cash flow. In addition, any KC Holdings subsidiary may make
distributions to KC Holdings in excess of net operating cash flow, provided that
the option exercise price with respect to such subsidiary is reduced by the
amount of such distribution, and further provided that no amount may be
distributed so as to cause the option exercise price for any subsidiary to be
reduced to less than $1. KC Holdings may increase the indebtedness in its
subsidiaries for the purpose of improving, maintaining, refinancing or operating
the related shopping center properties. Such indebtedness may include borrowings
from the stockholders of KC Holdings.

In the event of a complete casualty or a condemnation of a property held by any

of KC Holdings' subsidiaries, the acquisition option will terminate with respect
to such property and the option shall continue to be effective with respect to
any other properties held by such subsidiary.

Each of KC Holdings' subsidiaries has agreed with the Company that it will
engage in no activities other than in connection with the ownership, maintenance
and improvement of the properties that it owns and only to the extent that the
Company could engage in such activities without receiving or earning
non-qualifying income (in excess of certain limits) under the REIT provisions of
the Code or without otherwise impairing the Company's status as a REIT. In
addition, KC Holdings has covenanted not to engage in any other real estate
activity. The Company has agreed not to make loans to KC Holdings or its
subsidiaries.

Exchange Listings

The Company's common stock, Class A Depositary Shares, Class B Depositary Shares
and Class C Depositary Shares are traded on the NYSE under the trading symbols
"KIM", "KIMprA", "KIMprB" and "KIMprC", respectively.

Item 2. Properties

Real Estate Portfolio As of February 1, 1998 the Company's shopping center
portfolio was comprised of approximately 35.8 million square feet of GLA in 273
neighborhood and community shopping center properties and two regional malls,
located in 30 states. Neighborhood and community shopping centers



13


comprise the primary focus of the Company's current portfolio, representing
approximately 97% of the Company's total shopping center GLA. As of February 1,
1998 approximately 90% of the Company's neighborhood and community shopping
center space was leased, and the average annualized base rent per leased square
foot was $6.37.

The Company's neighborhood and community shopping center properties, generally
owned and operated through subsidiaries or joint ventures, had an average size
of approximately 126,000 square feet as of February 1, 1998. The Company retains
its shopping centers for long-term investment and consequently pursues a program
of regular physical maintenance together with major renovations and refurbishing
to preserve and increase the value of its properties. These projects usually
include renovating existing facades, installing uniform signage, resurfacing
parking lots and enhancing parking lot lighting. During 1997, the Company
capitalized approximately $3.7 million in connection with these property
improvements.

The Company's neighborhood and community shopping centers are usually "anchored"
by a national or regional discount department store, supermarket or drugstore.
As one of the original participants in the growth of the shopping center
industry and one of the nation's largest owners and operators of shopping

centers, the Company has established close relationships with a large number of
major national and regional retailers. National and regional companies that are
tenants in the Company's shopping center properties include Venture, Kmart
Corporation, Kohl's, WalMart, TJX Companies, Toys/Kids `R Us and Schottenstein
Stores.

A substantial portion of the Company's income consists of rent received under
long-term leases. Most of the leases provide for the payment of fixed base
rentals monthly in advance and for the payment by tenants of an allocable share
of the real estate taxes, insurance, utilities and common area maintenance
expenses incurred in operating the shopping centers. Although a majority of the
leases require the Company to make roof and structural repairs as needed, a
number of tenant leases place that responsibility on the tenant, and the
Company's standard small store lease provides for roof repairs to be reimbursed
by the tenant as part of common area maintenance. The Company's management
places a strong emphasis on sound construction and safety at its properties.

Approximately 1,100 of the Company's 2,680 leases also contain provisions
requiring the payment of additional rent calculated as a percentage of tenants'
gross sales above predetermined thresholds. Percentage rents accounted for
approximately 2% of the Company's revenues from rental property for the year
ended December 31, 1997.

Minimum base rental revenues and operating expense reimbursements accounted for
approximately 98% of the Company's total revenues from rental property for the
year ended December 31, 1997. The Company's management believes that the average
base rent per square foot for the Company's existing leases is generally lower
than the prevailing market rate base rents in the geographic regions where the
Company operates, reflecting the potential for future growth.

The Company has been able to capitalize on the below market-rate leases in its
existing shopping center portfolio to obtain increases in rental revenues
through the renewal of leases or strategic re-tenanting of space. From January
1, 1997 to December 31, 1997, excluding the effect of 1997 acquisitions, the
Company increased the average base rent per leased square foot on its portfolio
of neighborhood and community shopping centers from $6.21 to $6.50, an increase
of $.29 per square foot, or approximately 5%, which was attributable to leasing
activity within the existing portfolio. The effect of 1997 acquisitions reduced
the overall rent per leased square foot by $.19, thus bringing the average rent
per leased square foot to $6.31 as of December 31, 1997. The average annual base
rent per leased square foot for new leases executed in 1997 was $9.07.

The Company seeks to reduce its operating and leasing risks through geographic
and tenant diversity. No single neighborhood and community shopping center



14


accounted for more than 1.0% of the Company's total shopping center GLA or more
than 1.9% of total annualized base rental revenues as of December 31, 1997. The
five largest tenants of the Company include Venture, Kmart Corporation, Kohl's,

WalMart and TJX Companies, which represent approximately 11.7%, 4.1%, 3.4%, 2.7%
and 2.2%, respectively, of the annualized base rental revenues at December 31,
1997. The Company maintains an active leasing and capital improvement program
that, combined with the high quality of the locations, has made, in management's
opinion, the Company's properties attractive to tenants.

The Company's management believes its experience in the industry and its
relationships with numerous national and regional tenants gives it an advantage
in an industry where ownership is fragmented among a large number of property
owners.

Retail Store Leases In addition to its neighborhood and community shopping
center portfolio and two regional malls, the Company holds interests in various
retail store leases relating to approximately 5.6 million square feet of anchor
store premises in 62 neighborhood and community shopping centers located in 24
states. As of February 1, 1998 approximately 98% of these premises had been
sublet to retailers which lease the stores pursuant to net lease agreements
providing for average annualized base rental payments to the Company of $3.73
per square foot. The Company's average annualized base rental obligation
pursuant to its retail store leases with the fee owners of such subleased
premises is approximately $2.74 per square foot. The average remaining primary
term of the Company's retail store leases (and similarly the remaining primary
terms of its sublease agreements with the tenants currently leasing such space)
is approximately 4.8 years, excluding options to renew such leases for terms
which generally range from 5-25 years.

Ground-Leased Properties The Company has 45 shopping center properties that are
subject to long-term ground leases where a third party owns and has leased the
underlying land to the Company (or an affiliated joint venture) to construct
and/or operate a shopping center. The Company or the joint venture pays rent for
the use of the land and generally is responsible for all costs and expenses
associated with the building and improvements. At the end of these long-term
leases, unless extended, the land together with all improvements revert to the
land owner.

Undeveloped Land Although the Company does not own any unimproved land tracts
that it intends to develop as new shopping centers, the Company does own parcels
of land adjacent to certain of its existing shopping centers that are held for
possible expansion and a parcel of undeveloped land leased to a retailer. At
times, should circumstances warrant, the Company may develop or dispose of these
parcels.

The table on pages 16 to 23 sets forth more specific information with respect to
each of the Company's shopping center properties as of December 31, 1997.

Item 3. Legal Proceedings

The Company is not presently involved in any litigation nor to its knowledge is
any litigation threatened against the Company or its subsidiaries that, in
management's opinion, would result in any material adverse effect on the
Company's ownership, management or operation of its properties, or which is not
covered by the Company's liability insurance.

Item 4. Submission of Matters to a Vote of Security Holders


None


15


PROPERTY CHART