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, 2001

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

Depositary Shares, each representing one-
tenth of a share of 7-1/2% Class D
Cumulative Convertible Preferred
Stock, par value $1.00 per share. New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:
None
- -------------------------------------------------------------------------------


Indicate by check mark whether the Registrant (i) 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 (ii) 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 non-affiliates
of the Registrant was approximately $2.7 billion based upon the closing price on
the New York Stock Exchange for such stock on February 1, 2002.

(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.

104,306,463 shares as of February 1, 2002.

Page 1 of 151



DOCUMENTS INCORPORATED BY REFERENCE


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 14, 2002.

Index to Exhibits begins on page 41.


2

TABLE OF CONTENTS

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

PART I

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

2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . 15

3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . 17

4. Submission of Matters to a Vote of Security Holders . . . . 17

Executive Officers and other Significant Employees
of the Registrant . . . . . . . . . . . . . . . . . . . . 25


PART II

5. Market for the Registrant's Common Equity
and Related Shareholder Matters . . . . . . . . . . . . . 27

6. Selected Financial Data . . . . . . . . . . . . . . . . . . 28

7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . 30

7A. Quantitative and Qualitative Disclosures About Market Risk. . 38

8. Financial Statements and Supplementary Data . . . . . . . . 38

9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . 38



PART III

10. Directors and Executive Officers of the Registrant . . . . . 39

11. Executive Compensation . . . . . . . . . . . . . . . . . . . 39

12. Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . . . . 39

13. Certain Relationships and Related Transactions . . . . . . . 39



PART IV

14. Exhibits, Financial Statements, Schedules and Reports on
Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . 40



3


PART I

FORWARD-LOOKING STATEMENTS

This annual report on Form 10-K, together with other statements and information
publicly disseminated by Kimco Realty Corporation (the "Company" or "Kimco")
contains certain forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. The Company intends such forward-looking
statements to be covered by the safe harbor provisions for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995 and
include this statement for purposes of complying with these safe harbor
provisions. Forward-looking statements, which are based on certain assumptions
and describe the Company's future plans, strategies and expectations, are
generally identifiable by use of the words "believe," "expect," "intend,"
"anticipate," "estimate," "project" or similar expressions. You should not rely
on forward-looking statements since they involve known and unknown risks,
uncertainties and other factors which are, in some cases, beyond the Company's
control and which could materially affect actual results, performances or
achievements. Factors which may cause actual results to differ materially from
current expectations include, but are not limited to, (i) general economic and
local real estate conditions, (ii) the inability of major tenants to continue
paying their rent obligations due to bankruptcy, insolvency or general downturn
in their business, (iii) financing risks, such as the inability to obtain equity
or debt financing on favorable terms, (iv) changes in governmental laws and
regulations, (v) the level and volatility of interest rates (vi) the
availability of suitable acquisition opportunities and (vii) increases in
operating costs. Accordingly, there is no assurance that the Company's
expectations will be realized.


SHARE SPLIT

As of December 21, 2001, the Company effected a three-for-two split (the "Stock
Split") of the Company's common stock in the form of a stock dividend paid to
stockholders of record on December 10, 2001. All common share and per common
share data included in this annual report on Form 10-K and the accompanying
Consolidated Financial Statements and Notes thereto have been adjusted to
reflect this Stock Split.


Item 1. Business

General

Kimco Realty Corporation, a Maryland corporation, is one of the nation's largest
owners and operators of neighborhood and community shopping centers. The Company
is a self-administered real estate investment trust ("REIT") and manages its
properties through present management, which has owned and operated neighborhood
and community shopping centers for over 35 years. The Company has not engaged,
nor does it expect to retain, any REIT advisors in connection with the operation
of its properties. As of February 1, 2002, the Company's portfolio was comprised
of 520 property interests including 448 neighborhood and community shopping
center properties, two regional malls, 49 retail store leases, 17 ground-up
development projects, three parcels of undeveloped land and one distribution
center totaling approximately 71.1 million square feet of leasable space located
in 42 states and Canada. The Company's portfolio includes 64 shopping center
properties comprising approximately 12.0 million square feet (the "KIR
Portfolio") relating to the Kimco Income REIT ("KIR"), a joint venture
arrangement with institutional investors established for the purpose of
investing in high quality retail properties financed primarily with individual
non-recourse mortgage debt (See Recent Developments - Kimco Income REIT ("KIR")
and Note 3 of the Notes to Consolidated Financial Statements included in this
annual report on Form 10-K). 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 REIT.

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 commencing with its
taxable year which began January 1, 1992, elected to qualify as a REIT in
accordance with Sections 856 through 860 of the Internal Revenue Code of 1986,
as amended (the "Code"). In 1994 the Company reorganized as a Maryland
corporation.

4


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 growth strategy to focus on the
acquisition of existing shopping centers and creating value through the
redevelopment and re-tenanting of those properties. As a result of this
strategy, substantially all of the operating shopping centers added to the
Company's portfolio since 1981 have been through the acquisition of existing
shopping centers.

During 1998, the Company, through a merger transaction, completed the
acquisition of The Price REIT, Inc., a Maryland corporation, (the "Price REIT").
Prior to the merger, Price REIT was a self-administered and self-managed equity
REIT that was primarily focused on the acquisition, development, management and
redevelopment of large retail community shopping center properties concentrated
in the western part of the United States. In connection with the merger, the
Company acquired interests in 43 properties, located in 17 states. With the
completion of the Price REIT merger, the Company expanded its presence in
certain western states including California, Arizona and Washington. In
addition, Price REIT had strong ground-up development capabilities. These
development capabilities, coupled with the Company's own construction management
expertise, provides the Company, on a selective basis, the ability to pursue
ground-up development opportunities.

Also, during 1998, the Company formed KIR, an entity in which the Company held a
99.99% limited partnership interest. KIR was established for the purpose of
investing in high quality properties financed primarily with individual
non-recourse mortgages. The Company believes that these properties are
appropriate for financing with greater leverage than the Company traditionally
uses. At the time of formation, the Company contributed 19 properties to KIR,
each encumbered by an individual non-recourse mortgage. During 1999, KIR sold a
significant interest in the partnership to institutional investors. As of
December 31, 2001, the Company holds a 43.3% non-controlling limited partnership
interest in KIR and accounts for its investment in KIR under the equity method
of accounting (See Recent Developments - Kimco Income REIT ("KIR") and Note 3 of
the Notes to Consolidated Financial Statements included in this annual report on
Form 10-K).

In connection with the Tax Relief Extension Act of 1999 (the "RMA") which became
effective January 1, 2001, the Company is now permitted to participate in
activities which it was precluded from previously in order to maintain its
qualification as a REIT, so long as these activities are conducted in entities
which elect to be treated as taxable subsidiaries under the Code, subject to
certain limitations. As such, the Company, through its taxable REIT
subsidiaries, is engaged in various retail real estate related opportunities,
including (i) merchant building through its wholly owned taxable REIT
subsidiary, Kimco Developers, Inc. ("KDI"), which is primarily engaged in the
ground-up development of neighborhood and community shopping centers and
subsequent sale thereof upon completion (see Recent Developments - Kimco
Developers, Inc. ("KDI")), (ii) retail real estate advisory and disposition
services which primarily focus on leasing and disposition strategies for real
estate property interests of distressed retailers and (iii) acting as an agent
or principal in connection with tax deferred exchange transactions. The Company
will consider other investments through taxable REIT subsidiaries should
suitable opportunities arise.


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 will 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 discount
department store, a supermarket or drugstore tenant offering day-to-day
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/or other indebtedness. Financing or
other indebtedness may be incurred simultaneously or subsequently in connection
with 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.


5



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 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, 2001, the Company's single largest
neighborhood and community shopping center, excluding the KIR Portfolio,
accounted for only 1.5% of the Company's annualized base rental revenues and
only 0.9% of the Company's total shopping center GLA. At December 31, 2001, the
Company's five largest tenants, excluding the KIR Portfolio, include Kmart
Corporation (see Subsequent Events - Kmart Bankruptcy), Kohl's, The Home Depot,
TJX Companies, and Wal-Mart, which represent approximately 12.6%, 3.1%, 2.5%,
1.9% and 1.7%, respectively, of the Company's annualized base rental revenues.

In connection with the RMA, which became effective January 1, 2001, the Company
has expanded its investment and operating strategy to include new retail real
estate related opportunities which the Company was precluded from previously in
order to maintain its qualification as a REIT. As such, the Company, has
established a merchant building business through its KDI subsidiary. KDI makes
selective acquisitions of land parcels for the ground-up development of
neighborhood and community shopping centers and subsequent sale thereof upon
completion. Additionally, the Company has developed a retail property solutions
business which specializes in real estate advisory and disposition services of
real estate controlled by distressed and/or bankrupt retailers. These services
may include assistance with inventory and fixture liquidation in connection with
going-out-of-business sales. The Company may participate with other entities in
providing these advisory services through partnerships, joint ventures or other
co-ownership arrangements. The Company, as a regular part of its investment
strategy, will continue to actively seek investments for its taxable REIT
subsidiaries.

The Company emphasizes equity real estate investments including preferred equity
investments, but may, at 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,
on a selective basis, acquire all or substantially all 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 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 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 Company's stockholders.


Capital Strategy and Resources

The Company intends to operate with and maintain a conservative capital
structure with a level of debt to total market capitalization of approximately
50% or less. As of December 31, 2001, the Company's level of debt to total
market capitalization was 27%. In addition, the Company intends to maintain
strong debt service coverage and fixed charge coverage ratios as part of its
commitment to maintaining its investment-grade debt ratings. As of December 31,
2001, the Company had a debt service coverage ratio of 3.9 times and a fixed
charge coverage ratio of 3.2 times.

Since the completion of the Company's IPO in 1991, the Company has utilized the
public debt and equity markets as its principal source of capital for its
expansion needs. Since the IPO, the Company has completed additional offerings
of its public unsecured debt and equity, raising in the aggregate over $2.3
billion for the purposes of, among other things, repaying indebtedness,
acquiring interests in neighborhood and community shopping centers, funding
ground-up development projects, expanding and improving properties in the
portfolio and other investments.

6

The Company has a $250.0 million, unsecured revolving credit facility, which is
scheduled to expire in August 2003. This credit facility, which replaced the
Company's $215.0 million unsecured revolving credit facility, has made available
funds to both finance the purchase of properties and meet any short-term working
capital requirements. As of December 31, 2001 there were no borrowings
outstanding under this unsecured revolving credit facility.

The Company also has a $200.0 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, development and redevelopment costs, and (ii) 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.)

In addition to the public debt and equity markets as capital sources, the
Company may, from time to time, obtain mortgage financing on selected
properties. As of December 31, 2001, the Company had over 380 unencumbered
property interests in its portfolio representing over 87% of the Company's net
operating income.

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, unsecured
debt financings and/or mortgage financings in a manner consistent with its
intention to operate with a conservative debt capitalization policy.

During May 2001, the Company filed a shelf registration on Form S-3 for up to
$750.0 million of debt securities, preferred stock, depositary shares, common
stock and common stock warrants. As of February 1, 2002, the Company had
approximately $625.7 million available for issuance under this shelf
registration statement.

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 the payment of dividends in accordance with REIT
requirements in both the short-term and long-term. In addition, the Company
anticipates that cash on hand, free cash flow generated by the operating
business, availability under its revolving credit facility, issuance of equity
and public debt, as well as other debt and equity alternatives, will provide the
necessary capital required by the Company. Cash flow from operations increased
to $287.4 million for the year ended December 31, 2001, as compared to $250.5
million for the year ended December 31, 2000.

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 regional and local
commercial developers, real estate companies, financial institutions and other
investors who compete with the Company for the acquisition of properties and in
seeking tenants who will lease space in the Company's properties.

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 debt.

Risk Factors

Set forth below are the material risks associated with the purchase and
ownership of the securities of the Company. As an owner of real estate, the
Company is subject to certain business risks arising in connection with the
underlying real estate, including, among other factors, (i)defaults of major
tenants due to bankruptcy, insolvency and/or general downturn in their business
which could reduce the Company's cash flow, (ii) major tenants not renewing
their leases as they expire or renew at lower rental rates which could reduce
the Company's cash flow, (iii) changes in retailing trends which could reduce
the need for shopping centers, (iv) potential liability for future or unknown
environmental issues, (v) changes in real estate and zoning laws and competition
from other real estate owners which could make it difficult to lease or develop
properties, and (vi) the inability to acquire capital, either in the form of
debt or equity, on satisfactory terms to fund the Company's cash requirements.
The success of the Company also depends upon trends in the economy, including,
but not limited to, interest rates, income tax laws, governmental regulations
and legislation and population trends. Additionally, the Company is subject to
complex regulations related to its status as a REIT and would be adversely
affected if it failed to maintain its qualification as a REIT.

7

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
and accordingly, the Company maintains regional offices in Margate, Orlando and
Tampa, Florida; Philadelphia, Pennsylvania; Dallas, Texas; Dayton and Cleveland,
Ohio; Lisle and Chicago, Illinois; Charlotte, North Carolina; Phoenix and
Tucson, Arizona; Jonesboro, Georgia; Woodbridge, Virginia and Los Angeles, San
Francisco and Sacramento, California. A total of 305 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 50 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 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 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.

In connection with the RMA, which became effective January 1, 2001, the Company
is now permitted to participate in activities which the Company was precluded
from previously in order to maintain its qualification as a REIT, so long as
these activities are conducted in entities which elect to be treated as taxable
subsidiaries under the Code, subject to certain limitations. The primary
activities conducted by the Company in its taxable REIT subsidiaries during 2001
include, but are not limited to, (i) the ground-up development of shopping
center properties and subsequent sale thereof upon completion (see Recent
Developments - Kimco Developers, Inc. ("KDI")) and (ii) real estate advisory and
disposition services provided in connection with the asset designation rights
obtained from the bankrupt estate of Montgomery Ward (see Recent Developments -
Other Real Estate Joint Venture Investments - Montgomery Ward Asset Designation
Rights). As such, the Company was subject to federal income tax on the income
from these activities.

Recent Developments

Stock Split -

On October 24, 2001, the Company's Board of Directors declared a three-for-two
split of the Company's common stock which was effected in the form of a stock
dividend paid on December 21, 2001 to stockholders of record on December 10,
2001. The Board, in taking this action, indicated a desire to increase the
number of shares outstanding and thereby broaden the base of investors in the
Company's common stock. All share and per share data included in this annual
report on Form 10-K and the accompanying Consolidated Financial Statements and
Notes thereto have been adjusted to reflect this Stock Split.

8

Operating Properties -

Acquisitions -

During the year ended December 31, 2001, the Company and its affiliates acquired
interests in three operating properties located in three states, comprising
approximately 0.4 million square feet of GLA for an aggregate purchase price of
approximately $21.1 million as follows:

In May 2001, the Company acquired Wakefield Commons shopping center located in
Raleigh, NC for a purchase price of approximately $6.2 million. This shopping
center is anchored by Kroger Corporation and contains approximately 84,000
square feet of GLA.

In August 2001, the Company acquired Merchants Walk shopping center located in
Lakeland, FL for a purchase price of approximately $12.9 million. This shopping
center is anchored by Ross Stores and Steinmart and contains approximately
230,000 square feet of GLA.

In December 2001, the Company acquired Bangor shopping center located in Bangor,
ME for a purchase price of approximately $2.0 million. This shopping center is
anchored by Burlington Coat Factory and has approximately 86,000 square feet of
GLA.

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.

Dispositions -

During 2001, the Company, in separate transactions, disposed of three operating
properties (including the sale of a property to KIR - see Recent Developments -
Kimco Income REIT ("KIR")) and a portion of another operating property. Cash
proceeds from these dispositions aggregated approximately $46.7 million, which
resulted in a net gain of approximately $3.0 million. Details of these
transactions are as follows:

During January 2001, the Company disposed of an operating property located in
Jennings, MO. Cash proceeds from this disposition totaled approximately $2.2
million, which approximated net book value.

During May 2001, the Company disposed of an operating property located in
Elyria, OH. Cash proceeds from this disposition totaling approximately $5.8
million, together with an additional $7.1 million cash investment, were used to
acquire an exchange shopping center property located in Lakeland, FL during
August 2001. The sale of this property resulted in a gain of approximately $3.0
million.

Additionally, during May 2001, the Company disposed of a portion of an operating
property located in Sanford, FL. Cash proceeds from this disposition totaled
approximately $4.3 million which approximated net book value.

During June 2001, the Company sold an operating property located in Bridgewater,
NJ to KIR for a purchase price of $37.0 million which approximated net book
value. KIR paid the Company $34.4 million in cash and the Company contributed
the remaining $2.6 million of equity in the property in satisfaction of its
equity contribution commitment.

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 2001,
the Company substantially completed the redevelopment and re-tenanting of
various operating properties. The Company expended approximately $29.5 million
in connection with these major redevelopments and re-tenanting projects during
2001. The Company is currently involved in redeveloping several other shopping
centers in the existing portfolio. The Company anticipates its capital
commitment toward these and other redevelopment projects will be approximately
$30.0 million to $50.0 million during 2002.

Kimco Developers, Inc. ("KDI") -

Effective January 1, 2001, the Company has elected taxable REIT subsidiary
status for its wholly-owned subsidiary, KDI. KDI is primarily engaged in the
ground-up development of neighborhood and community shopping centers and the
subsequent sale thereof upon completion. As of December 31, 2001, KDI had in
progress 15 ground-up development projects located in seven states. These
projects had substantial pre-leasing prior to the commencement of construction.
During 2001, KDI expended approximately $119.4 million in connection with the
purchase of land and construction costs related to these projects. These
projects are currently proceeding on schedule and in line with the Company's
budgeted costs. The Company anticipates its capital commitment toward these and
other development projects will be approximately $140.0 million to $160.0
million during 2002. The proceeds from the sales of the completed ground-up
development projects during 2002 are expected to be sufficient to fund these
anticipated capital requirements.

9

KDI Acquisitions -

During the year ended December 31, 2001, KDI acquired eight land parcels for the
ground-up development of shopping centers and subsequent sales thereof upon
completion for an aggregate purchase price of approximately $40.2 million,
including the assumption of approximately $5.9 million of construction financing
encumbering one of the properties, as follows:

During January 2001, KDI acquired a land parcel located in Columbus, OH for the
development of the Orange Township shopping center for a purchase price of
approximately $5.4 million. Additionally, during January 2001, KDI acquired a
50% interest in a land parcel in Raleigh, NC for the development of Wakefield
Crossings shopping center for a purchase price of approximately $4.0 million.

During March 2001, KDI acquired a 50% interest in a land parcel located in
Tampa, FL for the development of Northwoods Center for a purchase price of
approximately $2.7 million.

During May 2001, KDI acquired a 65% interest in a land parcel located in
Houston, TX for the development of Tomball Crossings shopping center for a
purchase price of approximately $2.1 million. Additionally, during May 2001, KDI
acquired a 60% interest in a land parcel located in Raleigh, NC for the
development of Wakefield Commons Phase II for a purchase price of approximately
$6.5 million including the assumption of approximately $5.9 million in
construction financing encumbering the property.

During July 2001, KDI acquired a land parcel located in Hillsborough, NJ for the
development of Hillsborough Promenade for a purchase price of approximately
$15.0 million. KDI paid $3.7 million in cash and provided an $11.3 million
letter of credit as collateral for the balance of the purchase price which is
due in April 2002. Additionally, during July 2001, KDI acquired a 50% interest
in a land parcel located in Fountain Hills, AZ for the development of Four Peaks
Plaza for a purchase price of approximately $2.9 million.

During November 2001, KDI acquired a 50% interest in a land parcel located in
Gilbert Fiesta, AZ for the development of Gilbert Fiesta shopping center for a
purchase price of approximately $1.6 million.

KDI Dispositions -

During the year ended December 31, 2001, KDI sold two of its recently completed
projects and five out-parcels for approximately $61.3 million, which resulted in
net gains of approximately $8.1 million after provision for income taxes, as
follows:

During January 2001, KDI disposed of Casa Paloma shopping center, a completed
ground-up development project located in Chandler, AZ, for approximately $32.5
million, which resulted in a net gain of approximately $3.5 million after
provision for income taxes.

During August 2001, KDI disposed of an out-parcel located in Cedar Hills, TX,
for an aggregate purchase price of approximately $0.6 million, which resulted in
a net gain of approximately $0.3 million after provision for income taxes.

During May 2001, KDI disposed of an out-parcel at Home Depot Plaza located in
Houston, TX for approximately $1.1 million. A second out-parcel was disposed of
in August 2001 for approximately $2.7 million. The remainder of the project was
sold in October 2001 for approximately $20.6 million. These sales resulted in
net gains of approximately $3.2 million after provision for income taxes.

During December 2001, KDI sold four out-parcels located in San Antonio, TX for
approximately $3.8 million, which resulted in net gains of approximately $1.1
million after provision for income taxes.

Kimco Select Investments ("Kimco Select") -

Kimco Select, a New York general partnership, 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. Kimco
Select is managed by David M. Samber, formerly President and Chief Operating
Officer of the Company who owns the remaining 10% interest in Kimco Select.
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 troubled or bankrupt tenants and other assets.

10

During 2001, Kimco Select (i) acquired certain public bonds for an aggregate
purchase price of approximately $7.1 million, (ii) sold certain public bonds for
an aggregate sales price of approximately $14.7 million resulting in net gains
of approximately $2.0 million and (iii) sold an interest in a mortgage
receivable for approximately $6.0 million which resulted in a net gain of
approximately $0.7 million.

During December 2001, the Company purchased the remaining 10% interest in Kimco
Select from Mr. Samber, who continues to serve as the Chief Executive Officer of
Kimco Select, for an aggregate purchase price of approximately $1.7 million.

Kimco Select also has investments in (i) a joint venture which owns an office
building in Miami, FL, (ii) a joint venture which has participating interests in
first and second mortgages, (iii) nine retail properties, and (iv) four
properties which are anchored by ambulatory care facilities with complementary
retail space. As of December 31, 2001, Kimco Select had total investments of
approximately $98.0 million.

Kimco Income REIT ("KIR") -

During 1998, the Company formed KIR, an entity that was established for the
purpose of investing in high quality real estate properties financed primarily
with individual non-recourse mortgages. These properties include, but are not
limited to, fully developed properties with strong, stable cash flows from
credit-worthy retailers with long-term leases. The Company originally held a
99.99% limited partnership interest in KIR. Subsequent to KIR's formation, the
Company sold a significant portion of its original interest to an institutional
investor and admitted three other limited partners. As of December 31, 2001, KIR
has received total capital commitments of $569.0 million, of which the Company
subscribed for $247.0 million and the four limited partners subscribed for
$322.0 million. The Company has a 43.3% non-controlling limited partnership
interest in KIR and accounts for its investment under the equity method of
accounting.

During 2001, the limited partners in KIR contributed $71.0 million towards their
respective capital commitments, including $30.8 million by the Company, of which
$2.6 million was in the form of a real estate contribution. As of December 31,
2001, KIR had unfunded capital commitments of $184.0 million, including $79.7
million from the Company.

During 2001, KIR purchased 12 shopping center properties (including one property
from the Company for $37.0 million), in separate transactions, aggregating
approximately 2.9 million square feet of GLA for approximately $349.0 million,
including the assumption of approximately $40.2 million of mortgage debt
encumbering two of the properties.

During December 2001, KIR disposed of a shopping center property in Lake Mary,
FL for an aggregate sales price of approximately $2.4 million. This disposition
resulted in a gain of approximately $0.5 million. Proceeds from this sale will
be used to acquire an exchange shopping center property.

As of December 31, 2001, the KIR portfolio was comprised of 64 shopping center
properties aggregating approximately 12.0 million square feet of GLA located in
20 states.

During 2001, KIR obtained individual non-recourse, non-cross collateralized
fixed-rate mortgages aggregating approximately $280.0 million on 14 of its
previously unencumbered properties with terms ranging from 7 to 10 years and
rates ranging from 6.76% to 7.69% per annum. The net proceeds were used to
finance the acquisition of various shopping center properties.

KIR maintains a $100.0 million secured revolving credit facility with a
syndicate of banks, which is scheduled to expire in November 2002. This facility
is collateralized by the unfunded subscriptions of certain partners, including
those of the Company. Under the terms of the facility, funds may be borrowed for
general corporate purposes including the acquisition of institutional quality
properties. Borrowings under the facility accrue interest at LIBOR plus 0.80%.
As of December 31, 2001, there was $15.0 million outstanding under this
facility.


11

Other Real Estate Joint Venture Investments -

Montgomery Ward Asset Designation Rights -

During March 2001, the Company, through a taxable REIT subsidiary, formed a
joint venture (the "Ward Venture") in which the Company has a 50% interest, for
purposes of acquiring asset designation rights for substantially all of the real
estate property interests of the bankrupt estate of Montgomery Ward LLC and its
affiliates. These asset designation rights have provided the Ward Venture the
ability to direct the ultimate disposition of the 315 fee and leasehold
interests held by the bankrupt estate. The asset designation rights expire in
August 2002 for the leasehold positions and December 2004 for the fee owned
locations. During the marketing period, the Ward Venture will be responsible for
all carrying costs associated with the properties until the property is
designated to a user.

As of December 31, 2001, the Ward Venture has completed transactions on 271
properties, and the Company has recognized net profits of approximately $20.9
million after provision for income taxes for the year ended December 31, 2001.
The pre-tax profits from the Ward Venture of approximately $34.6 million are
included in the Consolidated Statements of Income in the caption Equity in
income of other real estate joint ventures, net for the year ended December 31,
2001.

RioCan Investments -

During September 2001, the Company purchased 2.5 million units of RioCan Real
Estate Investment Trust ("RioCan", Canada's largest publicly traded REIT
measured by GLA). The Company paid a price of $10.50 per unit in Canadian
Dollars ("CAD"), or approximately CAD $26.3 million (approximately USD $16.9
million). In connection with this transaction, the Company was also granted 2.5
million warrants of RioCan. Each warrant entitles the Company to obtain one
trust unit of RioCan at any time during the next 5 years at an exercise price of
CAD $11.02.

During October 2001, the Company formed a joint venture (the "RioCan Venture")
with RioCan in which the Company has a 50% interest, to acquire retail
properties and development projects in Canada. The acquisition and development
projects are to be sourced and managed by RioCan and are subject to review and
approval by a joint oversight committee consisting of RioCan management and the
Company's management personnel. During October 2001, the RioCan Venture acquired
a portfolio of four shopping center properties for an aggregate purchase price
of CAD $170.0 million (approximately USD $107.8 million), including the
assumption of approximately CAD $108.5 million (approximately USD $68.8 million)
in mortgage debt. The Company has committed a total equity investment of up to
CAD $150.0 million for the acquisition of retail properties and development
projects. Capital contributions will only be required as suitable opportunities
arise and are agreed to by the Company and RioCan.

Kimco / G.E. Joint Venture -

During October 2001, the Company formed a joint venture (the "GE Venture") with
GE Capital Real Estate ("GECRE"), in which the Company has a 20% interest. The
purpose of this joint venture is to acquire established, high-growth potential
retail properties in the United States. The initial funding for this venture
will consist of an equity pool of up to $250.0 million, provided $50.0 million
by the Company and $200.0 million by GECRE. The Company will be responsible for
the day-to-day management, redevelopment and leasing of the properties acquired
and will be paid fees for those services. In addition, the Company will earn
fees related to the acquisition and disposition of properties by the GE Venture.
Capital contributions will only be required as suitable opportunities arise and
are agreed to by the Company and GECRE. Currently, the GE Venture is evaluating
certain portfolios of properties for potential acquisition.

Other -

During March 2001, the Company exercised its option to acquire a 50% interest in
a joint venture from KC Holdings, Inc. ("KC Holdings"), an entity formed in
connection with the Company's IPO in November 1991. This joint venture consists
of three shopping center properties located in Buffalo, NY, comprising
approximately 395,000 square feet of GLA. The joint venture was acquired for an
aggregate option price of approximately $3.5 million, paid approximately $2.7
million in cash and $0.8 million in shares of the Company's common stock (29,638
shares valued at $27.67 per share). The members of the Company's Board of
Directors who are not also shareholders of KC Holdings, unanimously approved the
Company's purchase of this joint venture investment.


12

Other Investments -

During June 2001, the Company purchased from an unaffiliated partner the
remaining 20% interest in a property located in Skokie, IL for an aggregate
purchase price of approximately $0.8 million. Also during June 2001, the Company
purchased from an unaffiliated partner the remaining 10% interest in a property
located in Smithtown, NY for an aggregate purchase price of approximately $2.5
million. These properties are now 100% owned by the Company.

During August 2001, the Company, through a joint venture in which the Company
has a 50% interest, provided $27.5 million of debtor-in-possession financing to
Ames Department Stores, Inc. ("Ames"), a retailer in bankruptcy. This loan is
secured by the real estate owned by Ames.

Financing Transactions -

Mortgage Debt

During 2001, the Company obtained four individual non-recourse, non-cross
collateralized fixed-rate mortgage loans of which three of the shopping centers
are anchored by Kmart Corporation (see Subsequent Events - Kmart Bankruptcy),
providing aggregate proceeds to the Company of approximately $51.2 million.
These ten-year loans mature in 2011 and have effective interest rates ranging
from 7.31% to 7.64% per annum.

Credit Facility

The Company maintains a $250.0 million unsecured revolving credit facility (the
"Credit Facility") with a group of banks. The Credit Facility is scheduled to
expire in August 2003. Under the terms of the Credit Facility, funds may be
borrowed for general corporate purposes, including (i) funding property
acquisitions, (ii) funding development and redevelopment costs and (iii) funding
any short-term working capital requirements. Interest on borrowings under the
Credit Facility accrues at a spread (currently 0.55%) to LIBOR, which fluctuates
in accordance with changes in the Company's senior debt ratings. As part of the
Credit Facility, the Company has a competitive bid option where the Company may
auction up to $100.0 million of its requested borrowings to the bank group. This
competitive bid option provides the Company the opportunity to obtain pricing
below the currently stated spread to LIBOR of 0.55%. As of December 31, 2001
there were no borrowings outstanding under the Credit Facility.

Equity

During March 2001, the Company issued 29,638 shares of common stock at $27.67
per share in connection with the exercise of its option to acquire a 50%
interest in a joint venture consisting of three shopping center properties from
KC Holdings (See Notes 9 and 14 of the Notes to Consolidated Financial
Statements included in this annual report on Form 10-K).

During November 2001, the Company completed a primary public stock offering of
2,250,000 shares of common stock priced at $32.85 per share. The net proceeds
from this sale of common stock, totaling approximately $70.1 million (after
related transaction costs of $3.8 million) will be used primarily to invest
equity capital in the GE Venture and for additional equity capital in KIR.

During December 2001, the Company completed a primary public stock offering of
1,500,000 shares of common stock priced at $33.57 per share. The net proceeds
from this sale of common stock, totaling approximately $47.6 million (after
related transaction costs of $2.7 million) will be used for general corporate
purposes, including (i) the investment of additional equity capital in KIR and
(ii) the development, redevelopment and expansion of properties in the Company's
portfolio.

Additionally, during November 2001, the Company announced the redemption of all
outstanding depositary shares of the Company's 7-1/2% Class D Cumulative
Convertible Preferred Stock (the "Class D Preferred Stock") in exchange for
shares of the Company's common stock. The Board of Directors set January 3, 2002
as the mandatory redemption date on which all outstanding depositary shares of
Class D Preferred Stock were redeemed. Holders of the Class D Preferred Stock on
the redemption date received 0.93168 shares of the Company's common stock, as
adjusted for the Company's three-for-two common stock split, for each depositary
share redeemed. During 2001, 3,258,642 depositary shares of the Class D
Preferred Stock were voluntarily converted to common stock by the holders. On
January 3, 2002, the remaining 923,900 depositary shares of the Class D
Preferred Stock were redeemed for common stock by the Company and a final
dividend payment of 43.4680 cents per Class D Depositary share was paid on
January 15, 2002.

During 2001, the Company issued approximately 1.8 million shares of common stock
in connection with (i) exercises of common stock options by employees, (ii)
stock grants awarded to newly-appointed officers of the Company and (iii) the
Company's dividend reinvestment plan. The Company received approximately $37.5
million in connection with these issuances.

13

Hedging Activities

During 2001, the Company entered into two foreign currency forward contracts.
The Company expects these forward contracts to be highly effective in limiting
its exposure to the variability in the fair value of its CAD $56.1 million
investments (approximately USD $35.8 million) as it relates to changes in the
exchange rate. (See Note 11 of the Notes to Consolidated Financial Statements
included in this annual report on Form 10-K.)

In November 2001, the Company entered into an interest rate swap agreement on
its $100.0 million remarketed reset notes in order to reduce its exposure to
fluctuations of interest rates on its floating rate debt. This swap agreement
expires in August 2002 and effectively fixed the interest rate at 2.93% per
annum. The Company has determined that this swap agreement is highly effective
in offsetting future variable interest cash flows related to the Company's debt
portfolio. (See Notes 7 and 11 of the Notes to Consolidated Financial Statements
included in this annual report on Form 10-K.)

KC Holdings

To facilitate the Company's November 1991 IPO, 46 shopping center properties and
certain other assets, together with indebtedness related thereto, were
transferred to subsidiaries of KC Holdings. The Company, although having no
ownership interest in KC Holdings or its subsidiary companies, was granted
ten-year, fixed-price acquisition options which expired in November 2001 to
re-acquire 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. The acquisition options enabled 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.

As of December 31, 2001, KC Holdings' subsidiaries had conveyed 29 shopping
center properties and a 50% interest in a joint venture consisting of three
properties back to the Company. Additionally, KC Holdings' subsidiaries disposed
of ten additional centers in transactions with unaffiliated 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 shopping centers that
have been re-acquired by the Company from KC Holdings. (See Notes 9 and 14 of
the Notes to Consolidated Financial Statements included in this annual report on
Form 10-K.) The Company manages three of KC Holdings' remaining four shopping
center properties pursuant to a management agreement. KC Holdings' other
shopping center property is managed by an unaffiliated joint venture partner.

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.

Subsequent Events

Kmart Bankruptcy -

On January 22, 2002, Kmart Corporation ("Kmart") filed for protection under
Chapter 11 of the U.S. Bankruptcy Code. As of the filing date, Kmart occupied 69
locations (excluding the KIR portfolio which includes six Kmart locations),
representing 12.6% of the Company's annualized base rental revenues and 13.3% of
the Company's total shopping center GLA. As of February 1, 2002, Kmart rejected
its lease at 15 locations. These 15 locations represent approximately $16.3
million of annualized base rental revenues comprising approximately 1.6 million
square feet of GLA. The average rent per square foot at these locations was
$10.43. As adjusted for the 15 leases rejected by Kmart subsequent to December
31, 2001, Kmart now represents 8.7% of annualized base rents and 10.4% of leased
GLA. The Company is actively marketing these locations to prospective tenants,
however, no assurances can be provided that these locations will be leased in
the near term or at comparable rents previously paid by Kmart. The Company will
file claims in connection with these rejected leases generally for lost rents
equal to three years of rental obligations as well as other amounts related to
obligations under the leases. Actual amounts to be received in satisfaction of
these claims will be subject to Kmart's final plan of reorganization and the
availability of funds to pay creditors such as the Company.

On March 8, 2002, Kmart announced it would be closing an additional 284
locations of which 17 of these locations are leased from the Company. The
Company had previously encumbered seven of these properties with individual
non-recourse mortgage loans. The annualized base rental revenues from these 17
locations is approximately $15.1 million. The annualized interest expense for
the seven encumbered properties is approximately $5.6 million. As of the date of
this filing of this annual report on Form 10-K, the Company has not been
notified directly by Kmart as to the timing of these store closings or whether
the leases will be assigned or rejected. Until such time as the leases are
rejected in accordance with the bankruptcy proceedings, Kmart remains obligated
for payments of rent and operating expenses at these locations and all other
remaining locations.

14

Exchange Listings

The Company's common stock, Class A Depositary Shares, Class B Depositary
Shares, Class C Depositary Shares and Class D Depositary Shares are traded on
the NYSE under the trading symbols "KIM", "KIMprA", "KIMprB", "KIMprC" and
"KIMprD", respectively. Trading of the Class D Depositary Shares ceased on
January 3, 2002 in connection with the Company's mandatory redemption of such
shares.

Item 2. Properties

Real Estate Portfolio

As of January 1, 2002 the Company's real estate portfolio was comprised of
approximately 71.0 million square feet of GLA in 447 neighborhood and community
shopping center properties, two regional malls, 49 retail store leases, three
parcels of undeveloped land, one distribution center and 15 projects under
development, located in 42 states and Canada. The Company's portfolio includes
64 shopping center properties comprising approximately 12.0 million square feet
of GLA relating to the KIR Portfolio. Neighborhood and community shopping
centers comprise the primary focus of the Company's current portfolio,
representing approximately 98% of the Company's total shopping center GLA. As of
January 1, 2002, approximately 90.1% of the Company's neighborhood and community
shopping center space (excluding the KIR Portfolio) was leased, and the average
annualized base rent per leased square foot of the neighborhood and community
shopping center portfolio (excluding the KIR Portfolio) was $8.08. As of January
1, 2002, the KIR Portfolio was 96.7% leased with an average annualized base rent
per leased square foot of $11.42.

The Company's neighborhood and community shopping center properties, generally
owned and operated through subsidiaries or joint ventures, had an average size
of approximately 142,000 square feet as of January 1, 2002. The Company
generally 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 2001, the Company capitalized approximately $6.5 million in
connection with these property improvements and expensed to operations
approximately $14.5 million.

The Company's neighborhood and community shopping centers (including the KIR
Portfolio) 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. Some
of the major national and regional companies that are tenants in the Company's
shopping center properties include Kmart Corporation, Kohl's, The Home Depot,
TJX Companies, Wal-Mart, Toys R' Us, Office Max, Best Buy and Value City.

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 1,652 of the Company's 4,980 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 1% of the Company's revenues from rental property for the year
ended December 31, 2001.

Minimum base rental revenues and operating expense reimbursements accounted for
approximately 99% of the Company's total revenues from rental property for the
year ended December 31, 2001. The Company's management believes that the base
rent per leased square foot for many of 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.

15

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. For the period
January 1, 2001 to December 31, 2001 excluding the effects of 2001 acquisitions
and dispositions, the Company increased the average base rent per leased square
foot in its portfolio of neighborhood and community shopping centers (excluding
the KIR Portfolio) from $7.95 to $8.12, an increase of $0.17 per square foot,
which was primarily attributed to general leasing activity within the existing
portfolio. The combined effect of the 2001 acquisitions/dispositions decreased
the overall rent per leased square foot by $0.04, thus bringing the average rent
per leased square foot to $8.08 as of December 31, 2001. The average annual base
rent per leased square foot for new leases (excluding the KIR Portfolio)
executed in 2001 was $10.25.

The Company seeks to reduce its operating and leasing risks through geographic
and tenant diversity. No single neighborhood and community shopping center
(excluding the KIR Portfolio) accounted for more than 0.9% of the Company's
total shopping center GLA or more than 1.5% of total annualized base rental
revenues as of December 31, 2001. The Company's five largest tenants (excluding
the KIR Portfolio) include Kmart Corporation (see Subsequent Events - Kmart
Bankruptcy), Kohl's, The Home Depot, TJX Companies, and Wal-Mart, which
represent approximately 12.6%, 3.1%, 2.5%, 1.9% and 1.7%, respectively, of
annualized base rental revenues at December 31, 2001. 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 real estate 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 neighborhood and community shopping centers, as of January 1,
2002, the Company had interests in retail store leases totaling approximately
4.5 million square feet of anchor stores in 49 neighborhood and community
shopping centers located in 24 states. As of January 1, 2002, approximately
81.3% of the space in these anchor stores had been sublet to retailers that
lease the stores under net lease agreements providing for average annualized
base rental payments of $4.19 per square foot. The average annualized base
rental payments under the Company's retail store leases to the land owners of
such subleased stores is approximately $2.71 per square foot. The average
remaining primary term of the retail store leases (and, similarly, the remaining
primary terms of the sublease agreements with the tenants currently leasing such
space) is approximately 5 years, excluding options to renew the leases for terms
which generally range from 5 to 25 years.

Ground-Leased Properties

The Company has interests in 53 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.

Ground-Up Development Properties

As of January 1, 2002, the Company, through its wholly-owned taxable REIT
subsidiary, KDI, has currently in progress 15 ground-up development projects
located in seven states which are held for sale upon completion. These projects
had substantial pre-leasing prior to the commencement of construction. As of
January 1, 2002, the average annual base rent per leased square foot for the KDI
portfolio was $11.49 and the average annual base rent per leased square foot for
new leases executed in 2001 was $12.73.

Undeveloped Land

The Company owns certain unimproved land tracts and parcels of land adjacent to
certain of its existing shopping centers that are held for possible expansion.
At times, should circumstances warrant, the Company may develop or dispose of
these parcels.

The table on pages 18 to 24 sets forth more specific information with respect to
each of the Company's property interests.


16

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.


17