Kimco Realty Corporation reports third quarter 2010 earnings and increases 2010 guidance; Introduces preliminary 2011 guidance with six percent increase in recurring FFO
NEW HYDE PARK, N.Y.--(BUSINESS WIRE)-- Kimco Realty Corporation (NYSE: KIM) today reported results for the quarter ended September 30, 2010.
Highlights for the Third Quarter:
-- Announced a 12.5 percent increase to the quarterly common dividend to
$0.18 per common share;
-- Generated funds from operations (FFO) of $0.27 per diluted share;
recurring FFO of $0.28 per diluted share;
-- Reported a 2.2 percent increase in U.S. same-property net operating
income (NOI) compared to the third quarter of 2009;
-- Closed the quarter with occupancy of 92.7 percent in its combined
shopping center portfolio and 92.3 percent in the U.S. portfolio;
-- Reported positive U.S. cash-basis leasing spreads of 1.5 percent on 282
new leases, renewals and options signed totaling 0.9 million square
feet;
-- Transferred five unencumbered shopping centers to a joint venture with
BIG Shopping Centers (TLV:BIG) for approximately $30 million;
-- Acquired a shopping center in Jacksonville, Fla. for $35.6 million; and
-- Issued $175 million of 6.90% cumulative redeemable preferred stock and a
4.30% $300 million 71/2-year unsecured bond with net proceeds repaying
approximately $440 million of debt.
Financial Results
Net income available to common shareholders for the third quarter was $17.5 million, or $0.04 per diluted share, compared to $28.3 million, or $0.07 per diluted share, for the same period in 2009. The change in net income available to common shareholders is attributable to:
-- $10.8 million charge relating to early extinguishment of debt and a $1.0
million increase in preferred dividends from capital market activities
in the current quarter;
-- $10.6 million increase in real estate related depreciation including
$4.3 million related to the joint ventures; and
-- $3.3 million increase in interest expense and an aggregate of
approximately $8.4 million in other miscellaneous reductions to net
income.
These reductions were partially offset by:
-- $16.4 million increase in NOI relating to the transfer of properties
from various joint ventures to the company since the comparable period
of 2009 and an improvement in property operations;
-- $3.9 million increase in non-recurring income; and
-- $3.0 million of gains on sale of operating properties not included in
FFO.
Year-to-date, net income available to common shareholders per diluted share was $0.17 compared to a net loss available to common shareholders per diluted share of $0.27 through September 30, 2009. In addition, comparable earnings per diluted share were lower by $0.03 for the nine months ended September 30, 2010 as a result of the company's common share offerings of 134 million shares in 2009.
Funds from operations (FFO), a widely accepted supplemental measure of REIT performance, were $110.5 million, or $0.27 per diluted share, for the third quarter of 2010 compared to $112.5 million, or $0.30 per diluted share, in the same period a year ago. Recurring FFO, which excludes the effects of non-cash impairments of $0.8 million, early extinguishment of debt $10.8 million and non-recurring income of $7.6 million, were $114.5 million, or $0.28 per diluted share, for third quarter 2010. This compares to recurring FFO of $110.8 million, or $0.29 per diluted share, excluding non-cash impairments and non-recurring income of $2.0 million and $3.7 million, respectively, in the same quarter of the prior year. In addition, comparable FFO per diluted share were lower by $0.02 for three months ended September 30, 2010 as a result of the company's common share offerings of 134 million shares in 2009.
Year-to-date, FFO were $342.1 million, or $0.84 per diluted share, compared to $167.6 million, or $0.49 per diluted share, through September 2009. Comparable FFO per diluted share were lower by $0.17 for the nine months ended September 30, 2010 as a result of the company's common share offerings of 134 million shares in 2009. A reconciliation of net income to FFO is provided in the attached tables.
Core Business Operations
Shopping Center Portfolio
Third quarter 2010 shopping center portfolio operating results:
-- U.S. same-property NOI (cash-basis, excluding lease termination fees and
including charges for bad debts) increased 2.2 percent from the same
period in 2009. This represents continued improvement in same-property
NOI and the highest increase since the third quarter 2008;
-- Occupancy in the combined shopping center portfolio was 92.7 percent, an
increase of 30 basis points over third quarter 2009;
-- Occupancy in the U.S. shopping center portfolio was 92.3 percent, an
increase of 40 basis points over third quarter 2009;
-- U.S. cash-basis leasing spreads increased 1.5 percent, representing an
improvement sequentially and over the trailing four quarters. Spreads on
new leases decreased 3.4 percent and renewals/options increased 2.9
percent; and
-- Total leases executed in the combined shopping center portfolio: 637 new
leases, renewals and options signed totaling 1.6 million square feet.
Third quarter 2010 U.S. occupancy results include positive net absorption of 10 basis points as well as the negative impact relating to the inclusion of three former development properties pending stabilization. Excluding these three projects, occupancy in the U.S. shopping center portfolio would increase 10 basis points to 92.4 percent for the quarter ended September 30, 2010.
During the quarter, the company acquired Riverplace Shopping Center, a 257,000 square feet unencumbered shopping center located in Jacksonville, Fla. for $35.6 million. This center is 95.6% occupied and is anchored by a Stein Mart, TJ Maxx and Sears.
Kimco disposed of five consolidated non-strategic shopping center properties during the quarter for a total of $97.9 million including $81.0 million of mortgage debt. These properties, which totaled 990,000 square feet, include three properties in Ohio and one each in Ariz. and Mich.
Kimco's shopping center portfolio includes 936 operating properties, comprising 812 assets in the United States and Puerto Rico, 63 in Canada, 48 in Mexico and 13 in South America. The operating portfolio includes 21 former development properties that are approximately 75 percent leased and not included in the company's occupancy until the earlier of (i) reaching 90 percent leased or (ii) one year following the projects inclusion in operating real estate (two years for Latin America). Additionally, the company has seven development properties and five completed projects pending stabilization. The remaining development properties consist of two assets in the United States, three in Mexico and two in South America.
Investment Management and Other Joint Venture Programs
During the third quarter, the company and BIG acquired five unencumbered properties from the Prudential Real Estate Investors joint ventures for approximately $30.0 million. This portfolio, which totals approximately 508,000 square feet, includes three centers in California and two in Nevada. Kimco holds a 50.1% ownership interest in this joint venture in addition to serving as the operating partner.
In the third quarter, the company converted a Canadian retail preferred equity investment into a traditional pari-passu joint venture and sold 50% of its ownership interest to an indirect wholly-owned subsidiary of Sun Life Financial, a leading international financial services company headquartered in Toronto, Canada, for $29.4 million. The 680,000 square feet grocery-anchored power center, which is located in Quebec, is anchored by Sobey's, Zellers, Future Shop, Toys R'Us and The Brick Warehouse.
Additionally during the third quarter, the company and its Canadian preferred equity partner, Anthem Properties, converted a twelve retail property portfolio into a traditional pari-passu joint venture in which Kimco owns a 67% interest. This portfolio, which totals approximately 1.2 million square feet, is primarily grocery-anchored and includes nine properties in British Columbia and three in Alberta.
During the third quarter 2010, the company realized fee income of $9.1 million from its investment management business. This includes $8.0 million in management fees, $0.1 million in acquisition fees and $1.0 million in other ongoing fees.
At quarter-end, the company had a total of 286 properties in its investment management program with 24 institutional partners and 156 properties in other joint ventures.
Structured Investments and Non-Retail Assets
During the quarter, the company recognized $26.3 million of income related to its structured investments and other non-retail assets, of which $19.5 million was recurring. The recurring income was primarily attributable to $7.3 million from preferred equity investments and $6.5 million from non-retail joint ventures including Westmont Hospitality and $4.8 million from interest, dividends and other investment income.
In the third quarter, the company sold its interest in the Hyatt Cancun to Westmont Hospitality Group for $2.0 million including the assumption of $23.4 million of mortgage debt.
As previously noted, Kimco converted the interest in two Canadian retail preferred equity investments into traditional pari-passu joint ventures during the third quarter. In addition, the company sold or transferred interests in four preferred equity investments. The company reduced its total preferred equity investments by approximately $92.7 million and recognized non-recurring income of $5.3 million, net of tax, during the quarter as a result of these activities.
Since the beginning of the year, the company has monetized approximately $59.6 million of its non-retail assets and other structured investments including $7.2 million in the third quarter. The majority of these investments were from the sale of the company's urban portfolio properties, marketable securities and the repayment of mortgage financing receivables.
Dividend and Capital Structure
In August, the company completed the offering of 7,000,000 depositary shares, each representing a 1/100 fractional interest in a share of the company's 6.90% Class H Cumulative Redeemable Preferred Stock, $1.00 par value per share. These depositary shares, priced at $25.00, entitle holders to a 6.90% cumulative dividend or $1.725 per annum, are not convertible into common stock and are redeemable at par at the option of the company on and after August 30, 2015. The net proceeds of approximately $169.7 million were primarily used to repay five mortgage loans in the aggregate principal amount of approximately $150.1 million with interest rates from 6.75% to 7.87% per annum and with maturities from May 2011 to April 2013.
During the quarter, the company issued $300 million of 71/2-year unsecured senior notes due 2018 at a coupon of 4.30% per annum. The net proceeds of approximately $297.1 million were primarily used to repay a $25 million 7.30% medium term note that matured in September 2010 and prepay two medium term notes totaling $250 million that were scheduled to mature in 2011.
In connection with the prepayment of these mortgage loans and unsecured notes, the company recognized a charge for the early extinguishment of debt of $10.8 million or $0.03 per diluted share of FFO.
During the third quarter, Moody's Investor Services affirmed Kimco's Baa1 senior debt rating and revised its outlook to stable for the company. Additionally, Fitch Ratings assigned Kimco an initial credit rating of BBB+ and a stable outlook.
For the quarter ended September 30, 2010, the company maintains access to approximately $1.5 billion of immediate liquidity under its two credit facilities ($1.5 billion U.S. revolving credit facility and its CAD $250 million Canadian revolving credit facility).
As previously announced, Kimco's Board of Directors increased its quarterly cash dividend to $0.18 per common share, payable on January 18, 2011 to shareholders of record on January 3, 2011, representing an ex-dividend date of December 30, 2010.
2010 Guidance Update and 2011 Initial Guidance
The company remains committed to its core business objectives:
-- Increasing shareholder value through the ownership, management and
selective acquisition of neighborhood and community shopping centers;
-- Continue lease-up of its Latin America portfolio;
-- Actively engaging in the disposition of its non-retail and non-strategic
retail assets; and
-- Strengthening its balance sheet with a long-term focus on reducing its
leverage levels and employing a conservative capital mix.
2010 Guidance Update:
The company is revising its guidance range of FFO for the full year 2010 as follows:
-- Recurring FFO: $1.11 - $1.13 per diluted share;
-- FFO including non-recurring transactions and charges for debt
extinguishment and before non-cash impairments: $1.17 - $1.19 per
diluted share (Previous full year 2010 guidance: $1.14 - $1.18 per
diluted share)
2011 Initial Guidance:
The company's preliminary 2011 FFO guidance range, which does not include any estimate for non-recurring activities or impairments:
-- Recurring FFO: $1.17 - $1.21 per diluted share
Conference Call and Supplemental Materials
The company will hold its quarterly conference call on Thursday, November 4 at 9:00 a.m. Eastern Time. The call will include a review of the company's third quarter 2010 performance as well as a discussion of the company's strategy and expectations for the future.
To participate, dial 1-888-708-5678. A replay will be available for one week by dialing 1-888-203-1112; the Conference ID will be 1523431. Access to the live call and replay will be available through the company's website at www.kimcorealty.com under "Investor Relations: Presentations."
About Kimco
Kimco Realty Corporation, a real estate investment trust (REIT), owns and operates North America's largest portfolio of neighborhood and community shopping centers. As of September 30, 2010, the company owned interests in 948 shopping centers comprising 137 million square feet of leasable space across 44 states, Puerto Rico, Canada, Mexico and South America. Publicly traded on the NYSE under the symbol KIM and included in the S&P 500 Index, the company has specialized in shopping center acquisitions, development and management for 50 years. For further information, visit the company's web site at www.kimcorealty.com.
Safe Harbor Statement
The statements in this release state the company's and management's intentions, beliefs, expectations or projections of the future and are forward-looking statements. It is important to note that the company's actual results could differ materially from those projected in such forward-looking statements. Factors that could cause actual results to differ materially from current expectations include, but are not limited to, (i) general adverse economic and local real estate conditions (ii) the inability of major tenants to continue paying their rent obligations due to bankruptcy, insolvency or a general downturn in their business, (iii) financing risks, such as the inability to obtain equity, debt, or other sources of financing or refinancing on favorable terms, (iv) the company's ability to raise capital by selling its assets, (v) changes in governmental laws and regulations, (vi) the level and volatility of interest rates and foreign currency exchange rates, (vii) the availability of suitable acquisition opportunities, (viii) valuation of joint venture investments, (ix) valuation of marketable securities and other investments, (x) increases in operating costs, (xi) changes in the dividend policy for our common stock, (xii) the reduction in our income in the event of multiple lease terminations by tenants or a failure by multiple tenants to occupy their premises in a shopping center, and (xiii) impairment charges. Additional information concerning factors that could cause actual results to differ materially from those forward-looking statements is contained from time to time in the company's Securities and Exchange Commission filings, including but not limited to the company's Annual Report on Form 10-K for the year ended December 31, 2009. Copies of each filing may be obtained from the company or the Securities and Exchange Commission.
The company refers you to the documents filed by the company from time to time with the Securities and Exchange Commission, specifically the section titled "Risk Factors" in the company's Annual Report on Form 10-K for the year ended December 31, 2009, as may be updated or supplemented in the company's Form 10-Q filings, which discuss these and other factors that could adversely affect the company's results.
KIMCO REALTY CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(in thousands, except share information)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2010 2009 2010 2009
Revenues from
Rental $ 210,520 $ 190,092 $ 634,959 $ 570,284
Properties
Rental Property
Expenses:
Rent 3,505 3,617 10,775 10,151
Real Estate 30,194 28,633 89,568 79,941
Taxes
Operating and 27,961 25,358 88,130 80,070
Maintenance
61,660 57,608 188,473 170,162
Net Operating 148,860 132,484 446,486 400,122
Income
Income from
Other Real 15,316 9,288 32,717 26,904
Estate
Investments
Mortgage 2,486 3,747 7,526 11,619
Financing Income
Management and 9,082 10,166 30,343 30,361
Other Fee Income
Depreciation and (60,923 ) (55,379 ) (176,183 ) (167,346 )
Amortization
114,821 100,306 340,889 301,660
Interest,
Dividends and 4,552 9,236 15,833 22,371
Other Investment
Income
Other (Expense) (3,854 ) 4,382 (12,327 ) 464
/ Income, Net
Interest Expense (57,795 ) (54,530 ) (171,607 ) (151,935 )
General and
Administrative (28,463 ) (27,937 ) (83,035 ) (83,349 )
Expenses
Early
Extinguishment (10,811 ) - (10,811 ) -
of Debt Charges
18,450 31,457 78,942 89,211
Gain on Sale of
Development 336 1,073 2,130 3,476
Properties
Impairments:
Property - - (1,900 ) (38,800 )
Carrying Values
Investments in
Other Real - - (5,994 ) (40,602 )
Estate
Investments
Marketable
Equity
Securities and (657 ) - (1,163 ) (29,573 )
Other
Investments
Investments in
Real Estate - - - (26,896 )
Joint Ventures
Benefit for 377 691 6,342 2,208
Income Taxes
Equity in Income
of Joint 14,056 8,946 34,697 3,317
Ventures, Net
Income / (Loss)
from Continuing 32,562 42,167 113,054 (37,659 )
Operations
Discontinued
Operations:
(Loss) / Income
from
Discontinued (940 ) 971 1,280 2,038
Operating
Properties, Net
of Tax
Impairment/Loss
on Operating
Properties Held (337 ) - (3,440 ) (13,300 )
for Sale/Sold,
Net of Tax
Gain on
Disposition of
Operating 1,704 18 1,704 421
Properties, Net
of Tax
Income / (Loss)
from 427 989 (456 ) (10,841 )
Discontinued
Operations
Gain/Loss on
Transfer of - - (57 ) 26
Operating
Properties (1)
Gain/Loss on
Sale of - 489 2,434 2,044
Operating
Properties (1)
- 489 2,377 2,070
Net Income / 32,989 43,645 114,975 (46,430 )
(Loss)
Net Income
Attributable to (2,656 ) (3,537 ) (9,196 ) (9,689 )
Noncontrolling
Interests (1)
Net Income /
(Loss) 30,333 40,108 105,779 (56,119 )
Attributable to
the Company
Preferred (12,862 ) (11,822 ) (36,505 ) (35,466 )
Dividends
Net Income /
(Loss)
Available to $ 17,471 $ 28,286 $ 69,274 $ (91,585 )
the Company's
Common
Shareholders
Per Common
Share:
Income / (Loss)
from Continuing
Operations:
Basic $ 0.04 $ 0.07 $ 0.17 $ (0.24 )
Diluted $ 0.04 (2) $ 0.07 (2) $ 0.17 (2 ) $ (0.24 ) (2)
Net Income /
(Loss):
Basic $ 0.04 $ 0.07 $ 0.17 $ (0.27 )
Diluted $ 0.04 (2) $ 0.07 (2) $ 0.17 (2 ) $ (0.27 ) (2)
Weighted Average
Shares:
Basic 405,854 376,559 405,709 339,018
Diluted 406,253 378,127 406,076 339,018
(1) Included in the calculation of income from continuing operations per common
share in accordance with SEC guidelines.
(2) Reflects the potential impact if certain units were converted to common
stock at the beginning of the period.
The impact of the conversion would have an anti-dilutive effect on net
income and therefore have not been included.
KIMCO REALTY CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands, except share information)
(unaudited)
September 30, December 31,
2010 2009
Assets:
Operating Real Estate, Net of Accumulated
Depreciation
of $1,495,052 and $1,343,148, Respectively $ 6,628,972 $ 7,073,408
Investments and Advances in Real Estate Joint 1,341,432 1,103,625
Ventures
Real Estate Under Development 394,486 465,785
Other Real Estate Investments 447,771 553,244
Mortgages and Other Financing Receivables 110,791 131,332
Cash and Cash Equivalents 158,116 122,058
Marketable Securities 236,930 209,593
Accounts and Notes Receivable 126,542 113,610
Other Assets 369,468 389,550
Total Assets $ 9,814,508 $ 10,162,205
Liabilities:
Notes Payable $ 2,992,051 $ 3,000,303
Mortgages Payable 1,015,917 1,388,259
Construction Loans Payable 29,509 45,821
Dividends Payable 77,812 76,707
Other Liabilities 438,572 432,833
Total Liabilities 4,553,861 4,943,923
Redeemable Noncontrolling Interests 95,029 100,304
Stockholders' Equity:
Preferred Stock, $1.00 Par Value, Authorized
3,092,000 Shares
Class F Preferred Stock, $1.00 Par Value,
Authorized 700,000 Shares
Issued and Outstanding 700,000 Shares 700 700
Aggregate Liquidation Preference $175,000
Class G Preferred Stock, $1.00 Par Value,
Authorized 184,000 Shares
Issued and Outstanding 184,000 Shares 184 184
Aggregate Liquidation Preference $460,000
Class H Preferred Stock, $1.00 Par Value,
Authorized 70,000 Shares
Issued and Outstanding 70,000 Shares 70 -
Aggregate Liquidation Preference $175,000
Common Stock, $.01 Par Value, Authorized
750,000,000 Shares
Issued and Outstanding 405,940,556, and
405,532,566
Shares, Respectively 4,059 4,055
Paid-In Capital 5,460,974 5,283,204
Cumulative Distributions in Excess of Net Income (464,256 ) (338,738 )
5,001,731 4,949,405
Accumulated Other Comprehensive Income (59,403 ) (96,432 )
Total Stockholders' Equity 4,942,328 4,852,973
Noncontrolling Interests 223,290 265,005
Total Equity 5,165,618 5,117,978
Total Liabilities and Equity $ 9,814,508 $ 10,162,205
KIMCO REALTY CORPORATION AND SUBSIDIARIES
Reconciliation of Certain Non-GAAP Financial Measures
(in thousands, except share information)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2010 2009 2010 2009
Net Income / $ 32,989 $ 43,645 $ 114,975 $ (46,430 )
(Loss)
Net Income
Attributable to (2,656 ) (3,537 ) (9,196 ) (9,689 )
Noncontrolling
Interests
Gain on
Disposition of
Operating (1,704 ) (618 ) (4,145 ) (2,602 )
Prop., Net of
Tax
Gain on
Disposition of
Joint Venture (1,906 ) - (4,674 ) -
Operating
Properties
Depreciation
and 61,183 54,870 183,100 165,753
Amortization
Depr. and
Amort. - Real
Estate JV's, 37,162 32,845 100,984 100,664
Net of
Noncontrolling
Interests
Unrealized
Remeasurement (1,657 ) (2,830 ) (2,419 ) (4,591 )
of Derivative
Instrument
Preferred Stock (12,862 ) (11,822 ) (36,505 ) (35,466 )
Dividends
Funds From $ 110,549 $ 112,553 $ 342,120 $ 167,639
Operations
Non-Cash
Impairments 797 2,011 28,188 178,498
Recognized, Net
of Tax
Funds From
Operations
Before Non-Cash 111,346 114,564 370,308 346,137
Impairments,
Net of Tax
Non-Recurring (7,657 ) (3,727 ) (35,358 ) (10,625 )
Income
Early
Extinguishment 10,811 - 10,811 -
of Debt
Recurring Funds $ 114,500 $ 110,837 $ 345,761 $ 335,512
From Operations
Weighted
Average Shares
Outstanding for
FFO
Calculations:
Basic 405,854 376,559 405,709 339,018
Units 1,538 1,557 1,544 723
Dilutive Effect 399 86 367 87
of Options
Diluted 407,791 (1) 378,202 (1) 407,620 (1) 339,828 (1)
FFO Per Common $ 0.27 $ 0.30 $ 0.84 $ 0.49
Share - Basic
FFO Per Common $ 0.27 (1) $ 0.30 (1) $ 0.84 (1) $ 0.49 (1)
Share - Diluted
Recurring FFO
Per Common $ 0.28 (1) $ 0.29 (1) $ 0.85 (1) $ 0.99 (1)
Share - Diluted
Reflects the potential impact if certain units were converted to common
stock at the beginning of the period. Funds from operations would be
(1) increased by $224 and $90 for the three months ended September 30, 2010 and
2009, respectively. Funds from operations would be increased by $672 and
$324 for the nine months ended September 30, 2010 and 2009, respectively.
Reconciliation of Projected Diluted Net Income Per Common Share to Projected
Diluted Funds From Operations Per
Common Share
(unaudited)
Projected Range Projected Range
Full Year 2010 Full Year 2011
Low High Low High
Projected diluted net income
available to common
shareholder per share $ 0.20 $ 0.22 $ 0.24 $ 0.28
Unrealized remeasurement of (0.01 ) (0.02 ) - -
derivative instrument
Projected depreciation & 0.60 0.61 0.59 0.61
amortization
Projected depreciation &
amortization real estate
joint ventures, net of 0.34 0.35 0.36 0.38
non-controlling interests
Gain on disposition of operating (0.01 ) (0.02 ) (0.01 ) (0.03 )
properties
Gain on disposition of joint venture
operating properties,
net of non-controlling interests (0.02 ) (0.02 ) (0.01 ) (0.03 )
Projected FFO per diluted common $ 1.10 $ 1.12 $ 1.17 $ 1.21
share
Non-cash impairments 0.07 0.07 - -
Projected FFO per diluted common $ 1.17 $ 1.19 $ 1.17 $ 1.21
share before impairments
Non-recurring Income (0.09 ) (0.09 ) - -
Early extinguishment of debt 0.03 0.03 - -
Projected Recurring FFO per diluted $ 1.11 $ 1.13 $ 1.17 $ 1.21
common share
Projections involve numerous assumptions such as rental income (including assumptions on percentage rent), interest rates, tenant defaults, occupancy rates, foreign currency exchange rates (such as the US-Canadian rate), selling prices of properties held for disposition, expenses (including salaries and employee costs), insurance costs and numerous other factors. Not all of these factors are determinable at this time and actual results may vary from the projected results, and may be above or below the range indicated. The above range represents management's estimate of results based upon these assumptions as of the date of this press release.
Source: Kimco Realty Corporation
Released November 3, 2010