Kimco Realty’s FFO Declines

Kimco Realty Corporation (KIM - Analyst Report), a real estate investment trust (REIT) operating the largest portfolio of neighborhood and community shopping centers in North America, has reported a decline in third quarter 2009 FFO (fund from operations) to $112.6 million or 30 cents per share from $176.9 million or 68 cents per share in the year-earlier quarter. Fund from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income. 

The year-over-year decrease in FFO was due to the negative impact of non-cash impairments and charges related to early debt repayment. Excluding the one-time charges, FFO for the quarter was $117.9 million or 31 cents per share compared to $182.8 million or 70 cents per share in the year-ago period. 

Overall occupancy in Kimco’s combined shopping center portfolio was 92.4% at quarter end. In the U.S. portfolio, occupancy was 91.9%. During the quarter, Kimco executed a total of 634 leases spanning 2.1 million square feet, out of which 342 were new leases (1.0 million square feet) and 292 were lease renewals (1.1 million square feet). About 426 leases totaling 1.7 million square feet were executed in the U.S. portfolio – a 42% increase on square footage basis year-over-year. 

Same-store net operating income (NOI) decreased 3.6% during the quarter year-over-year, primarily due to bankruptcies of Linens N Things, Circuit City and Value City. Same-store leasing spreads increased 1.3% in the U.S. largely due to a 2.1% increase for lease renewals, partially offset by a 0.2% decline for new leases. 

During the quarter, Kimco realized $10.7 million of fee income from its investment management business. The company acquired the remaining 90% stake in one of its joint venture property for $23 million during the quarter. Subsequent to the end of the quarter, Kimco also acquired the remaining 85% interest in six unencumbered properties in Portland, Oregon, from its joint venture partner Prudential Real Estate Investors for $48 million. 

Kimco monetized $23 million in mortgage receivables during the quarter through debt repayment of two mortgages. In addition, the company also liquidated its investments totaling $41 million in marketable securities in Burlington Coat Factory, Duane Reade, Innvest Real Estate and Toys R Us. Also during the quarter, Kimco issued $300 million of 10-year unsecured senior notes for net proceeds of $297.3 million, the bulk of which was utilized to repay unsecured term loan scheduled to mature in Apr 2011. 

For full year 2009, Kimco anticipates FFO before non-recurring items in the range of $1.30 − $1.33 per share, with an expected occupancy of approximately 92% in the U.S. portfolio.