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Kimco Realty Corp. (KIM - Analyst Report), a leading real estate investment trust (REIT), reported third quarter 2011 rental revenues of $216.1 million compared with $207.2 million in the year-earlier quarter – an increase of 4.3%. Total revenues for the reported quarter, however, missed the Zacks Consensus Estimate of $220.0 million.

Kimco reported third quarter 2011 fund from operations (FFO) of $128.2 million or 31 cents per share compared with $110.5 million or 27 cents in the year-ago period. 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.

Excluding certain non-recurring items, FFO for the reported quarter was $123.7 million or 30 cents per share compared with $114.5 million or 28 cents in the year-earlier quarter. The recurring FFO for the quarter was in line with the Zacks Consensus Estimate.

Overall occupancy in Kimco’s combined shopping center portfolio was 93.0% at the end of the quarter, an increase of 10 bps compared with third quarter 2010. In the U.S. portfolio, occupancy was 92.9% as of September 30, 2011, an increase of 50 bps compared with the year-ago period. Same-store net operating income in the combined portfolio increased 3.3% year-over-year.

During the reported quarter, Kimco executed a total of 614 leases spanning 1.8 million square feet. These included 79 new leases in the U.S. same-store portfolio totaling 374,000 pro-rata square feet and 184 lease renewals and options for 775,000 pro-rata square feet. In addition, Kimco executed over 93 new leases totaling 345,000 square feet for spaces vacant for more than one year. Leasing spreads in the U.S. portfolio on a pro-rata basis increased 2.7% (cash basis).

The company acquired 4 shopping centers during the reported quarter for approximately $97.9 million. Subsequent to the quarter-end, Kimco acquired 2 shopping center properties for an aggregate purchase price of $18.9 million. At the same time, Kimco sold 10 non-strategic assets spanning 414,000 square feet for $35.9 million. As of September 30, 2011, the company had a portfolio of 128 non-strategic U.S. shopping centers totaling 8.6 million square feet with an 82.9% pro-rata occupancy.

The reported quarter also saw the company recognizing $8.7 million of fee income related to its investment management business, including $6.9 million in management fees and $1.8 million in other ongoing fees. Kimco had 285 properties in investment management funds with 24 institutional partners at quarter-end.

During the reported quarter, the company generated $34.4 million of pre-tax earnings from its structured investments and other non-retail assets, out of which $15.7 million was recurring in nature. As of September 30, 2011, Kimco reduced its non-retail assets to approximately $564 million compared to $1.2 billion at the end of first quarter 2009.

During third quarter 2011, Kimco increased its quarterly dividend by 5.6% to 19 cents per share. The company’s consolidated net debt to recurring EBITDA (earnings before interest, tax, depreciation and amortization) ratio improved to 6.0x during the quarter from 6.4x in the year-ago quarter.

Subsequent to the quarter-end, Kimco entered into a new $1.75 billion unsecured U.S. revolving credit facility that replaced its existing $1.5 billion U.S. and $250 million Canadian Dollar-denominated revolving credit facilities. The company had $180.2 million of cash and cash equivalents at the end of the reported quarter.

For fiscal 2011, the company narrowed its recurring FFO guidance from the range of $1.17 – $1.21 per share to $1.19 – $1.20. For fiscal 2012, Kimco expects recurring FFO in the range of $1.22 – $1.26.

We maintain our long-term ‘Neutral’ recommendation on the stock, which presently has a Zacks #3 Rank translating into a short-term ‘Hold’ rating. We also have a ‘Neutral’ recommendation and a Zacks #3 Rank for CBL & Associates Properties Inc. (CBL - Snapshot Report), one of the competitors of Kimco.

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