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Kimco Realty Corporation (KIM - Analyst Report), a real estate investment trust (REIT), reported total revenues of $231.9 million in third quarter 2012, compared with $213.0 million in the year-earlier quarter, representing a year-over-year increase of approximately 8.9%.
Kimco reported third quarter 2012 FFO (funds from operations) of $119.0 million or 29 cents per share, compared with $134.3 million or 33 cents in the year-ago period. The year-over-year decrease in FFO was primarily attributable to $8.3 million transactional expenses incurred mainly from a $6.2 million non-cash redemption charge.
Excluding certain non-recurring items, FFO for the reported quarter was $127.3 million or 31 cents per share, compared with $123.7 million or 30 cents in the year-earlier quarter. The recurring FFO for the third quarter of 2012 was in line with the Zacks Consensus Estimate.
Overall gross occupancy in Kimco’s combined shopping center portfolio was 93.7% at the end of the quarter, an increase of 70 bps compared with third quarter 2011. In the U.S. portfolio, gross occupancy was also 93.7%, an increase of 80 bps compared with the year-ago period.
Same-store net operating income (NOI) in the combined portfolio (before the impact of foreign currency translations) increased 2.6% in third quarter 2012 compared to the prior year. Same-store NOI in the U.S. portfolio increased 2.5% year over year.
During the reported quarter, Kimco executed a total of 690 leases in the combined portfolio, spanning 2.3 million square feet. Pro-rata leasing spreads in the U.S. portfolio increased 13% (cash basis), including 40.2% for new leases, and 4.3% for renewals/options.
Kimco acquired three wholly-owned shopping centers (420,000 square feet) during the quarter in core markets for $84.3 million, including $42.5 million of mortgage debt. The company also acquired a 161,000-square-foot shopping center in California, for $34.5 million. These properties have a pro-rata average occupancy of 94.5 %.
The company also acquired the remaining 50% ownership stake in a 81,000 square foot shopping center in Pompano Beach, Florida, for $12.3 million. Additionally, subsequent to the quarter-end, the company purchased an 89% ownership interest in a shopping center totaling 139,000 square feet in Greeley, Colorado for $23.4 million.
During third quarter 2012, Kimco completed the divesture of nine non-core assets (1 million square feet) for $94.7 million. Subsequent to the quarter-end, the company also sold a 13-property portfolio and an additional property (an aggregate of 1.7 million square feet) for $70.3 million. The company is currently under negotiations to sell 15 non-core properties for $130 million.
Kimco continues to reposition its portfolio through the divestiture of non strategic assets and acquisition of high-quality properties. Since September 2010, the company had acquired 47 properties spanning 6 million square feet with an average occupancy of 94.2% for $984.8 million.
During this same period, the company sold 86 non-strategic shopping centers, totaling 7.9 million square feet, for $529.9 million. These properties had a pro-rata average occupancy of 83.4% and an annual base rent of $8.35 per square foot, which was about 32% lower than the portfolio average.
During the quarter, Kimco recognized FFO contributions of $12 million from its non-retail investments, $7.4 million of which were from joint ventures and $2.3 million from non-retail preferred equity investments. The company reduced its non-retail investments by $30 million through the sale of two urban properties and the partial repayment of a mortgage receivable during the quarter.
Kimco increased its dividend payout by 10.5% to 21 cents during the quarter. At quarter-end, Kimco had $1.5 billion of liquidity, with a consolidated net debt to adjusted EBITDA (earnings before interest, tax, depreciation and amortization) ratio of 5.3x. For full year 2012, the company reiterated its recurring FFO guidance of $1.24 -$1.26 per share, while for full year 2013, recurring FFO is expected in the range of $1.28 -$1.33.
Kimco currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We maintain our long-term Neutral recommendation on the stock. One of its competitors, Simon Property Group Inc. (SPG - Analyst Report), currently retains a Zacks #2 Rank, which translates into a short-term Buy rating.
Note: FFO, 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.