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Kimco Realty Corporation (KIM - Analyst Report), a real estate investment trust (REIT), reported adjusted FFO per share of 33 cents, beating the Zacks Consensus Estimate by 2 cents and the year-ago quarter figure by 3 cents. The results were aided by better-than expected growth in revenue.

For full year 2012, the company’s adjusted FFO per share came in at $1.26, a cent ahead of the Zacks Consensus Estimate of $1.25 and 6 cents above the prior-year figure of $1.20 per share.

Total revenue of $239.5 million during the reported quarter, was up 8.4% year over year and exceeded the Zacks Consensus Estimate of $228 million. For full year 2012, the company booked total revenue of $922.3 million, up 7.1% from a year ago and was ahead of the Zacks Consensus Estimate of $911 million.

Including non-operating impairments and transactional income and expenses, FFO, on a reported basis, was $127.2 million or 31 cents per share in the reported quarter, slightly down from $135.4 million or 33 cents per share in the year-ago period. The decrease stemmed from a non-cash charge related to redemption of the company’s Class G preferred shares in Oct 2012, and was partly mitigated by a rise in net operating income.

For full year 2012, FFO was $510.4 million or $1.25 per share, compared with $517.8 million or $1.27 per share reported a year ago.

Quarter in Detail

Overall gross occupancy in Kimco’s combined shopping center portfolio was 93.8% at the end of the quarter, an increase of 70 bps from the prior-year quarter. In the U.S. portfolio, gross occupancy was also 93.9%, an increase of 80 bps compared with the year-ago period.

Same-store net operating income (NOI) in the combined portfolio increased 3.4% year over year. Same-store NOI in the U.S. portfolio climbed 3.1% over the same period.

Leasing Activity

During the reported quarter, Kimco executed a total of 605 leases in the combined portfolio, spanning 1.9 million square feet. Pro-rata leasing spreads in the U.S. portfolio increased 11.8% (cash basis), including 25.5% for new leases, and 6.1% for renewals/options.

Notable Activities during 4Q

During the reported quarter, Kimco acquired 7 properties (spanning 329,000 square feet) in core markets for its consolidated portfolio for $96.2 million, including $20 million of mortgage debt. In addition, the company shelled out $29.6 million for purchasing the remaining ownership interest in 2 unencumbered shopping centers from its joint venture partners comprising 189,000 square feet.

Furthermore, during the reported quarter, Kimco sold 34 retail properties (spanning 3.9 million square feet) for about $246.1 million, including $35.4 million of mortgage debt. Its share from the sales proceed was $180.2 million. Noteworthy among the dispositions were the sale of 2 shopping center portfolios in Ohio and Ind. that aggregated 22 properties for $131.1 million.

Liquidity

At year-end 2012, Kimco had $1.7 billion of liquidity, with a consolidated net debt to adjusted EBITDA (earnings before interest, tax, depreciation and amortization) ratio of 5.7x compared to 6.2x from the prior year.

2013 Outlook

For full year 2013, the company reiterated its recurring FFO per share guidance of $1.28 –$1.33.

Dividend Update

Kimco announced a quarterly cash dividend of 21 cents per share on its common stock. The dividend will be paid on Apr 15, 2013 to shareholders of record on Apr 3.

Our Take

We are encouraged by the better-than-expected results at Kimco. With a geographically diversified portfolio, concentrated mostly in high-income, high-growth areas, Kimco is a leading owner and operator of neighborhood and community shopping centers in the U.S.

The company is currently focusing on its core business activities to tide over the volatility in the market. In Jan 2013, the company disclosed its participation in the consortium to acquire 5 grocery banners totaling 877 locations from SUPERVALU Inc. (SVU - Analyst Report) and a tender offer for up to 30% percent of the outstanding SUPERVALU shares. Such strategic moves are expected to position the company well for better growth going forward.

In addition, it has a strong balance sheet with easy access to capital to allow continued growth. However, stiff competition from other players in the market undermines its growth potential to some extent.

Kimco currently retains a Zacks Rank #4 (Sell). However, one can consider 2 other stocks in the REIT industry - Simon Property Group Inc. (SPG - Analyst Report) and AmREIT Inc. (AMRE), both carrying a Zacks Rank #2 (Buy).


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.
 

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