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Retail real estate investment trust (“REIT”) Kimco Realty Corporation’s (KIM - Free Report) second-quarter 2016 funds from operations (“FFO”) per share came in at 38 cents, in line with the Zacks Consensus Estimate.
The company’s occupancy reached an eight-year high. Further, Kimco remains on track with its strategic 2020 Vision, which envisages the ownership of premium assets in major metro markets in the U.S. as well as a reduction in the joint venture portfolio. In fact, its exit from Canada is 90% complete.
However, FFO per share was down from the prior-year quarter figure of 44 cents. Also revenues from rental properties slipped 0.7% from the prior-year quarter to $287.1 million and fell short of the Zacks Consensus Estimate of $288.8 million.
At quarter end, U.S. pro-rata occupancy came in at 96.0%, denoting the company’s highest occupancy rate since fourth-quarter 2007. The figure was up 20 basis points (bps) sequentially and 30 bps year over year.
Further, pro-rata occupancy for small shop space (under 10,000 square feet) was 89.2%, up 60 bps sequentially and 120 bps from a year ago, while anchor tenant occupancy was 98.3%, denoting a rise of 10 bps from the prior quarter.
Same-property net operating income (NOI) climbed 3.1% year over year. U.S. pro-rata rental-rate leasing spreads moved north 16.2% and marked the highest combined leasing spreads reported in three years. Rental rates for new leases jumped 29.8% and renewals/options advanced 10.7%.
Balance Sheet Position
Kimco exited second-quarter 2016 with cash and cash equivalents of around $337.8 million, up from $189.5 million at year-end 2015.
Following the quarter end, Kimco disclosed an early debt repayment initiative for bolstering its capital structure by extending its debt maturity profile, lowering leverage and unencumbering an additional 10 properties. Particularly, the initiative includes the planned prepayment of two Canadian dollar-denominated bonds outstanding and $428 million of U.S. debt. As such, the company would recognize a one-time charge of around $48 million associated with the early extinguishment of debt during third-quarter 2016.
Portfolio Activity
Kimco disclosed second-quarter 2016 deals worth over $1.0 billion. This included acquisitions of $328.9 million, of which Kimco’s share was $164.4 million. Further, second-quarter sales aggregated $696.0 million and included disposition of 34 shopping centers, totaling 4.3 million square feet, and one land parcel. The company’s share of the sales price was $562.9 million.
Kimco reaffirmed its 2016 guidance for adjusted FFO per share within $1.48–$1.52. The Zacks Consensus Estimate is currently pegged at $1.54. Notably, the company expects U.S. portfolio occupancy in the range of 95.7–96.2% and same-property NOI growth of 2.50%–3.50%.
Dividend Update
Kimco’s board of directors announced a quarterly cash dividend of 25.5 cents per share on its common stock. The dividend will be paid on Oct 17, to shareholders of record on Oct 5.
Our Viewpoint
Going forward, premium properties in high-growth areas, presence of well-capitalized retailers in its tenant roster, investments in high-quality neighborhood and community shopping centers, and shedding of non-core assets augur well for growth of Kimco. But, earnings dilution led by high disposition activity and competition from other players remain causes of concern.
We now look forward to next week's earnings releases of other retail REITs like The Macerich Company (MAC - Free Report) , General Growth Properties, Inc. and Regency Centers Corporation (REG - Free Report) .
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. All EPS numbers presented in this write up represent FFO per share.
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Kimco (KIM) Q2 FFO Meets Estimates, Occupancy Elevated
Retail real estate investment trust (“REIT”) Kimco Realty Corporation’s (KIM - Free Report) second-quarter 2016 funds from operations (“FFO”) per share came in at 38 cents, in line with the Zacks Consensus Estimate.
The company’s occupancy reached an eight-year high. Further, Kimco remains on track with its strategic 2020 Vision, which envisages the ownership of premium assets in major metro markets in the U.S. as well as a reduction in the joint venture portfolio. In fact, its exit from Canada is 90% complete.
However, FFO per share was down from the prior-year quarter figure of 44 cents. Also revenues from rental properties slipped 0.7% from the prior-year quarter to $287.1 million and fell short of the Zacks Consensus Estimate of $288.8 million.
Quarter in Details
At quarter end, U.S. pro-rata occupancy came in at 96.0%, denoting the company’s highest occupancy rate since fourth-quarter 2007. The figure was up 20 basis points (bps) sequentially and 30 bps year over year.
Further, pro-rata occupancy for small shop space (under 10,000 square feet) was 89.2%, up 60 bps sequentially and 120 bps from a year ago, while anchor tenant occupancy was 98.3%, denoting a rise of 10 bps from the prior quarter.
Same-property net operating income (NOI) climbed 3.1% year over year. U.S. pro-rata rental-rate leasing spreads moved north 16.2% and marked the highest combined leasing spreads reported in three years. Rental rates for new leases jumped 29.8% and renewals/options advanced 10.7%.
Balance Sheet Position
Kimco exited second-quarter 2016 with cash and cash equivalents of around $337.8 million, up from $189.5 million at year-end 2015.
Following the quarter end, Kimco disclosed an early debt repayment initiative for bolstering its capital structure by extending its debt maturity profile, lowering leverage and unencumbering an additional 10 properties. Particularly, the initiative includes the planned prepayment of two Canadian dollar-denominated bonds outstanding and $428 million of U.S. debt. As such, the company would recognize a one-time charge of around $48 million associated with the early extinguishment of debt during third-quarter 2016.
Portfolio Activity
Kimco disclosed second-quarter 2016 deals worth over $1.0 billion. This included acquisitions of $328.9 million, of which Kimco’s share was $164.4 million. Further, second-quarter sales aggregated $696.0 million and included disposition of 34 shopping centers, totaling 4.3 million square feet, and one land parcel. The company’s share of the sales price was $562.9 million.
Specifically, the company sold interests in 22 Canadian shopping centers, all of which were in joint ventures (read more: Kimco's Q2 Deals Exceed $1B, Streamlining Continues).
Guidance
Kimco reaffirmed its 2016 guidance for adjusted FFO per share within $1.48–$1.52. The Zacks Consensus Estimate is currently pegged at $1.54. Notably, the company expects U.S. portfolio occupancy in the range of 95.7–96.2% and same-property NOI growth of 2.50%–3.50%.
Dividend Update
Kimco’s board of directors announced a quarterly cash dividend of 25.5 cents per share on its common stock. The dividend will be paid on Oct 17, to shareholders of record on Oct 5.
Our Viewpoint
Going forward, premium properties in high-growth areas, presence of well-capitalized retailers in its tenant roster, investments in high-quality neighborhood and community shopping centers, and shedding of non-core assets augur well for growth of Kimco. But, earnings dilution led by high disposition activity and competition from other players remain causes of concern.
KIMCO REALTY CO Price, Consensus and EPS Surprise
KIMCO REALTY CO Price, Consensus and EPS Surprise | KIMCO REALTY CO Quote
Kimco currently has a Zacks Rank #3 (Hold).
We now look forward to next week's earnings releases of other retail REITs like The Macerich Company (MAC - Free Report) , General Growth Properties, Inc. and Regency Centers Corporation (REG - Free Report) .
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. All EPS numbers presented in this write up represent FFO per share.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>