Retail real estate investment trust (REIT),
Kimco Realty Corporation
) reported third-quarter 2013 adjusted funds from operations
(FFO) per share of 33 cents, in line with the Zacks Consensus
Estimate and up 6.5% year over year.
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The results were aided by a decent operating portfolio
performance. Kimco also raised the lower end of its previously
issued full-year 2013 adjusted FFO per share guidance and hiked
its dividend payout.
Including non-recurring items, the company's FFO, on a reported
basis, was 34 cents per share, up 17.2% from 29 cents in the
Total revenue of $241.5 million during the reported quarter was
up 8.4% year over year and surpassed the Zacks Consensus Estimate
of $233 million.
Quarter in Detail
In the U.S. Shopping Center Portfolio, pro-rata occupancy was
94.4%, up 100 basis points (bps) from the year-ago period.
Pro-rata occupancy in Kimco's combined shopping center portfolio
was 94.0% at the quarter end, reflecting an uptick of 60 bps from
the prior-year quarter.
Same-property net operating income (NOI) in the U.S. portfolio
rose 2.7% year over year. Same-property NOI in the combined
portfolio rose 2.3% over the same time period. This represented
the 14th consecutive quarter of positive same-property NOI
During the said quarter, Kimco inked a total of 582 new leases,
renewals and options in the combined portfolio, spanning 2.1
million square feet. Moreover, pro-rata U.S. cash-basis leasing
spreads moved north 7.3% with new leases increasing 13.7% and
renewals/options climbing 4.8%.
During the third-quarter, Kimco bought two U.S. assets - Village
at Highlands Ranch II and ElmsfordCenter - in Colorado and New
York, respectively. Littleton-based Village at Highlands Ranch II
is part of an interrelated retail complex that is occupied by the
area's dominant grocer, King Soopers - a supermarket brand of
The Kroger Co.
). The mortgage-free retail center positioned in a prosperous
Denver suburb was bought for $14.6 million.
On the other hand, Elmsford Center that is located in the New
York metro suburb was acquired for $23 million. The power center
is anchored by
Bed Bath & Beyond Inc.
) and Sports Authority. Both the assets are positioned in upscale
communities, with a three-mile average household income of
$121,000 and $123,000, respectively.
Following the third quarter end, Kimco bought 2 shopping centers
- Northridge Shopping Center (Arvada, Colo.) and Five Forks
Crossing (Lilburn, Ga.) - for a total price of $29.6 million.
Notably, since 2010, Kimco has acquired 70 properties in highly
affluent areas of the U.S. for $1.7 billion. Moreover, the
company is in a deal to acquire a 24-property retail portfolio
mainly in the Boston metropolitan market, spanning 1.4 million
square feet, for $270 million, subject to mortgage debt of $121.5
million. The deal is expected to close during the first quarter
During third-quarter 2013, Kimco vended 8 assets of its U.S.
shopping center portfolio for $75.5 million, including $5.9
million of mortgage debt. Kimco's pro-rata share of proceeds from
these sales was $53.3 million. It recognized gains of $7.6
million on the sale of four properties while impairments of $0.7
million on the other four properties.
With this, since the initiation of the U.S. non-strategic retail
disposition program in 2010, Kimco has sold 133 properties for
$1.1 billion. Of this, its share of the proceeds was $651.3
In addition, Kimco and its JV partner - American Industries -
divested their stake in 84 Mexican industrial assets for $603.5
million. The properties were sold to Terrafina - a Mexican REIT.
Moreover, Kimco offloaded a 4-property Mexican shopping center
portfolio to its local operating partner, Planigrupo, for $84
Additionally, Kimco sold its 43% stake in a Guadalajara,
Mexico-based asset Centro Sur shopping center for $41 million.
Also, the company divested its 50% stake in a Chile-based
9-property shopping center portfolio to its local operating
partner for $50.2 million. Kimco had a pro-rata share of proceeds
from these sales of $259.4 million.
Notably, as of Sep 30, 2013, Kimco's Mexican investments had a
book value of around $445.2 million. This will be lowered by
about $400.9 million following the vending of 27 shopping
centers, which are currently in the negotiation stage.
As of Sep 30, 2013, Kimco had $401.7 million (up from $156.5
million as of Jun 30, 2013) of cash and cash equivalents, with
consolidated net debt to adjusted EBITDA (earnings before
interest, tax, depreciation and amortization) ratio of 5.4x
(compared to 5.8x from the prior quarter).
In addition, Kimco has access to immediate liquidity of about
$1.6 billion under its unsecured revolving credit facility worth
Raises 2013 Outlook
Kimco again raised the lower end of its adjusted FFO guidance
range and now expects it in the range of $1.32-$1.33 (prior range
being $1.31-$1.33). The company projects combined portfolio
occupancy to grow 50 to 75 bps while combined same-property NOI
to climb 3.00% to 4.00%.
Moreover, Kimco has provided an initial guidance for 2014
adjusted FFO per share. The company expects it to range between
$1.36 and $1.40.
Kimco announced a quarterly cash dividend of 22.5 cents per share
on its common stock, reflecting a 7.1% hike from the prior
quarter. The dividend will be paid on Jan 15, 2014, to
shareholders of record on Jan 2, 2014.
We are encouraged with the decent results at Kimco. Moreover, the
dividend hike and the raise of the lower end of its previously
issued 2013 adjusted FFO per share guidance boost investors'
confidence in the stock. The company is currently focusing on
owning and operating strategic retail assets in North America.
The portfolio restructuring activity, along with easy access to
capital promises considerable upside potential for Kimco.
Yet, stiff competition from other players in the market,
short-term headwinds for occupancy amid an unsettled economic
environment and rise in internet sales that adversely affect the
demand for retail space remain our concerns.
Kimco currently carries a Zacks Rank #3 (Hold). We now look
forward to the other retail REIT,
Regency Centers Corporation
), which is scheduled to release its earnings today and has a
Zacks Rank #2 (Buy).
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.