Kimco Realty Corporation (KIM)

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Industry: Consumer Services
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Kimco Realty (KIM)

Q4 2012 Earnings Call

February 06, 2013 10:00 am ET

Executives

David F. Bujnicki - Vice President of Investor Relations and Corporate Communications

David B. Henry - Vice Chairman, Chief Executive Officer, President, Chief Investment Officer and Member of Executive Committee

Glenn G. Cohen - Chief Financial Officer, Executive Vice President and Treasurer

Michael V. Pappagallo - Chief Operating Officer and Executive Vice President

Milton Cooper - Executive Chairman and Chairman of Executive Committee

Mike Melson - Managing Director of Latin America Operations

Analysts

R.J. Milligan - Raymond James & Associates, Inc., Research Division

Christy McElroy - UBS Investment Bank, Research Division

Quentin Velleley - Citigroup Inc, Research Division

Paul Morgan - Morgan Stanley, Research Division

Nathan Isbee - Stifel, Nicolaus & Co., Inc., Research Division

Caitlin Burrows - Goldman Sachs Group Inc., Research Division

Richard C. Moore - RBC Capital Markets, LLC, Research Division

Michael W. Mueller - JP Morgan Chase & Co, Research Division

Andrew Schaffer

Cedrik Lachance - Green Street Advisors, Inc., Research Division

Michael Gorman - Cowen and Company, LLC, Research Division

Craig R. Schmidt - BofA Merrill Lynch, Research Division

Vincent Chao - Deutsche Bank AG, Research Division

Samit Parikh - ISI Group Inc., Research Division

Mary Ross Gilbert - Imperial Capital, LLC, Research Division

Presentation

Operator

Good morning, and welcome to the Kimco Fourth Quarter Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to David Bujnicki. Please go ahead.

David F. Bujnicki

Thanks, Laura. Thank you, all, for joining Kimco's fourth quarter 2012 earnings call. With me on the call this morning is Milton Cooper, our Executive Chairman; Dave Henry, President and Chief Executive Officer; Mike Pappagallo, Chief Operating Officer; Glenn Cohen, Chief Financial Officer; as well as other key executives who will be available to address questions at the conclusion of our prepared remarks.

As a reminder, statements made during the course of this call may be deemed forward-looking statements. It is important to note that the company’s actual results could differ materially from those projected in such forward-looking statements due to a variety of risks, uncertainties and other factors. Please refer to the company's SEC filings that address such factors that could cause actual results to differ materially from those forward-looking statements. During this presentation, management may make reference to certain non-GAAP financial measures that we believe help investors better understand Kimco's operating results. Examples include, but are not limited to, funds from operations and net operating income. Reconciliations of these non-GAAP financial measures are available on our website.

Finally, during the Q&A portion of the call, we request that you respect the limit of 1 question so that all of our callers have an opportunity to speak with management. If you have additional questions, please rejoin the queue. With that, I'll now turn the call over to Dave Henry.

David B. Henry

Good morning, and thanks for joining us today. We are happy to report strong fourth quarter and full year financial results as well as continued progress on our key goals and objectives. As customary, Glenn and Mike will provide details and color and Milton will close with some general observations.

Overall, the shopping center industry in our portfolio in particular continues to demonstrate steady and sustained improvement across the board, benefiting from population growth and very little new development. Effective rents and occupancy rates are increasing at an accelerating rate.

Our key metrics or vital signs, as we like to say, are very strong with 11 straight quarters of positive same-store NOI growth and an occupancy rate just under 94%, representing our highest level since the start of the recession and very high leasing spreads.

Store opening counts continues to hit multiyear highs and small store vacancy levels are improving, while the economy continues to be fragile with uncertain fiscal policies. We are optimistic about the 2013 financial performance of our portfolio and the shopping center industry.

During the quarter, we made good progress on several of our key objectives. Our sales contract with Starwood Capital on the InTown portfolio is now firm with no due diligence contingencies, and the sale is expected to close in the second quarter when the complicated loan assumption process is completed. The InTown properties themselves continue to perform well.

During the quarter, Blackstone signed a definitive agreement with UBS Wealth Management-North American Property Fund, to purchase their equity interest in 2 large Kimco-managed UBS retail joint ventures, encompassing 40 high-quality shopping centers containing approximately 5.6 million square feet. The total transaction value is approximately $1.1 billion. And Kimco is the current operating partner and presently owns approximately 18% of the combined ventures. We have reached preliminary agreement with Blackstone to increase our ownership interest from 18% to 33% and to continue to provide management and leasing services to the new joint venture.

Also, as previously announced, we are very pleased to continue our participation in a 6-year-old service-led consortium, which is now acquiring just under 900 grocery stores across 5 established and distinguished grocery brands. The transaction will reunite the Albertsons stores the consortium already owns, approximately 200, with the Albertsons currently operated by SUPERVALU, approximately 400. In addition to the obvious synergies, all of the brands should benefit from the proven operating management team led by Bob Miller.

I would also like to again note our progress in recycling the Kimco shopping center portfolio. During 2012, we sold 68 shopping center properties in the U.S., which in general read or not in our key long-term markets, were represented lower quality assets. At the same time, during 2012, we acquired 24 additional shopping centers with generally excellent demographics, strong tenants and long-term growth. We are committed to continuing quarter-by-quarter to upgrade our portfolio, focusing on larger properties within our key markets. The sale of the remaining non-strategic and non-retail investments will provide the capital to acquire additional high-quality retail assets.

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