Kimco Realty Corporation (KIM)

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Industry: Consumer Services
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Kimco Realty Corporation (KIM)

Q1 2010 Earnings Call Transcript

May 6, 2010 9:00 am ET

Executives

Barbara Pooley – SVP, Finance and IR

Dave Henry – President and CEO

Mike Pappagallo – COO and CFO

Milton Cooper – Executive Chairman

Rob Nadler – President, Central Region

Analysts

Jay Habermann – Goldman Sachs

Quentin Velleley – Citi

Jeffrey Donnelly – Wells Fargo

Nathan Isbee – Stifel Nicolaus

David Wigginton – Macquarie Research

Alexander Goldfarb – Sandler O'Neill

Rich Moore – RBC Capital Markets

Steve Sakwa – ISI Group

Michael Mueller – J.P. Morgan

Paul Morgan – Morgan Stanley

Ross Nussbaum – UBS

Chris Lucas – Robert W. Baird

Nathan Isbee – Stifel Nicolaus

Mike Bilerman – Citi

Dave Fick – Stifel Nicolaus

Presentation

Operator

Good day, ladies and gentlemen and welcome to the Kimco first quarter earnings conference call. Please be aware today's conference is being recorded. As a reminder, all lines are muted to prevent background noise. After the speakers' remarks, there will be a formal question-and-answer session. (Operator Instructions)

At this time, it is my pleasure to introduce your speaker today, Barbara Pooley. Please proceed, Miss Pooley.

Barbara Pooley

Thank you, Cindy. Thank you all for joining the first quarter 2010 Kimco earnings call. With me on the call this morning are Milton Cooper, Executive Chairman, Dave Henry, President and Chief Executive Officer and Mike Pappagallo, Chief Operating and Chief Financial Officer. Rob Nadler, President of Kimco's Central Region is also on today's call 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 represent the company and management's hopes, intentions, beliefs, expectations or projections of the future which are forward-looking statements. It's important to note that the company's actual results could differ materially from those projected in such forward-looking statements. Information concerning factors that could cause actual results to differ materially from those forward-looking statements is contained in the company's SEC filings. During this presentation, management may make reference to certain non-GAAP financial measures that we believe help investors better understand Kimco 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 web site.

Finally, during the Q&A portion of the call, we request that you respect the limit of one question so that all of our callers may have an opportunity to speak with management. Feel free to return to the queue, if you have additional questions and if we have time at the end of the call, we'll address those questions.

I'll now turn the call over to Dave Henry.

Dave Henry

Good morning. First, I'd like to begin by formally thanking David Lukes for his hard work and contributions to our company over the past seven years. David is a talented real estate executive and we wish him the very best in his new role as CEO of Mall Properties, Inc. At the same time, we are very pleased that Mike Pappagallo has become our new Chief Operating Officer.

For an interim period, Mike will also retain his CFO responsibilities. With his senior finance staff and our region Presidents adding additional duties to ensure a smooth transition across the board. While I have promised Mike that I would keep the superlative to a minimum, so I would like to note Mike's industry recognized accomplishments over 13 years as our CFO and our strong belief that Mike is well qualified to assume the key operating role in our firm. Congratulations and well deserved, Mike.

In terms of our first quarter, we are happy to report solid financial and operating results. Mike will provide the details. But it is clear that leasing activity in aggregate is increasing and our portfolio key metrics, such as occupancy, leasing spreads and same store NOI are improving after a very rough 2009. Our tenants, which in general are necessity based or discount oriented retailers, are showing much improved comparable sales and are again looking to expand selectively.

I encourage all of our shareholders and the analyst community to review page 29 of our supplemental financial report which lists our 50 largest tenants. The financial strength and prospect of almost all of these tenants gives us great confidence in the stability and reliability of our future rental revenues.

During the quarter, we also made good progress on each of the four key objectives we discussed in detail in our last earnings call, company leverage level, retail joint venture debt guarantees, placement of the PL retail assets in institutional joint ventures and the disposition of our non-retail portfolio.

With respect to leverage, our debt to EBITDA ratio declined from 6.8 to 6.3 during the first quarter and we are well advanced towards our 2012 goal of a 6.0 ratio. On the retail joint venture debt guarantees, the amount has been further reduced from $331 million to $311 million during the quarter. And as mentioned on our last call, we expect that the remaining amount will be fully repaid by the maturity date of August 15 with Kimco and Prudential each paying their respective share of the debt, 15% and 85% respectively.

As a point of reference, the total amount of retail joint venture debt guaranteed by Kimco was originally $1.2 billion, which has been reduced to the current level, $311 million through property sales and partnership contributions. With respect to the PL retail portfolio, we are very pleased that five of the largest assets totaling 370 million have been transferred to a new institutional joint venture with CPPIB, Canada Pension Plan Investment Board. We are proud to have been selected by CPPIB to be an operating partner for neighborhood and community shopping centers in the U.S. and we anticipate substantially increasing the number of assets in the venture.

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