Kimco Realty Corporation (KIM)

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Kimco Realty Corporation (KIM)

Q3 2010 Earnings Call Transcript

November 4, 2010 9:00 am ET

Executives

Dave Bujnicki – Senior Director, IR

Dave Henry – President and CEO

Glenn Cohen – EVP, CFO and Treasurer

Mike Pappagallo – COO

Milton Cooper – Executive Chairman

Barbara Pooley – SVP, Finance and IR

Robert Nadler – President, Central Region

Analysts

Jay Haberman – Goldman Sachs

Alex Goldfarb – Sandler O’ Neill

Nathan Isbee – Stifel Nicolaus

Quentin Velleley – Citi

Craig Schmidt – Bank of America

Steve Sakwa – ISI Group

Paul Morgan – Morgan Stanley

Laura Clark – Green Street Advisors

Michael Mueller – JPMorgan

Chris Lucas – Robert W. Baird

Ross Nussbaum – UBS

Jeffrey Donnelly – Wells Fargo

Rich Moore – RBC Capital Markets

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to the Kimco’s third 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 for today, Dave Bujnicki. Please go ahead, sir.

Dave Bujnicki

Thank you, Anola. Thank you all for joining the second quarter 2010 Kimco earnings call. With me on the call this morning are Milton Cooper, 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 answer 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 is 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 to 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 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 have an opportunity to speak to 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 will address your questions.

With that, I will now turn the call over to Dave Henry.

Dave Henry

Good morning. Thank you for calling in. As a management team, we are very pleased with our third quarter results and we believe that they represent solid and steady progress on our strategic goals and financial objectives. At the risk of repeating some of the highlights from our recent Investor Day, I’d like to provide an update on key issues we have repeatedly identified and discussed on previous earnings call.

Overall, and most importantly, we are very pleased with the improving metrics of our large portfolio of neighborhood and community shopping centers. Mike will provide a detailed discussion, but we continue to be encouraged by the increasing leasing activity of national retailers of all types.

With virtually no new retail development activity, national retailers with significant expansion plans are beginning to be concerned about achieving targeted store counts in 2011 and 2012. This is helping to absorb vacant space and obtain improved lease terms for us.

While the economy remains fragile and uncertain, we are seeing many tangible signs of improvement in most markets. In addition, prices for quality retail properties continued to increase with the favorable corresponding impact on our net asset value.

Next, we are significantly ahead of schedule on achieving our targeted leverage levels and strengthening our balance sheet. Glenn will provide further details, but our net debt to EBITDA ratio has now declined from 8.1 at the beginning of 2009 to 6.2 today. We’ve remained committed to a further reduction to 6.0 or below by the end of 2012.

Third, we have completely eliminated the corporate debt guarantees related to our U.S. institutional retail joint ventures. These guarantees totaled $694 million at the beginning of 2009 and were a significant concern to the analyst community at the time.

Fourth, we have successfully placed many of the retail assets purchased from two of our joint venture partners over the past 18 months into new institutional joint ventures at prices equal to or exceeding the purchase prices we paid for the properties.

We believe we accomplished a win-win situation by matching institutions that needed to reduce their retail real estate investments with institutions seeking to make new investments in our sector. These new institutional joint venture partners such as CPP, BIG and Cisterra have proven to be good partners and are looking to grow aggressively in the U.S.

With respect to our non-retail portfolio, which now represents less than 8% of our total assets, dispositions will continue to be measured but accelerated where possible over the next several years. Since the beginning of 2009, our non-retail portfolio has been reduced from $1 billion to $848 million to-date. An additional $70 million of non-retail properties and securities are scheduled to be sold or repaid in the fourth quarter.

In addition, our joint venture partners in our largest non-retail investment, the InTown Suites extended state portfolio, have now collectively agreed to formally market the portfolio. With year-over-year significant RevPAR increases and increasing interest by investors for hotel properties, we are cautiously optimistic about the sales process.

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