Kimco Realty Corporation (KIM)

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Kimco Realty Corporation (KIM)

Q4 2010 Earnings Call Transcript

February 10, 2011 10:00 am ET

Executives

David Bujnicki – Senior Director, IR

Dave Henry – President & CEO

Glenn Cohen – CFO, Treasurer, EVP

Mike Pappagallo – COO

Milton Cooper – Executive Chairman

Mike Melson – MD, Latin America Operations

Barbara Pooley – EVP & CAO

Rob Nadler – President, Central Region

Analysts

Craig Schmidt – Bank of America

Paul Morgan – Morgan Stanley

Quentin Vellely – Citi

Michael Mueller – JP Morgan

Alex Goldfarb – Sandler O'Neill

Richard Moore – RBC Capital Markets

Jeff Donnelly – Wells Fargo

Nathan Isbee – Stifel Nicolaus

Jim Sullivan – Cowen Group

Laura Clark – Green Street Advisors

Jay Haberman – Goldman Sachs

Vincent Chao – Deutsche Bank

Samit Parikh – ISI Group

Ross Nussbaum – UBS

Presentation

Operator

Please standby we are about to begin. Good morning, ladies and gentlemen, and welcome to the Kimco’s Fourth 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’s my pleasure to introduce your speaker for today, David Bujnicki. Please proceed, sir.

David Bujnicki

Thanks Lauren. Thank you all for joining the fourth-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 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 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’s operating results. Examples include, but are not limited to funds from operations and net operating income. Reconciliation 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 the opportunity to speak with management. Feel free to return to the queue and if you have additional questions, if we have time at the end of the call, we will address them.

With that I turn the call over to Dave Henry.

Dave Henry

Good morning. Thanks for calling in. Our fourth-quarter results reflect another solid quarter of improving fundamentals and a brightening outlook across the retail real estate sector. A third consecutive quarter of positive same-store NOI and good leasing activity together with continued progress in reducing both our corporate leverage and our non-retail portfolio leaves us feeling very optimistic about 2011.

Retail sales have been strong and retailer earnings and balance sheets are much improved. With virtually no new speculative retail development, retailers are becoming much more flexible in terms of looking at existing vacancies and effective rents are increasing, albeit still significantly below peak levels.

There continues to be substantial geographic differences across our portfolio, again highlighting the benefits of diversification in our large scale platform. Canada, Puerto Rico and Long Island, for example, have very few vacancies and rents have held firm during the downturn. Other markets, such as Arizona, Southern California and parts of Florida remain soft.

Overall, in an aggregate, however, leasing activity and rent levels are improving. With our strong balance sheet, substantial liquidity and multiple large institutional partners, we have selectively begun to acquire high quality retail properties from third-party owners, where the economics are accretive and the locations lie within our targeted markets.

We plan to be very disciplined and patient as we evaluate opportunities, but we will definitely win our share of property acquisitions, given our size, longstanding relationships and our reputation for being a reliable buyer.

Beginning in the third quarter of 2010, to-date, we have purchased and closed on 10 properties from third-party owners, four for various joint venture partners and six for our core REIT portfolio. The acquisitions totaled approximately $269 million and comprised $1.9 million square feet across six states. We continue to be selective and disciplined about purchasing shopping centers of high quality with good long-term demographics.

As noted in our press release, we also continue to make progress in reducing both our portfolio of non-retail investments and our retail preferred equity holdings. Our non-retail portfolio now stands at roughly $798 million, 130 investments, down from $1 billion, 161 investments at the beginning of 2009.

We had good momentum with our largest investment InTown Suites, now being formally marketed by an investment banking firm and a number of other repayments expected to occur in the first-quarter. In addition we have received $15 million in principal payments on the Valad convertible bond together with interest payments as scheduled.

With respect to our retail preferred equity portfolio, over the past year, we have reduced the amount and a number of our retail preferred equity investments from $297 million and 125 properties to $158 million and 92 properties. This has been achieved through a combination of property sales, refinancing, partner exchanges and conversions pari-passu joint ventures. Good solid progress on this front.

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