Kimco Realty Corporation (KIM)

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Kimco Realty (KIM)

Q2 2011 Earnings Call

July 27, 2011 9:00 am ET

Executives

Raymond Edwards -

Michael Pappagallo - Chief Operating Officer and Executive Vice President

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

Milton Cooper - Executive Chairman and Chairman of Executive Committee

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

Robert Nadler - Operating President of Central Region

David Bujnicki - Senior Director of Investor Relations

Analysts

Jonathan Habermann - Goldman Sachs Group Inc.

Christy McElroy - UBS Investment Bank

Jeffrey Donnelly - Wells Fargo Securities, LLC

Richard Moore - RBC Capital Markets, LLC

Quentin Velleley - Citigroup Inc

Alexander Goldfarb - Sandler O'Neill + Partners, L.P.

Paul Morgan - Morgan Stanley

David Wigginton - DISCERN Investment Analytics, Inc

Ross Nussbaum - UBS Investment Bank

Michael Bilerman - Citigroup Inc

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

Vincent Chao - Deutsche Bank AG

Cedric Lachance - Green Street

Samit Parikh - ISI Group Inc.

Craig Schmidt - BofA Merrill Lynch

Presentation

Operator

Good day, everyone, and welcome to Kimco Second Quarter Earnings Conference Call. Today's event is being recorded. [Operator Instructions] At this time, it is my pleasure to introduce your speaker, Mr. Dave Bujnicki. Please go ahead, sir.

David Bujnicki

Thanks, Felicia. Thank you, all for joining the Second Quarter 2011 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, 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 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 will request that you respect the limit of one question, so that all of our callers 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 will address your questions.

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

David Henry

Good morning, and thanks for calling in today. While worrisome clouds remain in the U.S. and around the world, ranging from the European debt crisis to continued U.S. challenges in housing and employment and deficit spending, the U.S. economic recovery continues its positive momentum, and the retail industry is once again, expanding. A recent RBC analysis is particularly encouraging, as it notes that it's research base of 2,200 retailers planned a total of approximately 73,000 new store openings over the next 24 months. This is expected to translate into increases in effective rents, occupancy and leasing spreads in our industry.

At Kimco, we are very pleased with our second quarter results and we believe that they represent solid and steady progress on our key 2011 objectives. Increasing occupancy is just under 93%, same-store NOI growth exceeding 3%, and positive leasing spreads of 2.1%, all combined to show very solid second quarter portfolio of vital signs.

Mike and Glenn, will provide further details. But overall, we are confident and optimistic about the balance of the year and our full year operating results. Permit us to take one final vow for completing the sale of the Valad bond at a price exceeding our basis. That done, we are turning our full attention to the disposition of the InTown portfolio, as InTown represents the last major piece of our non-retail portfolio. While no bidder achieved the minimum pricing level established by the joint venture partnership in the first round of bids, 3 potential purchasers are still fully engaged in due diligence and are trying to reach the necessary price level. We are also encouraged because the InTown portfolio itself continues to improve dramatically in terms of RevPAR growth and EBITDA metrics.

On an annualized basis, the portfolio EBITDA is now within 6% of its prerecession high, and our annualized FFO return exceeds 20% on our equity investment. The InTown portfolio, like the rest of the extended stay industry, is experiencing some substantial rate and occupancy increase.

In addition to the possible sale of the InTown portfolio this year, we anticipate the sale or repayment through refinancing of an additional $75 million of non-retail investments over the balance of the year. As a result, our non-retail portfolio should finish the year at less than 4% of our total gross asset through property sales, refinancings, partner buyouts and the conversion into pari passu joint ventures.

The retail preferred equity portfolio has also declined. From 297,000,125 properties to 136,000,081 properties over the past 18 months. With respect to new business, we continue to acquire high-quality retail properties in our core market, in a deliberate, patient and disciplined manner. So far this year, we have closed on 7 properties, totaling $165 million for both our institutional joint ventures and our own portfolio. Additionally, we currently have a firm pipeline of 10 additional property acquisitions, totaling a further $190 million.

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