Kimco Realty Management Discusses Q3 2012 Results - Earnings Call Transcript

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Kimco Realty (KIM)

Q3 2012 Earnings Call

October 31, 2012 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

Analysts

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

Jeffrey Spector - BofA Merrill Lynch, Research Division

Paul Morgan - Morgan Stanley, Research Division

Michael Bilerman - Citigroup Inc, Research Division

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

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

Andrew Schaffer

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

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

Jeffrey J. Donnelly - Wells Fargo Securities, LLC, Research Division

Presentation

Operator

Good morning, everyone, and welcome to the Kimco Realty Corp. Third Quarter Earnings Conference Call and Webcast. [Operator Instructions] Please also note that today's event is being recorded. At this time, I'd like to turn the conference call over to your moderator, Mr. David Bujnicki, Vice President. Sir, you may begin.

David F. Bujnicki

Thank you all for joining Kimco's third 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. [Operator Instructions]

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

David B. Henry

Good morning, and thank you for dialing in today. Hurricane Sandy has given us an exciting few days, and we are glad it has moved on from our area. We are pleased to report strong third quarter results, continued progress on our key objectives and a significant increase in our annual dividend. Glenn and Mike will provide details and color. But in the main we continue to see steady and sustained improvement across our portfolio in terms of our key metrics and retailer demand for space.

Despite the soft economy and weak employment and housing, consumer spending is holding up and national retailers in particular are again pursuing aggressive expansion plans. Discount and value-oriented anchors of all types have announced increased store counts for 2013, 2014. And this bodes well for our portfolio, especially in the context of very limited new development or supply of retail space. Although market rents remain substantially below peak levels and while certainly not a landlord's market, effective rents are increasing in most areas. We are even beginning to see occupancy improvement in our local stores basis, which has been our primary issue over the past several years.

During the quarter, we made solid progress reducing our non-retail investments, selling our lower-quality, non-strategic properties, leasing up our Latin American development properties and strengthening our balance sheets. We are also thrilled to be able to discuss the fully executed purchase and sales agreement with an affiliate of Starwood Capital Group for the purchase of our InTown Suites investment. We've been working through the sales process for an extended period of time due to the complexity of selling both the corporate entity and the real estate assets. The closing timeframe is also expected to be prolonged due to the loan assumptions required and other closing details. However, all parties involved are proceeding as expeditiously as possible, and the underlying investment continues to perform very well.

I would also like to take a moment to discuss our concentrated efforts to transform over time our large shopping center portfolio into one that is well recognized and described as "best-in-class." In addition to the disposition of nonstrategic and lower-quality retail assets, we have purchased many terrific new shopping centers, and we continue to expand, devote resources and invest capital in many of our very best retail properties. We recognize that the key to our success will be a dedicated focus on Kimco's primary core markets, which in general are highlighted by strong demographics, barriers to entry, limited retail per capita, larger-sized properties and higher population densities. The New York City metro area, where we have more than 70 shopping centers, and the Baltimore-Washington Corridor, where we have more than 40 shopping centers, are 2 good examples of Kimco primary markets, where we already have scale, long-standing tenant relationships and premier retail properties. We will remain fully national in scope, but we will continue to refine and focus on certain key markets.

With respect to our international markets, Canada remains a strong, improving contributor to our company with a long-term, very favorable outlook. Mexico, our other large international market, also has a strong economy with 10 straight quarters of year-over-year economic expansion and a strong resurgence of international capital in the real estate sector and increasing property values. For us, lease-up of our development portfolio remains paramount and the 130 basis points occupancy increase in aggregate in our Mexico properties during the quarter is gratifying and shows promise for the rest of the year. Overall, our Latin American stabilized portfolio now exceeds 90% occupancy.

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