NEW HYDE PARK, N.Y.--(BUSINESS WIRE)--
Kimco Realty Corp. (KIM) today reported results for the third quarter ended September 30, 2013.
Highlights for the Third Quarter 2013 and Subsequent Activity
- Reported funds from operations (FFO) of $0.34 per diluted share for the third quarter of 2013, compared to $0.29 per diluted share for the same period in 2012, representing a 17.2 percent increase;
- FFO as adjusted (recurring) was $0.33 per diluted share for the third quarter of 2013, compared to $0.31 per diluted share for the same period in 2012, representing a 6.5 percent increase;
- Announced a 7.1 percent increase in the quarterly dividend to $0.225 per common share;
- Pro-rata occupancy increased 100 basis points and 60 basis points for the U.S. and combined shopping center portfolios, respectively, to 94.4 percent and 94.0 percent, compared to September 30, 2012;
- U.S. same-property net operating income (NOI) increased 2.7 percent, which includes a negative 40 basis point impact from the inclusion of redevelopments, from the third quarter of 2012, representing the fourteenth consecutive positive increase;
- Recognized a 7.3 percent positive spread on U.S. leases signed during the quarter;
- Completed the sale of 98 properties in Latin America totaling approximately $779 million; and
- Executed a contract to acquire a 24-property portfolio concentrated in the greater Boston metropolitan area for $270 million.
Net income available to common shareholders for the third quarter of 2013 was $41.2 million, or $0.10 per diluted share, compared to $27.1 million, or $0.07 per diluted share, for the third quarter of 2012. Net income available to common shareholders during the third quarter of 2013 included $81.6 million of gains on sales of operating properties and $91.0 million of impairments attributable to the sale or pending disposition of operating properties. This compares to $11.7 million of gains on sales of operating properties and $4.3 million of impairments during the third quarter of 2012. Both operating property impairments and gains on sales are excluded from the calculation of FFO.
For the nine months ended September 30, 2013, net income available to common shareholders was $131.0 million, or $0.32 per diluted share, compared to $113.4 million, or $0.28 per diluted share, through September 30, 2012. Net income available to common shareholders for the nine months ended September 30, 2013 included $137.2 million of gains on sales of operating properties and $145.1 million of impairments attributable to the sale or pending disposition of operating properties, which compares to $58.8 million of gains on sales of operating properties and $33.1 million of impairments for the comparable period in 2012.
FFO, a widely accepted supplemental measure of REIT performance, was $141.4 million, or $0.34 per diluted share, for the third quarter of 2013, compared to $119.0 million, or $0.29 per diluted share, for the third quarter of 2012. For the nine months ended September 30, 2013, FFO was $417.9 million, or $1.02 per diluted share, compared to $383.2 million, or $0.94 per diluted share, for the same period last year.
FFO as adjusted, which provides information on a recurring FFO basis and excludes the effects of non-operating impairments as well as transactional income and expenses, was $134.6 million, or $0.33 per diluted share, for the third quarter of 2013, compared to $127.3 million, or $0.31 per diluted share, for the third quarter of 2012. FFO as adjusted for the nine months ended September 30, 2013, was $408.9 million, or $1.00 per diluted share, compared to $379.4 million, or $0.93 per diluted share, for the same period in 2012.
A reconciliation of net income to FFO and FFO as adjusted is provided in the tables accompanying this press release.
Shopping Center Operating Results
Third quarter 2013 shopping center portfolio operating results:
U.S. Shopping Center Portfolio
- Pro-rata occupancy was 94.4 percent, an increase of 100 basis points over the third quarter of 2012;
- U.S. same-property net operating income (NOI) increased 2.7 percent, which includes a negative 40 basis point impact from the inclusion of redevelopments, compared to the same period in 2012; and
- Pro-rata U.S. cash-basis leasing spreads increased 7.3 percent; new leases increased 13.7 percent; and renewals/options increased 4.8 percent;
Pro-rata occupancy for anchor space (10,000 square feet and greater) in the U.S. shopping center portfolio was 97.4 percent, a 110 basis point increase from the third quarter of 2012. In addition, pro-rata occupancy for small shop space, which accounts for approximately 24 percent of the pro-rata gross leasable area in the U.S. shopping center portfolio, increased by 80 basis points to 84.7 percent from the third quarter of 2012.
Combined Shopping Center Portfolio (includes U.S., Canada and Latin America)
- Pro-rata occupancy was 94.0 percent, an increase of 60 basis points over the third quarter of 2012;
- Combined same-property NOI increased 2.3 percent over the third quarter of 2012, representing the fourteenth consecutive quarterly increase; and
- Total leases executed in the combined portfolio: 582 new leases, renewals and options totaling 2.1 million square feet.
Combined same-property NOI for the third quarter of 2013 includes a reduction of 20 basis points due to the impact of foreign currency. For the nine months ended September 30, 2013, combined same-property NOI, inclusive of redevelopments, was 3.4 percent, which was reduced 10 basis points due to foreign currency. Kimco reports same-property NOI on a cash basis, excluding lease termination fees, and including charges for bad debts.
As previously announced, during the third quarter of 2013, Kimco acquired two wholly owned retail properties totaling 187,000 square feet, located in the metropolitan statistical areas (MSA) of Denver (Littleton, Colo.) and New York (Elmsford, N.Y.), for $37.6 million. Subsequent to the end of the quarter, the company purchased two additional shopping centers for its consolidated portfolio for a total purchase price of $29.6 million. These two properties are located in the Denver (Arvada, Colo.) and Atlanta (Lilburn, Ga.) MSAs and collectively comprise 220,000 square feet.
Additionally after the third quarter, Kimco announced the execution of a contract to acquire a 24-property retail portfolio located predominately in the Boston metropolitan market, comprising 1.4 million square feet, for a total purchase price of $270 million, subject to mortgage debt of $121.5 million. The company anticipates this transaction to close during the first quarter of 2014.
Since the company’s Investor Day in September 2010, Kimco has selectively acquired 70 U.S. properties, primarily located in the company’s key territories and comprising 9.4 million square feet, for a gross purchase price of $1.7 billion. These properties, which have an average pro-rata occupancy of 95.7 percent and an annual base rent per square foot of $14.16, are supported by strong demographics, including an average household income of $92,000 within a three-mile radius.
As previously announced, during the third quarter of 2013, Kimco sold eight properties in the U.S. for a gross price of $75.5 million, including $5.9 million of mortgage debt. The company recognized gains totaling $7.6 million on the sale of four properties and impairments of $0.7 million on the other four properties. Kimco’s pro-rata share of proceeds from these sales was $53.3 million.
Subsequent to the third quarter, Kimco sold its interests in four shopping centers for a gross price of $130.4 million. Currently, the company has 14 U.S. retail properties in contract negotiations for an aggregate sales price of $98.3 million.
Since the start of the company’s U.S. non-strategic retail disposition program in September 2010, Kimco has disposed of 133 properties, comprising 13.7 million square feet, for $1.1 billion, including $275.1 million of mortgage debt. The properties sold had, on a pro-rata basis, an average occupancy of 86.1 percent and an annual base rent per square foot of $8.89, with an average household income level of $66,000 within a three-mile radius. The company’s share of the proceeds from these sales was $651.3 million.
Mexico and South America (Latin America)
Latin American dispositions during the third quarter of 2013 included the sale of Kimco’s 50.7 percent ownership interest in a portfolio of 84 Mexican industrial properties for a gross price of $603.5 million; a four-property, wholly owned shopping center portfolio in Mexico for a gross price of approximately $84 million; and its 43 percent interest in a shopping center in Mexico for a gross price of approximately $41 million. In addition, Kimco sold its 50 percent ownership interest in a nine-property shopping center portfolio in Chile for a gross price of approximately $50.2 million. The company recognized, before the impact of currency, gains on sales totaling $76.7 million and impairments of $6.0 million. Kimco’s pro-rata share of proceeds from these sales was $259.4 million.
Additionally during the third quarter of 2013, Kimco recognized an impairment charge of $76.7 million related to 14 properties, one of which was sold subsequent to quarter end, that are in a pool of 27 shopping centers in Mexico that the company is negotiating for sale. The company anticipates that the sales of the remaining 13 shopping centers will result in significant after-tax gains, before the impact of currency, which will be recognized upon the closing of the sales of these assets. As of September 30, 2013, Kimco’s Mexican investments had a book value of approximately $445.2 million, which will be reduced by approximately $400.9 million upon the disposition of these 27 shopping centers.
At the end of the third quarter of 2013, included on Kimco’s balance sheet in “Accumulated other comprehensive income,” is a $113.1 million unrealized loss on foreign currency translation relating to the book value of its investments in Latin America (including those sold during 2013). This resulted from currency fluctuations between the local currency and the U.S. dollar during the company’s investment holding period and is subject to future fluctuations from ongoing changes in the respective foreign currency exchange rates for the properties not yet sold. Under U.S. GAAP, when the company has substantially monetized all its investments in a particular country, the then unrealized gain or loss on foreign currency translation will be recognized as a charge against earnings. The impact of currency will apply to the respective gains and losses on the sale of the operating properties and will be excluded from the calculation of FFO.
During the third quarter of 2013, a wholly owned entity of Kimco issued $200 million of 7-year unsecured Canadian-denominated notes that are due in 2020 with a coupon of 3.855 percent. The net proceeds were used to repay a $200 million 5.180 percent Canadian-denominated unsecured note that matured in August 2013.
At September 30, 2013, Kimco’s consolidated net debt to EBITDA as adjusted was 5.4x. In addition, the company maintains access to approximately $1.6 billion of immediate liquidity under its $1.75 billion unsecured revolving credit facility.
Kimco’s board of directors declared and increased the company’s quarterly cash dividend 7.1 percent to $0.225 per common share payable on January 15, 2014, to shareholders of record on January 2, 2014, representing an ex-dividend date of December 30, 2013.
The board of directors also declared quarterly dividends for the company’s preferred shares as follows:
- For the Class H depositary shares, each representing 1/100 of a share of 6.90 percent Class H cumulative redeemable preferred shares, a quarterly dividend of $0.43125 per preferred depositary share will be paid on January 15, 2014, to shareholders of record on January 2, 2014, representing an ex-dividend date of December 30, 2013;
- For the Class I depositary shares, each representing 1/1000 of a share of 6.00 percent Class I cumulative redeemable preferred shares, a quarterly dividend of $0.37500 per preferred depositary share will be paid on January 15, 2014, to shareholders of record on January 2, 2014, representing an ex-dividend date of December 30, 2013;
- For the Class J depositary shares, each representing 1/1000 of a share of 5.50 percent Class J cumulative redeemable preferred shares, a quarterly dividend of $0.34375 per preferred depositary share will be paid on January 15, 2014, to shareholders of record on January 2, 2014, representing an ex-dividend date of December 30, 2013;
- For the Class K depositary shares, each representing 1/1000 of a share of 5.625 percent Class K cumulative redeemable preferred shares, a quarterly dividend of $0.35156 per preferred depositary share will be paid on January 15, 2014, to shareholders of record on January 2, 2014, representing an ex-dividend date of December 30, 2013;
2013 Guidance and 2014 Initial Guidance
The company’s 2013 full-year guidance range for FFO as adjusted, which does not include any estimate for transactional activities or non-operating impairments, has been increased to $1.32 - $1.33 per diluted share from the previous $1.31 - $1.33 per diluted share. Estimated shopping center portfolio metrics remain as follows:
- Combined portfolio occupancy: +50 to +75 basis points
- Combined same-property NOI: +3.00 to +4.00 percent
2014 Initial Guidance:
The company’s preliminary 2014 guidance for FFO as adjusted per diluted share: $1.36 - $1.40.
Conference Call and Supplemental Materials
Kimco will hold its quarterly conference call on Wednesday, October 30, 2013, at 10:00 a.m. EDT. The call will include a review of the company’s third quarter 2013 results as well as a discussion of the company’s strategy and expectations for the future. To participate, dial 1-888-317-6003 (Passcode:2371321).
A replay will be available through 9:00 a.m. EST on December 2, 2013, by dialing 1-877-344-7529 (Passcode:10033244). Access to the live call and replay will be available on the company's website at investors.kimcorealty.com.
Kimco Realty Corp. (KIM) is a real estate investment trust (REIT) headquartered in New Hyde Park, N.Y., that owns and operates North America’s largest portfolio of neighborhood and community shopping centers. As of September 30, 2013, the company owned interests in 855 shopping centers comprising 125 million square feet of leasable space across 42 states, Puerto Rico, Canada, Mexico and South America. Publicly traded on the NYSE since 1991, and included in the S&P 500 Index, the company has specialized in shopping center acquisitions, development and management for more than 50 years. For further information, please visit www.kimcorealty.com, the company’s blog at blog.kimcorealty.com, or follow Kimco on Twitter at www.twitter.com/kimcorealty.
Safe Harbor Statement
The statements in this news release state the company's and management's intentions, beliefs, expectations or projections of the future and 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. Factors which may cause actual results to differ materially from current expectations include, but are not limited to (i) general adverse economic and local real estate conditions, (ii) the inability of major tenants to continue paying their rent obligations due to bankruptcy, insolvency or a general downturn in their business, (iii) financing risks, such as the inability to obtain equity, debt or other sources of financing or refinancing on favorable terms to the company, (iv) the company’s ability to raise capital by selling its assets, (v) changes in governmental laws and regulations, (vi) the level and volatility of interest rates and foreign currency exchange rates, (vii) risks related to our international operations, (viii) the availability of suitable acquisition and disposition opportunities, and risks related to acquisitions not performing in accordance with our expectations, (ix) valuation and risks related to our joint venture and preferred equity investments, (x) valuation of marketable securities and other investments, (xi) increases in operating costs, (xii) changes in the dividend policy for the company’s common stock, (xiii) the reduction in the company’s income in the event of multiple lease terminations by tenants or a failure by multiple tenants to occupy their premises in a shopping center, (xiv) impairment charges and (xv) unanticipated changes in the company’s intention or ability to prepay certain debt prior to maturity and/or hold certain securities until maturity. Additional information concerning factors that could cause actual results to differ materially from those forward-looking statements is contained from time to time in the company's Securities and Exchange Commission (SEC) filings, including but not limited to the company's Annual Report on Form 10-K for the year ended December 31, 2012. Copies of each filing may be obtained from the company or the SEC.
The company refers you to the documents filed by the company from time to time with the SEC, specifically the section titled "Risk Factors" in the company's Annual Report on Form 10-K for the year ended December 31, 2012, as may be updated or supplemented in the company’s Quarterly Reports on Form 10-Q and the company’s other filings with the SEC, which discuss these and other factors that could adversely affect the company's results.
|CONDENSED CONSOLIDATED STATEMENTS OF INCOME|
|(in thousands, except share information)|
|Three Months Ended||Nine Months Ended|
|September 30,||September 30,|
|Revenues from rental properties||$||232,074||$||213,946||$||689,678||$||637,378|
|Management and other fee income||9,423||8,917||26,865||27,053|
|Real estate taxes||30,900||28,823||88,770||84,131|
|Operating and maintenance||27,547||25,333||84,563||76,020|
|General and administrative expenses||30,961||29,880||96,456||95,157|
|Provision for doubtful accounts||2,118||888||7,190||6,397|
|Depreciation and amortization||63,158||63,854||186,345||180,647|
|Total operating expenses||232,768||152,048||582,394||452,135|
|Mortgage financing income||925||2,092||3,341||6,083|
|Interest, dividends and other investment income||481||595||9,648||1,094|
|Other income/(expense), net||2,878||(3,073||)||(3,070||)||(6,126||)|
|Income from other real estate investments||670||545||1,628||1,688|
|Income/(loss) from continuing operations before income taxes,|
|equity in income of joint ventures, gain/(loss) on change in control|
|of interests and equity in income from other real estate investments||(40,308||)||14,507||(16,898||)||44,811|
|Provision for income taxes, net||(24,238||)||(5,520||)||(28,110||)||(13,581||)|
|Equity in income of joint ventures, net||96,175||24,498||179,791||89,588|
|Gain on change in control of interests, net||-||-||21,711||14,156|
|Equity in income of other real estate investments, net||10,547||10,239||29,910||35,340|
|Income from continuing operations||42,176||43,724||186,404||170,314|
|Income from discontinued operating properties, net of tax||1,887||5,222||8,693||9,924|
|Impairment/loss on operating properties sold, net of tax||(10,813||)||(3,191||)||(42,971||)||(30,248||)|
|Gain on disposition of operating properties, net of tax||23,398||11,329||27,762||34,571|
|Income/(loss) from discontinued operations||14,472||13,360||(6,516||)||14,247|
|Gain on sale of operating properties, net of tax (1)||540||-||1,080||4,059|
|Net income attributable to noncontrolling interests (3)||(1,425||)||(2,143||)||(6,296||)||(10,928||)|
|Net income attributable to the Company||55,763||54,941||174,672||177,692|
|Preferred stock redemption costs||-||(6,213||)||-||(6,213||)|
|Preferred stock dividends||(14,573||)||(21,622||)||(43,720||)||(58,037||)|
|Net income available to the Company's common shareholders||$||41,190||$||27,106||$||130,952||$||113,442|
|Per common share:|
|Income from continuing operations: (3)|
|Net income: (4)|
|Weighted average shares:|
|(1)||Included in the calculation of income from continuing operations per common share in accordance with SEC guidelines.|
|(2)||Reflects the potential impact if certain units were converted to common stock at the beginning of the period. The impact of the conversion would have an anti-dilutive effect on net income and therefore have not been included.|
|(3)||Includes the net income attributable to noncontrolling interests related to continued operations of ($1,413) and ($2,957) for the quarters ended September 30, 2013 and 2012, and ($6,256) and ($9,343) for the nine months ended September 30, 2013 and 2012, respectively.|
|(4)||Includes earnings attributable to unvested restricted shares of $337 and $298 for the quarters ended September 30, 2013 and 2012 and $1,,011 and $893 for the nine months ended September 30, 2013 and 2012, respectively.|
|CONDENSED CONSOLIDATED BALANCE SHEETS|
|(in thousands, except share information)|
|September 30,||December 31,|
|Operating real estate, net of accumulated depreciation|
|of $1,864,904 and $1,745,462, respectively||$||7,086,534||$||7,104,562|
|Investments and advances in real estate joint ventures||1,308,184||1,428,155|
|Real estate under development||97,033||97,263|
|Other real estate investments||288,364||317,557|
|Mortgages and other financing receivables||45,708||70,704|
|Cash and cash equivalents||401,730||141,875|
|Accounts and notes receivable||160,126||171,540|
|Redeemable noncontrolling interests||85,903||81,076|
|Preferred stock, $1.00 par value, authorized 5,961,200 shares|
|102,000 shares issued and outsanding (in series)|
|Aggregate liquidation preference $975,000||102||102|
|Common stock, $.01 par value, authorized 750,000,000 shares|
|issued and outstanding 409,656,477 and 407,782,102 shares, respectively||4,097||4,078|
|Cumulative distributions in excess of net income||(950,905||)||(824,008||)|
|Accumulated other comprehensive income||(44,128||)||(66,182||)|
|Total stockholders' equity||4,697,587||4,765,160|
|Total liabilities and equity||$||9,953,079||$||9,751,234|
|RECONCILIATION OF NET INCOME AVAILABLE TO COMMON SHAREHOLDERS|
|TO FUNDS FROM OPERATIONS - "FFO"|
|(in thousands, except per share data)|
|Three Months Ended||Nine Months Ended|
|September 30,||September 30,|
|Net income available to common shareholders||$||41,190||$||27,106||$||130,952||$||113,442|
|Gain on disposition of operating property, net of noncontrolling interests||(23,922||)||(11,084||)||(28,827||)||(35,806||)|
|Gain on disposition of joint venture operating properties||(57,651||)||(641||)||(108,407||)||(23,013||)|
|Depreciation and amortization - real estate related||62,445||65,496||185,742||194,032|
|Depr. and amort. - real estate jv's, net of noncontrolling interests||28,245||33,821||93,295||101,506|
|Impairments of operating properties, net of tax and noncontrolling interests||91,046||4,295||145,118||33,070|
|Funds from operations||141,353||118,993||417,873||383,231|
|Transactional (income) / charges, net||(6,744||)||8,309||(8,963||)||(3,798||)|
|Funds from operations as adjusted||$||134,609||$||127,302||$||408,910||$||379,433|
|Weighted average shares outstanding for FFO calculations:|
|Dilutive effect of equity awards||2,378||2,274||2,622||2,106|
|FFO per common share - basic||$||0.35||$||0.29||$||1.03||$||0.94|
|FFO per common share - diluted||$||0.34||(1||)||$||0.29||(1||)||$||1.02||$||0.94|
|FFO as adjusted per common share - diluted||$||0.33||(1||)||$||0.31||(1||)||$||1.00||(1||)||$||0.93||(1||)|
|(1) Reflects the potential impact if certain units were converted to common stock at the beginning of the period. Funds from operations would be increased by $621 and $518 for the three months ended September 30, 2013 and 2012, and $1,878 and $1,555 for the nine months ended September 30, 2013 and 2012, respectively.|
|FFO is a widely accepted supplemental measure of REIT performance with the standards established by the National Association of Real Estate Investment Trusts (NAREIT). Given the company’s business as a real estate owner and operator, Kimco believes that FFO and FFO as adjusted is helpful to investors as a measure of its operating performance. NAREIT defines FFO as net income/(loss) attributable to common shareholders computed in accordance with generally accepted accounting principles, excluding (i) gains or losses from sales of operating real estate assets and (ii) extraordinary items, plus (iii) depreciation and amortization of operating properties and (iv) impairment of depreciable real estate and in substance real estate equity investments. Included in these items are also the company’s share of unconsolidated real estate joint ventures and partnerships. FFO as adjusted excludes the effects of non-operating impairments, transactional income and expenses.|
|Reconciliation of Projected Diluted Net Income per Common Share|
|to Projected Diluted Funds From Operations ("FFO") per Common Share|
|Projected Range||Projected Range|
|Full Year 2013||Full Year 2014|
|Projected diluted net income available to common|
|shareholder per share||$||0.41||$||0.42||$||0.47||$||0.51|
|Projected depreciation & amortization||0.61||0.63||0.62||0.64|
|Projected depreciation & amortization real estate|
|joint ventures, net of noncontrolling interests||0.30||0.32||0.29||0.31|
|Gain on disposition of operating properties||(0.07||)||(0.09||)||(0.01||)||(0.03||)|
|Gain on disposition of joint venture operating properties,|
|net of noncontrolling interests||(0.26||)||(0.28||)||(0.01||)||(0.03||)|
|Impairments of operating properties, net of tax|
|and noncontrolling interests||0.35||0.35||-||-|
|Projected FFO per diluted common share||$||1.34||$||1.35||$||1.36||$||1.40|
|Transactional income, net||(0.02||)||(0.02||)|
|Projected FFO, as adjusted per diluted common share||$||1.32||$||1.33||$||1.36||$||1.40|
|Projections involve numerous assumptions such as rental income (including assumptions on percentage rent), interest rates, tenant defaults, occupancy rates, foreign currency exchange rates (such as the US-Canadian rate), selling prices of properties held for disposition, expenses (including salaries and employee costs), insurance costs and numerous other factors. Not all of these factors are determinable at this time and actual results may vary from the projected results, and may be above or below the range indicated. The above range represents management’s estimate of results based upon these assumptions as of the date of this press release.|
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David F. Bujnicki, 1-866-831-4297
Vice President, Investor Relations and Corporate Communications