Kimco Reports In Line with Estimates

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Kimco Realty Corp. (NYSE:KIM - News), a leading real estate investment trust (:REIT), reported fourth quarter 2011 FFO (funds from operations) of $135.4 million or 33 cents per share compared with $125.3 million or 31 cents in the year-ago period. Funds from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

Excluding certain non-recurring items, FFO for the reported quarter was $123.5 million or 30 cents per share compared with $119.7 million or 29 cents in the year-earlier quarter. The recurring FFO for the quarter was in line with the Zacks Consensus Estimate.

For full year 2011, Kimco reported FFO of $517.2 million or $1.27 per share compared with $493.2 million or $1.21 in 2010. Recurring FFO for the reported fiscal was $489.8 million or $1.20 per share compared with $465.4 million or $1.14 in the previous fiscal. The recurring FFO for fiscal 2011 marginally beat the Zacks Consensus Estimate by a penny.

Kimco reported fourth quarter 2011 rental revenues of $223.0 million compared with $210.6 million in the year-earlier quarter – an increase of 5.9%. For full year 2011, Kimco reported total revenues of $873.7 million compared to $831.2 million in the previous year.

Overall occupancy in Kimco’s combined shopping center portfolio was 93.3% at the end of the quarter, an increase of 30 bps compared with fourth quarter 2010. In the U.S. portfolio, occupancy was 93.2% as on December 31, 2011, an increase of 50 bps compared with the year-ago period. Same-store net operating income in the combined portfolio increased 1.6% year-over-year.

During the reported quarter, Kimco executed a total of 570 leases spanning 1.8 million square feet. Leasing spreads in the U.S. portfolio were 4.9% (cash basis) on 282 leases totaling 1.3 million square feet.

For full year 2011, the company executed 2,474 leases totaling over 8.0 million square feet, including 487 same-store new leases totaling 1.5 million square feet and 1,169 lease renewals and options for 4.5 million square feet. On trailing four quarter basis, pro-rata U.S. leasing spreads (cash) increased 350 bps to 2.6% over the same period in 2010.

During 2011, Kimco acquired 21 shopping centers (17 wholly-owned properties and 4 joint venture ones) spanning 3.6 million square feet of retail space for $494 million. At the same time, the company sold about 31 non-core shopping center properties (25 wholly-owned and 6 unconsolidated joint ventures) totaling 2.6 million square feet for approximately $158.1 million, including $34.6 million of mortgage debt. Kimco currently has 122 non-strategic U.S. shopping centers spanning 8.1 million square feet.

The reported quarter also saw the company recognizing $8.5 million of fee income related to its investment management business, including $7.1 million in management fees, $0.3 million in acquisition fees and $1.1 million in other ongoing fees. Kimco had 285 properties in investment management funds with 24 institutional partners at year-end 2011. During the quarter, the company generated $26.4 million of income from its structured investments and other non-retail assets, out of which $14.6 million was recurring in nature.

During the reported quarter, Kimco entered into a new $1.75 billion unsecured U.S. revolving credit facility that replaced its $1.5 billion U.S. and $250 million Canadian-denominated revolving credit facilities. The new credit facility has a four-year term with a one year extension option.

At year-end 2011, Kimco had over $1.5 billion available under its revolving credit facilities. The company’s consolidated net debt to recurring EBITDA (earnings before interest, tax, depreciation and amortization) ratio was 6.2x. For fiscal 2012, the company expects recurring FFO in the range of $1.22 – $1.26 per share.

We maintain our Neutral recommendation for the long term on the stock, which presently has a Zacks #2 Rank translating into a short-term Buy rating. We also have a Neutral recommendation and a Zacks #3 Rank (short-term Hold) for CBL & Associates Properties Inc. (NYSE:CBL - News), one of the competitors of Kimco.

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