Kimco Realty Reports Strong Third Quarter 2012 Operating Results; Company's Board Approves a 10.5 Percent Dividend Increase on Common Shares
Highlights for the Third Quarter and Subsequent Activity:
Reported funds from operations as adjusted of $0.31 per diluted share, an increase from $0.30 for the third quarter of 2011;
Announced a 10.5 percent increase in the quarterly common cash dividend to $0.21 per share;
Gross occupancy was 93.7 percent in both the combined and U.S. shopping center portfolios representing increases of 70 basis points and 80 basis points, respectively, from the third quarter of 2011 and the highest level since December 2008;
Recognized U.S. cash-basis leasing spreads of 13 percent; new leases increased 40.2 percent and renewals/options increased 4.3 percent;
Combined same-property net operating income (NOI) increased 2.6 percent before the impact of foreign currency changes from the third quarter 2011 representing the tenth consecutive quarter with a positive increase; and
Executed a purchase and sale agreement for the disposition of InTown Suites for $735 million.
Net income available to common shareholders for the third quarter of 2012 was $27.1 million, or $0.07 per diluted share, compared to $40.1 million, or $0.10 per diluted share, for the third quarter of 2011. Year to date, net income available to common shareholders was $113.4 million, or $0.28 per diluted share, compared to $78.1 million, or $0.19 per diluted share, through September 30, 2011.
Funds from operations (FFO), a widely accepted supplemental measure of REIT performance, was $119 million, or $0.29 per diluted share, for the third quarter of 2012 compared to $134.3 million, or $0.33 per diluted share, for the third quarter of 2011. The decrease in FFO in the third quarter of 2012 was the result of $8.3 million in transactional expenses incurred mainly from a $6.2 million non-cash redemption charge in connection with the company's $175 million 6.65 percent Class F Cumulative Redeemable Preferred Stock that was redeemed in August 2012. This compares to $10.6 million of transactional income earned in the third quarter of 2011 primarily from the monetization of several non-retail investments.
For the nine months ended September 30, 2012, FFO was $383.2 million, or $0.94 per diluted share, compared to $382.3 million, or $0.94 per diluted share, for the same period last year.
FFO as adjusted, which excludes the effects of non-operating impairments and transactional income and expenses, was $127.3 million, or $0.31 per diluted share, for the third quarter of 2012 compared to $123.7 million, or $0.30 per diluted share, for the third quarter of 2011.
FFO as adjusted, for the nine months ended September 30, 2012 was $379.4 million, or $0.93 per diluted share, compared to $366.3 million, or $0.90 per diluted share, for the same period in 2011.
A reconciliation of net income to FFO and FFO as adjusted are provided in the tables accompanying this press release.
Shopping Center Operating Results
Third quarter 2012 shopping center portfolio operating results:
Combined Shopping Center Portfolio (includes U.S., Canada and Latin America)
Gross occupancy was 93.7 percent, an increase of 20 basis points sequentially and 70 basis points over the third quarter of 2011;
Pro-rata occupancy was 93.4 percent, an increase of 10 basis points sequentially and 60 basis points over the third quarter of 2011;
Combined same-property NOI increased 2.6 percent before the impact of foreign currency changes over the third quarter of 2011. NOI is reported on a cash-basis, excluding lease termination fees and including charges for bad debts; and
Total leases executed in the combined portfolio: 690 new leases, renewals and options totaling 2.3 million square feet representing a 29 percent increase in pro-rata square footage over the third quarter of 2011.
In the combined shopping center portfolio, same-property NOI for the third quarter of 2012, including the impact of foreign currency, was 1.6 percent compared to the same period in 2011. For the nine months ended September 30, 2012, combined same-property NOI, including the impact of foreign currency, was 2 percent. In addition, the Mexico portfolio's combined gross occupancy for the third quarter of 2012 reached 86.9 percent, representing a 130 basis-point increase from the second quarter of 2012.
U.S. Shopping Center Portfolio
Gross occupancy was 93.7 percent, an increase of 30 basis points sequentially and 80 basis points over the third quarter of 2011;
Pro-rata occupancy was 93.4 percent, an increase of 10 basis points sequentially and 60 basis points over the third quarter of 2011;
U.S. same-property NOI increased 2.5 percent during the third quarter of 2012 compared to the same period in 2011; and
Pro-rata U.S. cash-basis leasing spreads increased 13 percent; new leases increased 40.2 percent, and renewals/options increased 4.3 percent.
In addition, the U.S. shopping center portfolio's pro-rata occupancy for small shop space (defined as space less than 10,000 square feet) was 83.9 percent, an increase of 60 basis points sequentially and 210 basis points from the third quarter of 2011.
Shopping Center Investment Activity
As previously announced, in the third quarter Kimco acquired three high-quality wholly-owned shopping centers, comprising 420,000 square feet and located in its primary core markets, for a total purchase price of $84.3 million, including $42.5 million of mortgage debt. Subsequently, the company acquired Savi Ranch, a 161,000-square-foot shopping center located in Yorba Linda, Calif., for $34.5 million. Collectively, these properties have a pro-rata average occupancy of 94.5 percent and a median household income of $126,000 within a three-mile radius.
Also during the quarter, Kimco acquired the remaining 50-percent interest in an 81,000-square-foot unencumbered shopping center located in Pompano Beach, Fla., for a gross purchase price of $12.3 million. Subsequently in October of 2012, the company acquired the remaining 89-percent interest in Greeley Commons, a 139,000-square-foot unencumbered shopping center located in Greeley, Colo. for a gross price of $23.4 million.
Since the company initiated its U.S. shopping center recycling program in September 2010 to improve the overall quality of its portfolio, Kimco has selectively acquired in its core markets 47 properties, comprising 6 million square feet, for a gross purchase price of $984.8 million. These properties have, on a pro-rata basis, an average occupancy of 94.2 percent and are supported by excellent demographics, including an average household income of $96,000 within a three-mile radius.
In the third quarter of 2012, Kimco sold nine non-strategic properties totaling nearly 1 million square feet, for approximately $94.7 million. Subsequently, the company sold a 13-property portfolio and one additional property comprising a total of 1.7 million square feet for $70.3 million. Currently, Kimco has 15 additional non-strategic properties in contract negotiations for approximately $130 million.
Since September 2010, the company has sold 86 non-strategic shopping centers, comprising 7.9 million square feet, for a gross amount of $529.9 million generating proceeds of $377.4 million. These properties had a pro-rata average occupancy of 83.4 percent and an annual base rent of $8.35 per square foot, which is 32 percent below the portfolio average.
During the third quarter, Kimco recognized FFO of $12 million from its non-retail investments, of which $7.4 million was attributable to joint ventures, including InTown Suites, and $2.3 million to non-retail preferred equity investments.
In the third quarter, the company further reduced its non-retail investments by $30 million through the sale of two urban properties and the partial repayment of a mortgage receivable. As of September 30, 2012, the book value of the company's non-retail investment portfolio was $429 million which is 3.6 percent of gross assets, compared to $846 million, or 7.5 percent of gross assets, at September 30, 2010 in which the company reiterated its commitment to the non-retail disposition strategy.
In October, the company executed a purchase and sale agreement with an affiliate of Starwood Capital Group to sell InTown Suites for a gross sales price of $735 million, including $617 million of existing debt. InTown Suites is owned by InTown Hospitality Investors LP, a joint venture in which Kimco holds a 75 percent interest. The company expects this transaction to close in the first half of 2013.
Kimco's board of directors increased the company's quarterly cash dividend 10.5 percent to $0.21 per common share, payable on January 15, 2013 to shareholders of record on January 2, 2013, representing an ex-dividend date of December 28, 2012.
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, 2013 to shareholders of record on January 2, 2013, representing an ex-dividend date of December 28, 2012;
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 $0.375 per preferred depositary share will be paid on January 15, 2013 to shareholders of record on January 2, 2013, representing an ex-dividend date of December 28, 2012.
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, 2013 to shareholders of record on January 2, 2013, representing an ex-dividend date of December 28, 2012.
During July 2012, Kimco issued $225 million of 5.50 percent Class J Cumulative Redeemable Preferred Stock. Proceeds from this offering were used to fund the redemption of the company's $175 million 6.65 percent Class F Cumulative Redeemable Preferred Stock in August 2012 as well as for general corporate purposes.
Subsequently in October 2012, Kimco completed the redemption of its $460 million 7.75 percent Class G Cumulative Redeemable Preferred Stock. As a result of this redemption, the company anticipates it will incur a non-cash transaction charge to FFO of $15.5 million during the quarter ending December 31, 2012.
At September 30, 2012, Kimco's consolidated net debt to EBITDA as adjusted was 5.3x compared to 6.0x from the prior year. In addition, the company maintains access to approximately $1.5 billion of immediate liquidity.
2012 Guidance and 2013 Initial Guidance
The company maintains its 2012 full-year guidance range for FFO as adjusted, which does not include any estimate for transactional activities or non-operating impairments, of $1.24 - $1.26 per diluted share.
Estimated shopping center portfolio metrics remain as follows:
Combined portfolio occupancy: +50 to +100 basis points
Combined same-property NOI: +1.5 to +3.5 percent
2013 Initial Guidance:
The company's preliminary 2013 guidance for FFO as adjusted per diluted share: $1.28 - $1.33.
Conference Call and Supplemental Materials
Kimco will hold its quarterly conference call on Wednesday, October 31, 2012 at 10:00 a.m. EDT. The call will include a review of the company's third quarter performance as well as a discussion of the company's strategy and expectations for the future. To participate, dial 1-877-883-0383 (Passcode: 5911206).
A replay will be available through 9:00 a.m. EST November 30, 2012 by dialing 1-877-344-7529 (Passcode: 10017987). Access to the live call and replay will be available through the company's website at investors.kimcorealty.com.
Kimco Realty Corp. (NYS: 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, 2012, the company owned interests in 922 shopping centers comprising 135 million square feet of leasable space across 44 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, (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, (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 filings, including but not limited to the company's Annual Report on Form 10-K for the year ended December 31, 2011. Copies of each filing may be obtained from the company or the Securities and Exchange Commission.
The company refers you to the documents filed by the company from time to time with the Securities and Exchange Commission, specifically the section titled "Risk Factors" in the company's Annual Report on Form 10-K for the year ended December 31, 2011, as may be updated or supplemented in the company's Form 10-Q filings, 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
Revenues from rental properties
Management and other fee income
Real estate taxes
Operating and maintenance
General and administrative expenses
Depreciation and amortization
Total operating expenses
Mortgage financing income
Interest, dividends and other investment income
Other expense, net
Income from other real estate investments
Income from continuing operations before income taxes, equity in income of joint ventures and equity in income from other real estate investments
Provision for income taxes, net
Equity in income of joint ventures, net
Equity in income of other real estate investments, net
Income from continuing operations
Income/(loss) from discontinued operating properties, net of tax
Impairment/loss on operating properties sold, net of tax
Gain on disposition of operating properties, net of tax
Income from discontinued operations
Gain on sale of operating properties, net of tax (1)
Net income attributable to noncontrolling interests (3)
Net income attributable to the Company
Preferred stock dividends
Net income available to the Company's common shareholders