Kimco Realty Reports a 12.9 Percent Increase in FFO As Adjusted Per Diluted Share for the Second Qua
Kimco Realty Reports a 12.9 Percent Increase in FFO As Adjusted Per Diluted Share for the Second Quarter of 2013; Portfolio Operating Metrics Strong
Highlights for the Second Quarter 2013 and Subsequent Activity
- FFO as adjusted was $0.35 per diluted share for the second quarter of 2013 compared to $0.31 per diluted share for the same period in 2012, representing a 12.9 percent increase;
- Reported funds from operations (FFO) of $0.35 per diluted share for the second quarter of 2013, compared to $0.34 per diluted share for the same period in 2012;
- U.S. same-property net operating income (NOI) increased 4.2 percent from the second quarter of 2012, representing the highest year-over-year increase in six years;
- Recognized 16.7 percent positive spread on U.S. leases signed during the quarter;
- Pro-rata occupancy increased in the combined and U.S. shopping center portfolios to 93.7 percent and 93.9 percent, respectively, at June 30, 2013 compared to 93.3 percent at June 30, 2012;
- Closed on the sale of a nine-property Mexican shopping center portfolio for approximately $274 million;
- Completed the sale of InTown Suites and several other non-retail assets during the quarter bringing the non-retail investment portfolio to less than 2 percent of gross assets; and
- Issued $350 million of 10-year senior unsecured notes priced at 3.125 percent and subsequently completed an offering in July for $200 million 7-year unsecured Canadian-denominated notes priced at 3.855 percent. The net proceeds from both of these transactions are directed toward paying off maturing debt with a weighted average rate of 5.38 percent.
Net income available to common shareholders for the second quarter of 2013 was $36.6 million, or $0.09 per diluted share, compared to $48.3 million, or $0.12 per diluted share, for the second quarter of 2012. The decrease in net income available to common shareholders during the second quarter of 2013 was primarily due to a $31.3 million increase in impairments that were partially offset by a $12.0 million increase in gains on sales of operating properties; Both operating property impairments and gains on sales are excluded from the calculation of FFO.
Year to date, net income available to common shareholders was $89.8 million, or $0.22 per diluted share, compared to $86.3 million, or $0.21 per diluted share, through June 30, 2012. The increase in net income available to common shareholders for the six months ended June 30, 2013 has been impacted by a $25.3 million increase in impairments, which were partially offset by an $8.6 million increase in gains on sales of operating properties.
FFO, a widely accepted supplemental measure of REIT performance, was $141.6 million, or $0.35 per diluted share, for the second quarter of 2013, compared to $138.0 million, or $0.34 per diluted share, for the second quarter of 2012. For the six months ended June 30, 2013, FFO was $276.5 million, or $0.68 per diluted share, compared to $264.2 million, or $0.65 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 $142.1 million, or $0.35 per diluted share, for the second quarter of 2013, compared to $126.2 million, or $0.31 per diluted share, for the second quarter of 2012. FFO as adjusted for the six months ended June 30, 2013, was $274.3 million, or $0.67 per diluted share, compared to $252.1 million, or $0.62 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
Second quarter 2013 shopping center portfolio operating results:
Combined Shopping Center Portfolio (includes U.S., Canada and Latin America)
- Pro-rata occupancy was 93.7 percent, an increase of 40 basis points over the second quarter of 2012;
- Combined same-property NOI increased 4.0 percent over the second quarter of 2012, representing the thirteenth consecutive quarter with a positive increase; and
- Total leases executed in the combined portfolio: 580 new leases, renewals and options totaling 1.8 million square feet.
For the six months ended June 30, 2013, combined same-property NOI was 4.0 percent. Kimco reports same-property NOI on a cash-basis, excluding lease termination fees, and including charges for bad debts.
U.S. Shopping Center Portfolio
- Pro-rata occupancy was 93.9 percent, an increase of 60 basis points over the second quarter of 2012;
- U.S. same-property NOI increased 4.2 percent during the second quarter of 2013, compared to the same period in 2012;
- Pro-rata U.S. cash-basis leasing spreads increased 16.7 percent; new leases increased 28.0 percent, and renewals/options increased 13.7 percent; and
- For the trailing four quarters, the company's pro-rata U.S. leasing spreads rose 10.2 percent, which represents the highest level since the third quarter of 2008.
In addition, the U.S. shopping center portfolio's pro-rata occupancy for small shop space (defined as space of less than 10,000 square feet) was 84.3 percent, an increase of 100 basis points from the second quarter of 2012.
As previously announced, Kimco acquired from existing joint venture partners, two retail properties totaling 607,000 square feet for a gross purchase price of approximately $146.6 million.
Also in the second quarter of 2013, the company increased its ownership interest in the Kimco-UBS joint venture from 18 percent to 33 percent. Simultaneously, affiliates of Blackstone Real Estate Partners VII acquired the remaining 67 percent ownership interest from affiliates of UBS Wealth Management North American Property Fund. Both of these transactions were based on a gross purchase price of $1.1 billion, including $631 million of debt.
Year to date, Kimco has acquired the full or majority interest in seven U.S. shopping centers and two parcels totaling 1.5 million square feet for $367.5 million. These properties had a gross occupancy of approximately 95.1 percent and were supported by an average household income of $105,000 within a three-mile radius.
Additionally during the quarter, Kimco increased its ownership interest in the Kimco Income REIT (KIR) joint venture from 45.0 percent to 48.6 percent as well as the Kimco Income Fund (KIF) joint venture from 29.8 percent to 39.5 percent through the acquisition of an institutional partner's interest for $48.4 million and $18.4 million, respectively.
As previously announced, Kimco sold 11 U.S. shopping centers, totaling 735,000 square feet, for a gross sales price of $71.6 million during the second quarter. Currently, the company has 16 U.S. retail properties in contract negotiations for approximately $128.5 million. Year to date, Kimco has disposed of 13 U.S. properties, comprising 1.0 million square feet, for $82.0 million. The properties sold had a combined gross occupancy of 84.6 percent with an average household income of $80,000 within a three-mile radius. The company's share of the proceeds from these sales was $47.2 million.
Since the start of the company's U.S. asset recycling program in September 2010, Kimco has disposed of 121 properties, comprising 11.9 million square feet, for $907.2 million, including $220.3 million of mortgage debt. The company's share of the proceeds from these sales was $551.3 million.
Also during the second quarter, the company:
- Sold a nine-property Mexican retail shopping center portfolio, in which Kimco held a 47.6 percent ownership interest, for a gross sales price of $274 million;
- Together with its joint venture partner, American Industries, agreed to sell their beneficial interests in certain trusts that hold a portfolio of Mexican industrial properties to Terrafina (BMV: TERRA13) based on a gross value in the underlying properties of approximately $600 million;
- Completed the sale of the InTown Suites portfolio for a gross price of $735 million, including the assignment of $609 million of debt, as well as four non-retail urban properties for an aggregate $67 million.
In May, the company issued $350 million of 10-year senior unsecured notes due in 2023 at a coupon of 3.125 percent per annum. The net proceeds were used to (i) partially reduce borrowings under Kimco's revolving credit facility maturing in October 2015, (ii) replace $100 million of 6.125 percent senior unsecured notes that were repaid in January 2013, (iii) pay off $75 million of 4.70 percent senior notes that matured in June 2013, and (iv) pre-fund $100 million of 5.19 percent senior unsecured notes due in October 2013 and $67 million of mortgage debt maturing during 2013 at a weighted average interest rate of 5.93 percent.
Subsequent to the end of the second 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 will be used to repay a $200 million 5.180 percent Canadian-denominated unsecured note that matures in August 2013.
At June 30, 2013, Kimco's consolidated net debt to EBITDA as adjusted was 5.8x. In addition, the company maintains access to approximately $1.6 billion of immediate liquidity under the company's $1.75 billion unsecured revolving credit facility.
Kimco's board of directors declared a cash dividend of $0.21 per common share for the fourth quarter of 2013, which represents a 10.5 percent increase from the quarterly cash dividend in the fourth quarter of 2012. The dividend on common shares is payable on October 15, 2013, to shareholders of record on October 3, 2013, representing an ex-dividend date of October 1, 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 October 15, 2013, to shareholders of record on October 2, 2013, representing an ex-dividend date of September 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 October 15, 2013, to shareholders of record on October 2, 2013, representing an ex-dividend date of September 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 October 15, 2013, to shareholders of record on October 2, 2013, representing an ex-dividend date of September 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 October 15, 2013, to shareholders of record on October 2, 2013, representing an ex-dividend date of September 30, 2013.
2013 Revised 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. In addition, Kimco has increased its 2013 guidance range for combined same-property NOI. Kimco's 2013 revised guidance is as follows:
|FFO as adjusted per diluted share:||$1.31 - $1.33||$1.29 - $1.33|
|Combined portfolio occupancy:||+50 to +75 basis points||+50 to +75 basis points|
|Combined same-property NOI:||+3.00 to +4.00 percent||+2.75 to +3.75 percent|
Conference Call and Supplemental Materials
Kimco will hold its quarterly conference call on Wednesday, July 31, 2013, at 10:00 a.m. EDT. The call will include a review of the company's second 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: 5894250).
A replay will be available through 9:00 a.m. EDT on September 3, 2013 by dialing 1-877-344-7529 (Passcode: 10029767). Access to the live call and replay will be available on 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 June 30, 2013, the company owned interests in 874 shopping centers comprising 128 million square feet of leasable space across 43 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||Six Months Ended|
|June 30,||June 30,|
|Revenues from rental properties||$||237,079||$||217,809||$||467,371||$||429,892|
|Management and other fee income||9,049||8,710||17,442||18,136|
|Real estate taxes||28,858||27,985||58,306||55,592|
|Operating and maintenance||31,445||26,756||59,567||52,413|
|General and administrative expenses||31,420||30,908||65,535||65,314|
|Provision for doubtful accounts||3,266||2,551||5,199||5,624|
|Depreciation and amortization||63,409||59,731||125,136||118,299|
|Total operating expenses||197,144||150,947||356,212||303,754|
|Mortgage financing income||1,430||1,985||2,416||3,991|
|Interest, dividends and other investment income||6,500||350||9,163||512|
|Other (expense)/income, net||(2,526||)||538||(6,002||)||(3,058||)|
|Income from other real estate investments||555||416||958||1,143|
|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||(480||)||22,085||26,166||33,105|
|Benefit/(provision) for income taxes, net||11,830||(3,302||)||(3,937||)||(8,089||)|
|Equity in income of joint ventures, net||59,504||30,352||83,616||65,090|
|Gain/(loss) on change in control of interests, net||(1,459||)||12,147||21,711||14,156|
|Equity in income of other real estate investments, net||8,200||14,074||19,363||25,101|
|Income from continuing operations||77,595||75,356||146,919||129,363|
|Income/(loss) from discontinued operating properties, net of tax||1,652||(180||)||2,631||1,906|
|Impairment/loss on operating properties sold, net of tax||(27,844||)||(18,111||)||(30,675||)||(27,035||)|
|Gain on disposition of operating properties||1,869||11,263||4,365||23,242|
|Loss from discontinued operations||(24,323||)||(7,028||)||(23,679||)||(1,887||)|
|Gain on sale of operating properties, net of tax (1)||-||4,059||540||4,059|
|Net income attributable to noncontrolling interests (3)||(2,133||)||(3,275||)||(4,871||)||(8,785||)|
|Net income attributable to the Company||51,139|