Market Overview

Kimco Realty Reports Second Quarter 2018 Results

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- Solid Operating Results Reflect Strengthened Portfolio -

- Company Raises 2018 Guidance -

- Small Shop Occupancy Reaches All-Time High -

Kimco Realty Corp. (NYSE:KIM) today reported results for the second
quarter and year-to-date period ended June 30, 2018.

Highlights:

  • Increased net income available to the company's common shareholders by
    16.1% to $0.36 per diluted share, compared to $0.31 per diluted share
    during the same period in 2017.
  • Grew same-property net operating income by 3.8% (3.9% including
    redevelopments) over the same period in 2017.
  • Increased pro-rata occupancy to 96.0%, a 50-basis-point increase year
    over year.
  • Achieved pro-rata small shop occupancy of 90.2%, representing the
    highest level since the company began reporting this metric in 2010.
  • Generated new leasing spreads of 11.5%, representing the seventeenth
    consecutive quarter that the rental rate for new leases increased by
    more than 10% over the prior rent for the comparable space.
  • Disposed of 17 shopping centers totaling 2.7 million square feet for a
    gross sales price of $334.0 million. Kimco's share of the sales price
    was $319.3 million.

Financial Results

Net income available to the company's common shareholders for the second
quarter of 2018 was $150.9 million, or $0.36 per diluted share, compared
to $131.9 million, or $0.31 per diluted share, for the second quarter
2017. The increase was primarily due to $14.3 million of higher gains on
the sales of operating properties, net of impairments.

For the six months ended June 30, 2018, net income available to the
company's common shareholders was $280.4 million, or $0.66 per diluted
share, compared to $197.0 million, or $0.46 per diluted share, for the
six months ended June 30, 2017. The increase was primarily due to $55.9
million of higher gains on the sales of operating properties, net of
impairments and $27.7 million of lower depreciation expense on operating
properties, as compared to the same period in 2017. Gains on sales,
property impairments, and depreciation related to operating properties
are excluded from the calculation of NAREIT Funds from Operations (FFO).

NAREIT FFO was $165.3 million, or $0.39 per diluted share, for the
second quarter 2018 compared to $175.0 million, or $0.41 per diluted
share, for the second quarter 2017. NAREIT FFO for the second quarter of
2018 included $9.5 million of transactional income (net of transactional
charges). This compares to $14.3 million of transactional income (net of
transactional charges) for the second quarter 2017.

For the six months ended June 30, 2018, NAREIT FFO was $330.1 million,
or $0.78 per diluted share, compared to $330.1 million, or $0.78 per
diluted share, for the same period last year. NAREIT FFO for the six
months ended June 30, 2018 included $16.6 million of transactional
income (net of transactional charges). This compares to $13.6 million of
transactional income (net of transactional charges) for the same period
in 2017.

FFO available to the company's common shareholders as adjusted (FFO as
adjusted), which excludes the effects of non-operating impairments as
well as transactional income and charges, was $155.7 million, or $0.37
per diluted share, for the second quarter 2018 compared to $160.7
million, or $0.38 per diluted share, for the second quarter 2017. For
the six months ended June 30, 2018, FFO as adjusted was $313.5 million,
or $0.74 per diluted share, compared to $316.5 million, or $0.75 per
diluted share, for the same period in 2017.

A reconciliation of net income to NAREIT FFO, FFO as adjusted and
same-property NOI is provided in the tables accompanying this press
release.

Operating Results

  • Pro-rata occupancy ended the quarter at 96.0%, representing an
    increase of 50 basis points from the second quarter 2017.
  • Pro-rata small shop occupancy increased 50 basis points to 90.2%
    compared to the same period in 2017. Pro-rata anchor occupancy
    increased by 60 basis points over the second quarter 2017 to 98.1%.
  • Achieved pro-rata rental-rate leasing spreads of 9.2% during the
    second quarter 2018; rental rates for new leases were up 11.5% and
    renewals/options increased 8.5%.
  • Generated a 3.8% increase in same-property NOI compared to the second
    quarter 2017, which excludes a positive 10 basis points from the
    impact of redevelopments. For the six months ended June 30, 2018,
    same-property NOI increased 3.2% compared to the same period in 2017.

Investment Activity

As previously announced, during the second quarter of 2018, the company
sold 17 shopping centers totaling 2.7 million square feet for $334.0
million. Kimco's share of these dispositions was $319.3 million. The
blended cap rate for the property sales was in line with the company's
expected range of 7.50% to 8.00%.

The dispositions include Primrose Marketplace, a
368,000-square-foot property in Springfield, Missouri, for $51.8
million, Broadway Plaza, a 356,000-square-foot property in Chula
Vista, California, for $58.5 million, and Downers Park Plaza, a
269,000-square-foot center in Downers Grove, Illinois for $26.7 million.
In addition, the company exited the state of Alabama with the sale of The
Grove
, a 145,000-square-foot property in Hoover, Alabama, for $21.0
million.

Year to date, the company's dispositions included 38 shopping centers
and 4 land parcels, totaling 5.0 million square feet, for a gross sales
price of $556.1 million. Kimco's share of the sales price was $531.8
million.

Capital Activity

The company repurchased 3.5 million shares of common stock for $50.8
million during the second quarter under the company's $300 million share
buyback program at an average price of $14.53. Year to date, Kimco
repurchased 5.1 million shares of common stock for $75.1 million at an
average price of $14.73.

 

2018 Full Year Guidance

Guidance (per diluted share)   Current   Previous
Net Income attributable to common shareholders:   $0.92 to $1.00   $0.72 to $0.79
NAREIT FFO & FFO as adjusted:   $1.43 to $1.46   $1.42 to $1.46

Reconciliations are provided for these current forward-looking
non-GAAP metrics (NAREIT FFO and
FFO as adjusted) in the
tables accompanying this press release.

Pro-rata Operational Assumptions   Current   Previous
Same-property NOI (excluding redevelopments):   2.00% to 2.50%   1.50% to 2.00%
Net dispositions (7.50% to 8.00% blended cap rate):   Unchanged   $700 million to $900 million
Total redevelopment & development investment:   Unchanged   $425 million to $525 million
   

Dividend Declarations

Kimco's board of directors declared a quarterly cash dividend of $0.28
per common share, payable on October 15, 2018, to shareholders of record
on October 2, 2018.

The board of directors also declared quarterly dividends with respect to
each of the company's Class I, Class J, Class K, Class L and Class M
series of cumulative redeemable preferred shares. All dividends on the
preferred shares will be paid on October 15, 2018, to shareholders of
record on October 1, 2018.

Conference Call and Supplemental Materials

Kimco will hold its quarterly conference call on Thursday, July 26,
2018, at 10:00 a.m. Eastern Time (ET). The call will include a review of
the company's second quarter and year-to-date results as well as a
discussion of the company's strategy and expectations for the future. To
participate, dial 1-888-317-6003 (Passcode: 1753635).

A replay will be available through October 26, 2018, by dialing
1-877-344-7529 (Passcode: 10120684). Access to the live call and replay
will be available through the company's website at investors.kimcorealty.com.

About Kimco

Kimco Realty Corp. (NYSE:KIM) is a real estate investment trust (REIT)
headquartered in New Hyde Park, N.Y., that is one of North America's
largest publicly traded owners and operators of open-air shopping
centers. As of June 30, 2018, the company owned interests in 460 U.S.
shopping centers comprising 79 million square feet of leasable space
primarily concentrated in the top major metropolitan markets. 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 60 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.

The company announces material information to its investors using the
company's investor relations website (http://investors.kimcorealty.com),
SEC filings, press releases, public conference calls, and webcasts. The
company also uses social media to communicate with its investors and the
public, and the information the company posts on social media may be
deemed material information. Therefore, the company encourages
investors, the media, and others interested in the company to review the
information that it posts on the company's blog (http://blog.kimcorealty.com)
and social media channels, including Facebook (http://www.facebook.com/kimcorealty),
Twitter (http://www.twitter.com/kimcorealty),
Youtube (http://www.youtube.com/kimcorealty)
and LinkedIn (http://www.linkedin.com/company/kimco-realty-corporation).
The list of social media channels that the company uses may be updated
on its investor relations website from time to time.

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 and
management's ability to estimate the impact of such changes, (vi) the
level and volatility of interest rates and foreign currency exchange
rates and management's ability to estimate the impact thereof, (vii)
risks related to the Company's international operations, (viii) the
availability of suitable acquisition, disposition, development and
redevelopment opportunities, and risks related to acquisitions not
performing in accordance with our expectations, (ix) valuation and risks
related to the company's 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 and preferred stock and the company's ability to
pay dividends at current levels, (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 SEC filings. 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,
2017, 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. The company disclaims any intention or obligation to
update the forward-looking statements, whether as a result of new
information, future events or otherwise.

Non-GAAP Financial Measures

NAREIT FFO: A supplemental non-GAAP measure utilized to evaluate
the operating performance of real estate companies. The National
Association of Real Estate Investment Trusts ("NAREIT") defines funds
from operations ("NAREIT FFO") as net income/(loss) attributable to
common shareholders computed in accordance with generally accepted
accounting principles in the United States ("GAAP"), excluding gains or
losses from sales of operating real estate assets and change in control
of interests, plus (i) depreciation and amortization of operating
properties and (ii) impairment of depreciable real estate and in
substance real estate equity investments and (iii) after adjustments for
unconsolidated partnerships and joint ventures calculated to reflect
NAREIT FFO on the same basis.

The company considers NAREIT FFO an important supplemental measure of
our operating performance and believes it is frequently used by
securities analysts, investors and other interested parties in the
evaluation of REITs, many of which present NAREIT FFO when reporting
results. Comparison of our presentation of NAREIT FFO to similarly
titled measures for other REITs may not necessarily be meaningful due to
possible differences in the application of the NAREIT definition used by
such REITs.

FFO as Adjusted: A supplemental non-GAAP measure that the company
believes is more reflective of its core operating performance and
provides investors and analysts an additional measure to compare the
company's performance across reporting periods on a consistent basis by
excluding items that we do not believe are indicative of our core
operating performance. FFO as adjusted is generally calculated by the
company as NAREIT FFO excluding certain transactional income and
expenses and non-operating impairments which management believes are not
reflective of the results within the company's operating real estate
portfolio.

Same-Property NOI: A supplemental non-GAAP measure of real estate
companies' operating performance and should not be considered an
alternative to net income in accordance with GAAP or as a measure of
liquidity. The company considers same-property NOI as an important
operating performance measure because it is frequently used by
securities analysts and investors to measure only the net operating
income of properties that have been owned by the company for the entire
current and prior year reporting periods. It excludes properties under
development and pending stabilization; properties are deemed stabilized
at the earlier of (i) reaching 90% leased or (ii) one year following a
projects inclusion in operating real estate. Same-property NOI assists
in eliminating disparities in net income due to the development,
acquisition or disposition of properties during the period presented,
and thus provides a more consistent performance measure for the
comparison of the company's properties.

Same-property NOI is calculated using revenues from rental properties
(excluding straight-line rent adjustments, lease termination fees,
amortization of above/below market rents and includes charges for bad
debt) less operating and maintenance expense, real estate taxes and rent
expense plus the company's proportionate share of same-property NOI from
unconsolidated real estate joint ventures, calculated on the same basis.
The company's method of calculating same-property NOI may differ from
methods used by other REITs and, accordingly, may not be comparable to
such other REITs.

 
Condensed Consolidated Balance Sheets
(in thousands, except share information)
(unaudited)
   
June 30, December 31,
2018   2017
Assets:

 

Operating real estate, net of accumulated depreciation
   of
2,395,195 and $2,433,053, respectively

$ 9,126,945 $ 9,817,875
Investments in and advances to real estate joint ventures 568,698 483,861
Real estate under development 529,759 402,518
Other real estate investments 187,785 217,584
Mortgages and other financing receivables 31,127 21,838
Cash and cash equivalents 305,577 238,513
Marketable securities 13,131 13,265
Accounts and notes receivable, net 180,451 189,757
Other assets   348,310       378,515  
Total assets $ 11,291,783     $ 11,763,726  
 
Liabilities:
Notes payable, net $ 4,591,178 $ 4,596,140
Mortgages payable, net 477,538 882,787
Dividends payable 130,262 128,892
Other liabilities   587,676       617,617  
Total liabilities   5,786,654       6,225,436  
Redeemable noncontrolling interests   16,151       16,143  
 
Stockholders' equity:
Preferred stock, $1.00 par value, authorized 5,996,240 shares
42,580 and 41,200 shares issued and outstanding (in series),
respectively
Aggregate liquidation preference $1,064,500 and $1,030,000,
respectively
43 41

Common stock, $.01 par value, authorized 750,000,000 shares
   issued
and outstanding 421,387,540 and 425,646,380 shares, respectively

4,214 4,256
Paid-in capital 6,117,862 6,152,764
Cumulative distributions in excess of net income (710,981 ) (761,337 )
Accumulated other comprehensive income/(loss)   72       (1,480 )
Total stockholders' equity 5,411,210 5,394,244
Noncontrolling interests   77,768       127,903  
Total equity   5,488,978       5,522,147  
Total liabilities and equity $ 11,291,783     $ 11,763,726  
 
 
Condensed Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
       
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Revenues
Revenues from rental properties $ 222,651 $ 225,774 $ 453,066 $ 453,485
Reimbursement income 61,206 60,971 124,922 119,100
Other rental property income 5,526 6,098 11,112 9,649
Management and other fee income   4,020     4,333     8,381     8,530  
Total revenues   293,403     297,176     597,481     590,764  
Operating expenses
Rent 2,742 2,765 5,560 5,548
Real estate taxes 37,274 38,747 77,708 77,016
Operating and maintenance 41,325 42,703 84,656 85,277
General and administrative 24,029 19,965 46,427 42,195
Provision for doubtful accounts 1,051 2,096 3,182 3,500
Impairment charges 22,873 29,719 30,519 31,336
Depreciation and amortization   79,760     95,270     161,142     187,344  
Total operating expenses   209,054     231,265     409,194     432,216  
Operating income 84,349 65,911 188,287 158,548
 
Other income/(expense)
Other income, net 3,277 1,439 9,456 2,712
Interest expense (46,434 ) (46,090 ) (96,377 ) (92,572 )

Income from continuing operations before income taxes, net, equity
in
    income of joint ventures, net, gain on change in
control of interests and

       
equity in income from other real estate investments, net 41,192 21,260 101,366 68,688
 
Benefit for income taxes, net 720 1,034 668 1,527
Equity in income of joint ventures, net 19,040 13,169 35,953 27,902
Gain on change in control of interests - 60,972 - 71,160
Equity in income of other real estate investments, net 9,617 38,356 19,593 42,043
       
Income from continuing operations 70,569 134,791 157,580 211,320
 
Gain on sale of operating properties/change in control of interests 95,240 19,883 152,211 21,569
       
Net income 165,809 154,674 309,791 232,889
Net income attributable to noncontrolling interests   (423 )   (11,258 )   (315 )   (12,740 )
Net income attributable to the Company 165,386 143,416 309,476 220,149
Preferred dividends   (14,534 )   (11,555 )   (29,123 )   (23,110 )
Net income available to the Company's common shareholders $ 150,852   $ 131,861   $ 280,353   $ 197,039  
 
Per common share:
Net income available to the Company: (2)
Basic $ 0.36   $ 0.31   $ 0.66   $ 0.46  
Diluted $ 0.36   (1 ) $ 0.31   (1 ) $ 0.66   (1 ) $ 0.46   (1 )
Weighted average shares:
Basic   420,731     423,650     422,060     423,516  
Diluted   421,928     424,944     423,236     424,084  
 

(1) 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. Adjusted for distributions
on convertible units of $282 and $259
for the three months
ended June 30, 2018 and 2017, and $521 and $29 for the six months
ended June 30, 2018 and 2017, respectively.

(2) Adjusted for earnings attributable from participating
securities of ($863) and ($647) for the three months ended June
30, 2018 and 2017, and
($1,472) and ($1,070) for the six
months ended June 30, 2018 and 2017, respectively.

 

Certain reclassifications of prior year amounts have been made to
conform with the current year presentation.

 
 
Reconciliation of Net Income Available to the Company's Common
Shareholders to
FFO and FFO as Adjusted Available to the Company's Common
Shareholders
(in thousands, except per share data)
(unaudited)
         

Three Months Ended June
30,

Six Months Ended June 30,

2018 2017 2018 2017
Net income available to the Company's common shareholders $ 150,852 $ 131,861 $ 280,353 $ 197,039
Gain on sale of operating properties/change in control of interests (95,163 ) (19,763 ) (152,134 ) (20,861 )
Gain on sale of joint venture operating properties/change in control
of interests
(1,510 ) (60,955 ) (3,549 ) (72,185 )
Depreciation and amortization - real estate related 77,250 94,121 156,242 184,970
Depreciation and amortization - real estate jv's 11,611 10,311 20,895 19,851
Impairments of operating properties 22,720 21,048 30,366 23,643
Benefit for income taxes (2) - - - (39 )
Noncontrolling interests (2)   (507 )   (1,627 )   (2,059 )   (2,282 )
Funds from operations available to the Company's common shareholders 165,253 174,996 330,114 330,136
Transactional income, net   (9,524 )   (14,254 )   (16,573 )   (13,631 )
Funds from operations available to the Company's common shareholders
as adjusted
$ 155,729   $ 160,742   $ 313,541   $ 316,505  
 
Weighted average shares outstanding for FFO calculations:
Basic   420,731     423,650     422,060     423,516  
Units 935 960 927 854
Dilutive effect of equity awards   350     432     352     505  
Diluted (1)   422,016     425,042     423,339     424,875  
 
FFO per common share - basic $ 0.39   $ 0.41   $ 0.78   $ 0.78  
FFO per common share - diluted (1) $ 0.39   $ 0.41   $ 0.78   $ 0.78  
FFO as adjusted per common share - diluted (1) $ 0.37   $ 0.38   $ 0.74   $ 0.75  
 

(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 $261 and $267 for the three
months ended June 30, 2018 and 2017, and $525 and $459 for the six
months ended June 30, 2018 and 2017, respectively.
(2)
Related to gains, impairments and depreciation on operating
properties, where applicable.

 

 
 
Reconciliation of Net Income Available to the Company's Common
Shareholders
to Same Property NOI
(in thousands)
(unaudited)
       
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Net income available to the Company's common shareholders $ 150,852 $ 131,861 $ 280,353 $ 197,039
Adjustments:
Management and other fee income (4,020 ) (4,333 ) (8,381 ) (8,530 )
General and administrative 24,029 19,965 46,427 42,195
Impairment charges 22,873 29,719 30,519 31,336
Depreciation and amortization 79,760 95,270 161,142 187,344
Interest and other expense, net 43,157 44,651 86,921 89,860
Benefit for income taxes, net (720 ) (1,034 ) (668 ) (1,527 )
Gain on change in control of interests - (60,972 ) - (71,160 )
Equity in income of other real estate investments, net (9,617 ) (38,356 ) (19,593 ) (42,043 )
Gain on sale of operating properties/change in control of interests (95,240 ) (19,883 ) (152,211 ) (21,569 )
Net income attributable to noncontrolling interests 423 11,258 315 12,740
Preferred dividends 14,534 11,555 29,123 23,110
Non same property net operating income (26,833 ) (32,054 ) (58,175 ) (65,756 )
Non-operational expense from joint ventures, net   15,136     18,648     29,508     39,031  
Same Property NOI $ 214,334   $ 206,295   $ 425,280   $ 412,070  
 
Certain reclassifications of prior year amounts have been made to
conform with the current year presentation.
 

Reconciliation of Diluted Net Income Available to Common
Shareholders Per Common Share

to Diluted Funds From Operations Available to Common
Shareholders Per Common Share

 (unaudited)

 
  Projected Range
Full Year 2018
Low   High
 

Diluted net income available to common shareholder
   per
common share

$ 0.92 $ 1.00
 
 
Depreciation & amortization 0.73 0.76
 
Depreciation & amortization real estate joint ventures,
net of noncontrolling interests 0.09 0.10
 
Gain on sale of operating properties/change in control of interests (0.37 ) (0.45 )
 
Gain on sale of joint venture operating properties/change in control
of interests
(0.01 ) (0.02 )
 
Impairments of operating properties 0.07 0.07
 
Noncontrolling interests - -
   
Projected FFO per diluted common share $ 1.43 $ 1.46
 
Transactional charges/ (income), net - -
   
Projected FFO, as adjusted per diluted common share $ 1.43   $ 1.46  
 

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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