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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2005
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-10899
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Kimco Realty Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 13-2744380
- ----------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3333 New Hyde Park Road, New Hyde Park, NY 11042
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(Address of principal executive offices - zip code)
(516) 869-9000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- ------
Indicate by check mark whether the registrant is an accelerated filer
(as defined in rule 12-b of the Act).
Yes X No
----- ------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
113,087,015 shares outstanding as of March 31, 2005.
1 of 31
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Financial Statements -
Condensed Consolidated Balance Sheets as of March 31, 2005 and December
31, 2004.
Condensed Consolidated Statements of Income for the Three Months Ended
March 31, 2005 and 2004.
Condensed Consolidated Statements of Comprehensive Income for the Three
Months Ended March 31, 2005 and 2004.
Condensed Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2005 and 2004.
Notes to Condensed Consolidated Financial Statements.
2
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share information)
MARCH 31, DECEMBER 31,
2005 2004
----------------- -----------------
Assets:
Operating real estate, net of accumulated depreciation
of $686,447 and $634,642, respectively $ 3,046,718 $ 3,095,360
Investments and advances in real estate joint ventures 609,244 595,175
Real estate under development 371,917 362,220
Other real estate investments 190,862 188,536
Mortgages and other financing receivables 141,189 140,717
Cash and cash equivalents 96,141 38,220
Marketable securities 171,971 123,771
Accounts and notes receivable 57,366 52,182
Other assets 153,214 153,416
----------------- -----------------
$ 4,838,622 $ 4,749,597
================= =================
Liabilities:
Notes payable $ 1,618,743 $ 1,608,925
Mortgages payable 345,990 353,071
Construction loans payable 176,819 156,626
Dividends payable 71,892 71,489
Other liabilities 230,568 216,195
----------------- -----------------
2,444,012 2,406,306
----------------- -----------------
Minority interests 112,539 106,891
----------------- -----------------
Stockholders' equity:
Preferred Stock, $1.00 par value, authorized 3,600,000 shares
Class F Preferred Stock, $1.00 par value, authorized 700,000 shares
Issued and outstanding 700,000 shares 700 700
Aggregate liquidation preference $175,000
Common Stock, $.01 par value, authorized 200,000,000 shares
Issued and outstanding 113,087,015 and 112,426,406 shares, respectively 1,131 1,124
Paid-in capital 2,221,404 2,200,544
Retained earnings/(Cumulative distributions in excess of net income) 11,131 (3,749)
----------------- -----------------
2,234,366 2,198,619
Accumulated other comprehensive income 47,705 37,781
----------------- -----------------
2,282,071 2,236,400
----------------- -----------------
$ 4,838,622 $ 4,749,597
================= =================
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2005 2004
----------------- -----------------
Revenues from rental property $ 132,043 $ 139,137
----------------- -----------------
Rental property expenses:
Rent 2,574 2,820
Real estate taxes 16,395 16,281
Operating and maintenance 18,000 16,377
----------------- -----------------
36,969 35,478
----------------- -----------------
95,074 103,659
Income from other real estate investments 16,608 6,171
Mortgage and other financing income 3,105 3,560
Management and other fee income 7,653 5,761
Depreciation and amortization (26,031) (26,352)
----------------- -----------------
96,409 92,799
Interest, dividends and other investment income 4,040 3,003
Other income/(expense), net (947) 1,910
Interest expense (28,640) (27,228)
General and administrative expenses (12,004) (10,228)
----------------- -----------------
58,858 60,256
Provision for income taxes (2,637) (2,103)
Equity in income of real estate joint ventures, net 24,381 14,005
Minority interests in income, net (3,136) (2,199)
Gain on sale of development properties
net of tax of $3,479 and $2,599, respectively 5,219 3,899
----------------- -----------------
Income from continuing operations 82,685 73,858
----------------- -----------------
Discontinued operations:
Income from discontinued operating properties 104 445
Loss on operating properties held for sale/sold - (4,151)
Gain on disposition of operating properties 2,396 1,237
----------------- -----------------
Income/(loss) from discontinued operations 2,500 (2,469)
----------------- -----------------
Gain on transfer of operating properties 1,595 -
----------------- -----------------
Net income 86,780 71,389
Preferred stock dividends (2,909) (2,909)
----------------- -----------------
Net income available to common shareholders $ 83,871 $ 68,480
================= =================
Per common share:
Income from continuing operations:
-Basic $ 0.72 $ 0.64
================= =================
-Diluted $ 0.71 $ 0.63
================= =================
Net income :
-Basic $ 0.74 $ 0.62
================= =================
-Diluted $ 0.73 $ 0.61
================= =================
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ended March 31, 2005 and 2004
(Unaudited)
(in thousands)
2005 2004
--------------- ---------------
Net income $ 86,780 $ 71,389
--------------- ---------------
Other comprehensive income:
Change in unrealized gain on marketable securities 9,844 4,067
Change in unrealized gain on warrants - 2,161
Change in unrealized gain on foreign currency hedge agreements 1,802 191
Foreign currency translation adjustment (1,722) (448)
--------------- ---------------
Other comprehensive income 9,924 5,971
--------------- ---------------
Comprehensive income $ 96,704 $ 77,360
=============== ===============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
KIMCO REALTY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(Unaudited)
(in thousands)
2005 2004
--------------------- --------------------
Cash flow from operating activities:
Net income $ 86,780 $ 71,389
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 26,183 26,992
Loss on operating properties held for sale/sold - 4,151
Gain on sale of development properties (8,698) (6,498)
Gain on sale of operating properties (3,991) (1,237)
Minority interests in income, net 3,136 2,199
Equity in income of real estate joint ventures, net (24,381) (14,005)
Income from other real estate investments (12,325) (4,825)
Distributions of unconsolidated investments 33,815 18,393
Change in accounts and notes receivable (5,024) (4,552)
Change in accounts payable and accrued expenses 20,678 15,016
Change in other operating assets and liabilities (4,501) 478
--------------------- --------------------
Net cash flow provided by operating activities 111,672 107,501
--------------------- --------------------
Cash flow from investing activities:
Acquisition of and improvements to operating real estate (50,961) (95,321)
Acquisition of and improvements to real estate under development (71,862) (31,312)
Investment in marketable securities (40,011) (909)
Proceeds from sale of marketable securities 1,836 5,874
Proceeds from transferred operating properties 52,974 -
Investments and advances to real estate joint ventures (24,623) (12,626)
Reimbursements of advances to real estate joint ventures 8,556 39,395
Other real estate investments (7,915) (13,324)
Reimbursements of advances to other real estate investments 3,031 4,642
Investment in mortgage loans receivable (6,200) (22,991)
Collection of mortgage loans receivable 5,594 22,679
Settlement of net investment hedges (10,126) -
Proceeds from sale of operating properties 17,230 7,275
Proceeds from sale of development properties 78,083 46,719
--------------------- --------------------
Net cash flow used for investing activities (44,394) (49,899)
--------------------- --------------------
Cash flow from financing activities:
Principal payments on debt, excluding
normal amortization of rental property debt - (6,565)
Principal payments on rental property debt (1,979) (2,102)
Principal payments on construction loan financings (23,954) (18,190)
Proceeds from mortgage/construction loan financings 63,224 16,930
Borrowings under revolving credit facilities - 15,000
Repayment of borrowings under revolving credit facilities (94,102) -
Proceeds from issuance of unsecured senior note 100,000 -
Financing origination costs (730) -
Dividends paid (71,497) (65,969)
Proceeds from issuance of stock 19,681 10,693
--------------------- --------------------
Net cash flow used for financing activities (9,357) (50,203)
--------------------- --------------------
Change in cash and cash equivalents 57,921 7,399
Cash and cash equivalents, beginning of period 38,220 48,288
--------------------- --------------------
Cash and cash equivalents, end of period $ 96,141 $ 55,687
===================== ====================
Interest paid during the period (net of capitalized interest
of $2,447, and $2,614, respectively) $ 13,396 $ 12,960
===================== ====================
Income taxes paid during the period $ 382 $ 47
===================== ====================
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
KIMCO REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
---------------
1. Interim Financial Statements
Principles of Consolidation -
The accompanying Condensed Consolidated Financial Statements include
the accounts of Kimco Realty Corporation (the "Company"), its subsidiaries, all
of which are wholly-owned, and all entities in which the Company has a
controlling interest or has determined to be a primary beneficiary of a variable
interest entity in accordance with the provisions and guidance of the Financial
Accounting Standards Board ("FASB") Interpretation No. 46(R), Consolidation of
Variable Interest Entities ("FIN 46(R)"). All inter-company balances and
transactions have been eliminated in consolidation. The information furnished is
unaudited and reflects all adjustments which are, in the opinion of management,
necessary to reflect a fair statement of the results for the interim periods
presented, and all such adjustments are of a normal recurring nature. These
Condensed Consolidated Financial Statements should be read in conjunction with
the Company's Annual Report on Form 10-K.
Certain 2004 amounts have been reclassified to conform to the 2005
financial statement presentation.
Income Taxes -
The Company and its qualified REIT subsidiaries file a consolidated
federal income tax return. The Company has made an election to qualify, and
believes it is operating so as to qualify, as a Real Estate Investment Trust (a
"REIT") for federal income tax purposes. Accordingly, the Company generally will
not be subject to federal income tax, provided that distributions to its
stockholders equal at least the amount of its REIT taxable income as defined
under Sections 856 through 860 of the Internal Revenue Code, as amended (the
"Code"). However, in connection with the Tax Relief Extension Act of 1999, which
became effective January 1, 2001, the Company is now permitted to participate in
certain activities which it was previously precluded from in order to maintain
its qualification as a REIT, so long as these activities are conducted in
entities which elect to be treated as taxable REIT subsidiaries under the Code.
As such, the Company will be subject to federal and state income taxes on the
income from these activities. During the three months ended March 31, 2005, the
Company's provision for federal and state income taxes was approximately $6.1
million relating to activities conducted in its taxable REIT subsidiaries.
7
Earnings Per Share -
The following table sets forth the reconciliation of earnings and the
weighted average number of shares used in the calculation of basic and diluted
earnings per share (amounts presented in thousands except per share data):
Three Months Ended March 31,
2005 2004
---- ----
Computation of Basic Earnings Per Share:
Income from continuing operations $82,685 $73,858
Gain on transfer of operating properties 1,595 -
Preferred stock dividends (2,909) (2,909)
--------- ---------
Income from continuing operations
applicable to common shares 81,371 70,949
Income/(loss) from discontinued operations 2,500 (2,469)
--------- ---------
Net income applicable to common shares $83,871 $68,480
========= =========
Weighted average common shares outstanding 112,730 110,805
Basic Earnings Per Share:
Income from continuing operations $0.72 $0.64
Income from discontinued operations 0.02 (0.02)
--------- ---------
Net income $0.74 $0.62
========= =========
Computation of Diluted Earnings Per Share:
Income from continuing operations
applicable to common shares $81,371 $70,949
Distributions on convertible downREIT units 1,607 - (a)
--------- ---------
Income from continuing operations for diluted
earnings per share 82,978 70,949
Income/(loss) from discontinued operations 2,500 (2,469)
--------- ---------
Net income for diluted earnings per share $85,478 $68,480
========= =========
Weighted average common shares
outstanding - basic 112,730 110,805
Effect of dilutive securities:
Stock options/deferred stock awards 2,042 2,345
Assumed conversion of downREIT units 2,383 - (a)
--------- ---------
Shares for diluted earnings per share 117,155 113,150
--------- ---------
Diluted Earnings Per Share:
Income from continuing operations $0.71 $0.63
Income from discontinued operations 0.02 (0.02)
--------- ---------
Net income $0.73 $0.61
========= =========
8
(a) For the period ended March 31, 2004, the effect of the assumed
conversion of downREIT units would have an anti-dilutive effect upon the
calculation of Income from continuing operations per share. Accordingly, the
impact of such conversion has not been included in the determination of diluted
earnings per share calculations.
The Company maintains a stock option plan (the "Plan") for which prior
to January 1, 2003, the Company accounted for under the intrinsic value-based
method of accounting prescribed by Accounting Principles Board ("APB") Opinion
No. 25, Accounting for Stock Issued to Employees, and related interpretations
including FASB Interpretation No. 44, Accounting for Certain Transactions
involving Stock Compensation (an interpretation of APB Opinion No. 25).
Effective January 1, 2003, the Company adopted the prospective method provisions
of Statement of Financial Accounting Standards ("SFAS") No. 148, Accounting for
Stock-Based Compensation - Transition and Disclosure an Amendment of FASB
Statement No. 123 ("SFAS No. 148"), which applies the recognition provisions of
SFAS No. 123, Accounting for Stock-Based Compensation ("SFAS No. 123") to all
employee awards granted, modified or settled after January 1, 2003. Awards under
the Company's Plan generally vest ratably over a three-year term and expire ten
years from the date of grant. Therefore, the cost related to stock-based
employee compensation included in the determination of net income for the three
months ended March 31, 2005 is less than that which would have been recognized
if the fair value based method had been applied to all awards since the original
effective date of SFAS No. 123. The following table illustrates the effect on
net income and earnings per share if the fair value based method had been
applied to all outstanding stock awards in each period (amounts presented in
thousands except for per share data):
9
Three Months Ended March 31,
2005 2004
---- ----
Net income, as reported $86,780 $71,389
Add: Stock based employee compensation
expense included in reported net income 1,025 50
Deduct: Total stock based employee
compensation expense determined under
fair value based method for all awards (1,174) (417)
---------- ----------
Pro Forma Net Income - Basic $86,631 $71,022
========== ==========
Earnings Per Share
Basic - as reported $0.74 $0.62
===== =====
Basic - pro forma $0.74 $0.61
===== =====
Net income for diluted earnings per share $85,478 $68,480
Add: Stock based employee compensation
expense included in reported net income 1,025 50
Deduct: Total stock based employee
compensation expense determined under
fair value based method for all awards (1,174) (417)
---------- ----------
Pro Forma Net Income - Diluted $85,329 $68,113
========== ==========
Earnings Per Share
Diluted - as reported $0.73 $0.61
===== =====
Diluted - pro forma $0.73 $0.60
===== =====
In addition, there were approximately 1,707,000 and 24,000 stock
options that were anti-dilutive for the three month period ended March 31, 2005
and 2004, respectively.
New Accounting Pronouncements -
In December 2004, the FASB issued SFAS No. 123, (revised 2004)
Share-Based Payment ("SFAS No. 123(R)"), which supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees and its related implementation
guidance. SFAS No. 123(R) established standards for the accounting for
transactions in which an entity exchanges its equity instruments for goods or
services. It also addresses transactions in which an entity incurs liabilities
in exchange for goods or services that are based on the fair value of the
entity's equity instruments or that may be settled by the issuance of those
equity instruments. SFAS No. 123(R) focuses primarily on accounting for
transactions in which an entity obtains employee services in share-based payment
transactions. SFAS No. 123(R) is effective for fiscal years beginning after
December 15, 2005. The impact of adopting SFAS No. 123 (R) is not expected to
have a material adverse impact on the Company's financial position or results of
operations.
10
In December 2004, the FASB issued Statement No. 153, Exchange of
Non-monetary Assets - an amendment of APB Opinion No 29 ("SFAS No. 153"). The
guidance in APB Opinion No. 29, Accounting for Non-monetary Transactions, is
based on the principle that exchanges of non-monetary assets should be measured
based on the fair value of the assets exchanged. The guidance in that Opinion,
however, included certain exceptions to that principle. This Statement amends
Opinion No. 29 to eliminate the exception for non-monetary assets that do not
have commercial substance. A non-monetary exchange has commercial substance if
the future cash flows of the entity are expected to change significantly as a
result of the exchange. SFAS No. 153 is effective for non-monetary asset
exchanges occurring in fiscal periods beginning after June 15, 2005. The impact
of adopting SFAS No. 153 is not expected to have a material adverse impact on
the Company's financial position or results of operations.
2. Operating Property Activities
During January 2005, the Company acquired a shopping center property
located in Clearwater, FL, comprising approximately 0.2 million square feet of
gross leasable area ("GLA"), for a purchase price of approximately $17.7
million.
During March 2005, the Company acquired the 40% non-controlling
minority interest in a shopping center property located in Temple, TX, for a
purchase price of approximately $0.9 million. The Company now holds a 100%
interest in the property.
During March 2005, the Company acquired a self-storage facility located
in Austell, GA, through an existing joint venture in which the Company holds a
90% economic interest, for a purchase price of approximately $4.6 million. As of
March 31, 2005, this entity owns eight self-storage facilities located in
various states. The Company has cross-collateralized these properties with
approximately $24.3 million of non-recourse floating-rate mortgage debt which
matures in November 2007 and has an interest rate of LIBOR plus 2.75 (5.61% at
March 31, 2005) Based upon the provisions of FIN 46(R), the Company has
determined that this entity is a variable interest entity ("VIE"). The Company
has further determined that the Company is the primary beneficiary of this VIE
and has therefore consolidated this entity for financial reporting purposes. The
Company's maximum exposure to loss associated with this entity is limited to the
Company's capital investment, which was approximately $8.7 million at March 31,
2005.
11
Additionally, during March 2005, the Company acquired two operating
properties, located in New York, NY, through newly formed joint ventures in
which the Company holds 95% economic interests, for an aggregate purchase price
of approximately $11.6 million. Simultaneously with the closing, each property
was encumbered with an individual non-recourse floating-rate mortgage
aggregating approximately $9.1 million. These loans bear interest at LIBOR plus
2% and LIBOR plus 2.25% and mature in April 2007. Based upon the provisions of
FIN 46(R), the Company has determined that these entities are VIEs. The Company
has further determined that the Company is the primary beneficiary of these VIEs
and has therefore consolidated these entities for financial reporting purposes.
The Company's maximum exposure to loss associated with these entities is limited
to the Company's aggregate capital investment, which was approximately $2.9
million at March 31, 2005.
During the three months ended March 31, 2005, the Company (i) disposed
of, in separate transactions, two operating properties for an aggregate sales
price of $8.2 million, (ii) transferred two operating properties to KROP, as
defined below, for an aggregate price of approximately $29.1 million, and (iii)
transferred four operating properties to various co-investment ventures in which
the Company has 20% non-controlling interests for an aggregate price of
approximately $63.2 million. For the three months ended March 31, 2005, these
transactions resulted in aggregate gains of approximately $4.0 million.
3. Discontinued Operations
In accordance with SFAS No. 144, Accounting for Impairment or Disposal
of Long Lived Assets ("SFAS No. 144"), the Company reports as discontinued
operations, properties held-for-sale (as defined by SFAS No. 144) and operating
properties sold in the current period. The results of these discontinued
operations are included in a separate component of income on the Condensed
Consolidated Statements of Income under the caption Discontinued operations.
This reporting has resulted in certain reclassifications of 2004 financial
statement amounts.
The components of Income/(loss) from operations related to discontinued
operations for the three months ended March 31, 2005 and 2004 are shown below.
These include the results of operations through the date of each respective sale
for properties sold during 2005 and 2004 and a full quarter of operations for
those assets classified as held-for-sale as of March 31, 2005 (in thousands):
12
Three Months Ended
March 31, 2005 March 31, 2004
-------------- --------------
Discontinued Operations:
Revenues from rental property $ 887 $ 3,037
Rental property expenses (548) (1,734)
--------- ----------
Income from property operations 339 1,303
Depreciation and amortization (151) (639)
Interest expense (101) (216)
Other 17 (3)
--------- ----------
Income from discontinued operating
properties 104 445
Loss on operating properties held for sale/sold - (4,151)
Gain on disposition of operating
properties 2,396 1,237
--------- ----------
Income/(loss) from discontinued operations $2,500 $(2,469)
========= ==========
During the three months ended March 31, 2005, the Company reclassified
as held-for-sale three shopping center properties comprising approximately 0.4
million square feet of GLA. The book value of each of these properties,
aggregating approximately $17.1 million, net of accumulated depreciation of
approximately $8.4 million, did not exceed each of their estimated fair values.
As a result, no adjustment of property carrying value has been recorded. The
Company's determination of the fair value for each of these properties,
aggregating approximately $22.1 million, is based upon executed contracts of
sale with third parties less estimated selling costs.
4. Kimco Developers, Inc. ("KDI")
During the three months ended March 31, 2005, KDI, the Company's
wholly-owned development taxable REIT subsidiary, sold two of its recently
completed projects and nine of its out-parcels, in separate transactions, for
approximately $82.5 million. These sales provided gains of approximately $5.2
million, net of income taxes of $3.5 million.
Additionally, during the three months ended March 31, 2005, KDI
obtained construction financing on one ground-up development property for an
aggregate loan amount of up to $13.5 million, which was fully funded to KDI as
of March 31, 2005. As of March 31, 2005, KDI had 18 loans with total commitments
of up to $397.3 million of which $176.8 million has been funded to KDI. These
loans have original maturities ranging from 12 to 42 months and interest rates
ranging from 4.56% to 5.75% at March 31, 2005.
13
5. Investments and Advances in Real Estate Joint Ventures
Kimco Income REIT -
During 1998, the Company formed Kimco Income REIT ("KIR"), a limited
partnership which the Company manages, established to invest in high quality
retail properties financed primarily through the use of individual non-recourse
mortgages.
The Company holds a 43.3% non-controlling limited partnership interest
in KIR and accounts for its investment in KIR under the equity method of
accounting. The Company's equity in income of KIR for the three months ended
March 31, 2005 and 2004 was approximately $11.8 million and $5.0 million,
respectively.
During the three months ended March 31, 2005, KIR disposed of an
operating property and an out-parcel, in separate transactions, for an aggregate
sales price of approximately $43.1 million. These sales resulted in an aggregate
gain of approximately $17.8 million of which the pro-rata gain to the Company
was approximately $7.7 million. In connection with the sale of the operating
property, KIR incurred a $2.0 loan defeasance charge, of which the Company's
pro-rata share was approximately $0.9 million.
During March 2005, KIR acquired an operating property located in
Delran, NJ, for a purchase price of approximately $4.6 million.
In addition, KIR entered into a master management agreement with the
Company, whereby, the Company performs services for fees relating to the
management, operation, supervision and maintenance of the joint venture
properties. For each of the three months ended March 31, 2005 and 2004, the
Company earned management fees of approximately $0.8 million, respectively.
As of March 31, 2005, the KIR portfolio was comprised of 69 properties
aggregating 14.2 million square feet of GLA located in 20 states.
RioCan Venture -
During October 2001, the Company formed a joint venture (the "RioCan
Venture") with RioCan Real Estate Investment Trust ("RioCan", Canada's largest
publicly traded REIT measured by GLA) in which the Company has a 50%
non-controlling interest, to acquire retail properties and development projects
in Canada. The acquisitions and development projects are to be sourced and
managed by RioCan and are subject to review and approval by a joint oversight
committee consisting of RioCan management and the Company's management
personnel. As of March 31, 2005, the RioCan Venture consisted of 35 shopping
center properties and one development project aggregating 7.8 million square
feet of GLA. The Company accounts for its investment in the RioCan Venture under
the equity method of accounting. During the three months ended March 31, 2005
and 2004, the Company recognized equity in income of the RioCan Venture of
approximately $4.4 million and $4.5 million, respectively.
14
KROP Venture -
During 2001, the Company formed a joint venture (the "Kimco Retail
Opportunity Portfolio" or "KROP") with GE Capital Real Estate ("GECRE"), in
which the Company has a 20% non-controlling interest and manages the portfolio.
The purpose of this joint venture is to acquire established high growth
potential retail properties in the United States. Total capital commitments to
KROP from GECRE and the Company are for $200.0 million and $50.0 million,
respectively, and such commitments are funded proportionately as suitable
opportunities arise and are agreed to by GECRE and the Company. The Company
accounts for its investment in KROP under the equity method of accounting.
During the three months ended March 31, 2005, KROP acquired three
operating properties and one out-parcel, in separate transactions for an
aggregate purchase price of approximately $54.7 million, including the
assumption of approximately $14.1 million of mortgage debt encumbering one of
the properties and preferred units of approximately $4.2 million associated with
another property.
During February 2005, KROP disposed of an operating property for a
sales price of approximately $13.7 million. This sale resulted in a gain of
approximately $3.0 million, of which the Company's pro-rata share was
approximately $0.6 million.
As of March 31, 2005, the KROP portfolio was comprised of 39 shopping
center properties aggregating approximately 5.7 million square feet of GLA
located in 15 states.
Other Real Estate Joint Ventures -
During December 2004, the Company acquired the Price Legacy Corporation
through a newly formed joint venture, PL Retail LLC ("PL Retail"), in which the
Company has a 15% non-controlling interest and accounts for under the equity
method of accounting. In connection with this transaction, PL Retail acquired 33
operating properties aggregating approximately 7.6 million square feet of GLA
located in ten states. To partially fund the acquisition, the Company provided
PL Retail approximately $30.6 million of secured mezzanine financing. This
interest only loan bears interest at a fixed rate of 7.5% and matures in
December 2006. During February 2005, PL Retail disposed of an operating property
located in Columbia, SC, for a sales price of approximately $10.8 million, which
represented the approximate carrying value of the property. Proceeds of
approximately $2.5 million were used to partially repay the mezzanine financing
that was provided by the Company.
15
During March 2005, a joint venture in which the Company has a 50%
non-controlling interest, disposed of two vacant land parcels located in
Glendale, AZ, in separate transactions, for an aggregate sales price of
approximately $9.9 million. These sales resulted in an aggregate gain of
approximately $4.8 million, of which the Company's share was approximately $2.4
million.
During March 2005, the Company transferred 50% of the Company's 95%
interest in a development property located in Huehuetoca, Mexico, to a joint
venture partner for approximately USD $5.3 million, which approximated its
carrying value. As a result of this transaction, the Company now holds a 47.5%
non-controlling interest in this property and now accounts for its investment
under the equity method of accounting.
Additionally, during 2005, the Company transferred, in separate
transactions, four operating properties comprising approximately 0.5 million
square feet of GLA, to newly formed joint ventures in which the Company has 20%
non-controlling interests, for an aggregate price of approximately $63.2
million, including the assignment of approximately $40.2 million of mortgage
debt encumbering three of the properties. The Company accounts for its
investments in these joint ventures under the equity method of accounting.
The Company's maximum exposure to losses associated with its
unconsolidated joint ventures is limited to its carrying value in these
investments. As of March 31, 2005, the Company's carrying value in these
investments approximated $609.2 million.
6. Other Real Estate Investments
Kimsouth -
During November 2002, the Company through its taxable REIT subsidiary,
together with Prometheus Southeast Retail Trust, completed the merger and
privatization of Konover Property Trust, which has been renamed Kimsouth Realty,
Inc., ("Kimsouth"). The Company acquired 44.5% of the common stock of Kimsouth,
which consisted primarily of 38 retail shopping center properties comprising
approximately 4.6 million square feet of GLA. Total acquisition value was
approximately $280.9 million including approximately $216.2 million in mortgage
debt. The Company's investment strategy with respect to Kimsouth includes
re-tenanting, repositioning and disposition of the properties.
16
During the three months ended March 31, 2005, Kimsouth sold four
properties, in separate transactions, for an aggregate sales price of
approximately $55.7 million including the assignment of approximately $23.7
million of non-recourse mortgage debt encumbering two of the properties. For the
three months ended March 31, 2005 and 2004, the Company recognized equity in
income of Kimsouth of approximately $5.8 million and $3.7 million, respectively.
As of March 31, 2005, Kimsouth consisted of eight properties, including
the remaining office component of an operating property sold in 2004,
aggregating approximately 1.4 million square feet of GLA located in five states.
Preferred Equity Capital -
During 2002, the Company established a preferred equity program, which
provides capital to developers and owners of shopping centers. During the three
months ended March 31, 2005, the Company provided an aggregate of approximately
$5.7 million in investment capital to developers and owners of three shopping
centers. As of March 31, 2005, the Company's net investment under the Preferred
Equity program was approximately $161.2 million. During the three months ended
March 31, 2005, the Company earned from these investments approximately $6.8
million, including a $3.1 million profit participation earned from one capital
transaction. During the three months ended March 31, 2004, the Company earned
approximately $1.3 million from these investments.
Other -
During the three months ended March 31, 2005, the Company recognized
approximately $3.1 million primarily from land sales relating to the land
resource management operations of Blue Ridge / Big Boulder Real Estate, a
consolidated entity in which the Company holds a 52% ownership interest.
7. Mortgages and Other Financing Receivables
During May 2002, the Company provided a $15 million three-year term
loan and a $7.5 million revolving credit facility to Frank's Nursery & Crafts,
Inc. ("Frank's"), at an interest rate of 10.25% per annum collateralized by 40
real estate interests. Interest is payable quarterly in arrears. During 2003,
the revolving credit facility was amended to increase the total borrowing
capacity to $17.5 million. During January 2004, the revolving loan was further
amended to provide up to $33.75 million of borrowings from the Company. During
September 2004, Frank's filed for protection under Chapter 11 of the U.S.
Bankruptcy Code. The Company committed to provide an additional $27.0 million of
Debtor-in-Possession financing with a term of one year at an interest rate of
Prime plus 1.00% per annum. As of March 31, 2005, the aggregate outstanding loan
balance was approximately $29.1 million.
17
8. Notes Payable
During February 2005, the Company issued $100.0 million of fixed rate
unsecured senior notes under its medium-term notes ("MTN") program. This fixed
rate MTN matures February 2015 and bears interest at 4.904% per annum. The
proceeds from this MTN issuance will primarily be used for the repayment of all
$20.0 million of our fixed rate notes due April 2005, which bear interest at
7.91%, all $10.25 million of our fixed rate notes due May 2005, which bear
interest at 7.30%, and partially repay our $100.0 million fixed rate notes due
June 2005, which bear interest at 6.73%.
9. Supplemental Schedule of Non-Cash Investing / Financing Activities
The following schedule summarizes the non-cash investing and financing
activities of the Company for the three months ended March 31, 2005 and 2004 (in
thousands):
2005 2004
---- ----
Acquisition of real estate interests by assumption of
mortgage debt $ - $88,309
Acquisition of real estate interest by issuance of
downREIT units $ - $24,114
Disposition of real estate interests by assignment of
mortgage debt $40,239 $ -
Disposition/transfer of real estate interest by
assignment of downREIT units $ 4,236 $ -
Proceeds held in escrow from sale of real estate
interests $ - $19,653
Acquisition of real estate interest through proceeds
held in escrow $ - $41,194
Notes received upon disposition of real estate interests $ - $ 1,627
Declaration of dividends paid in succeeding period $71,892 $66,212
18
10. Pro Forma Financial Information
As discussed in Note 2, the Company and certain of its affiliates
acquired and disposed of interests in certain operating properties during the
three months ended March 31, 2005. The pro forma financial information set forth
below is based upon the Company's historical Condensed Consolidated Statements
of Income for the three months ended March 31, 2005 and 2004, adjusted to give
effect to these transactions as of January 1, 2004.
The pro forma financial information is presented for informational
purposes only and may not be indicative of what actual results of operations
would have been had the transactions occurred as of January 1, 2004, nor does it
purport to represent the results of future operations. (Amounts presented in
millions, except per share figures.)
Three Months ended March 31,
2005 2004
---- ----
Revenues from rental property $130.4 $138.9
Net income $82.8 $74.1
Net income per common share:
Basic $0.71 $0.64
===== =====
Diluted $0.70 $0.63
===== =====
11. Subsequent Events
On April 21, 2005, Kimco North Trust III, a wholly-owned entity of the
Company, completed the issuance of $150 million Canadian denominated senior
unsecured notes. The notes bear interest at 4.45 percent and mature on April 21,
2010. The Company has provided a fully and unconditional guarantee of the notes.
The proceeds will be used by Kimco North Trust III to pay down outstanding
indebtedness under existing credit facilities, to fund long-term investments in
Canadian real estate and for general corporate purposes. The senior unsecured
notes are governed by an indenture by and among Kimco North Trust III, the
Company, as guarantor, and BNY Trust Company of Canada, as trustee, dated April
21, 2005.
19
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the
accompanying Condensed Consolidated Financial Statements and Notes thereto.
These unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to reflect a fair statement of the results for
the interim periods presented, and all such adjustments are of a normal
recurring nature.
Results of Operations
Revenues from rental property decreased $7.1 million or 5.1% to $132.0
million for the three months ended March 31, 2005, as compared with $139.1
million for the corresponding quarter ended March 31, 2004. This net decrease
resulted primarily from the combined effect of (i) a decrease in revenues of
approximately $19.9 million for the three months ended March 31, 2005 as
compared to the corresponding period last year, resulting from the transfer of
operating properties to various unconsolidated joint venture entities and the
sale of certain properties during 2004 and the three months ended March 31 2005
and from tenant buyouts during the three months ended March 31, 2004, offset by
(ii) the acquisition of operating properties during 2004 and the three months
ended March 31, 2005, providing incremental revenues of $8.9 million and (iii)
an overall increase in shopping center portfolio occupancy to 93.4% at March 31,
2005, as compared to 91.9% at March 31, 2004 and the completion of certain
redevelopment projects, providing incremental revenues of approximately $3.9
million as compared to the corresponding period in 2004.
Rental property expenses, including depreciation and amortization,
increased $1.2 million or 1.9% to $63.0 million for the three months ended March
31, 2005, as compared to $61.8 million for the corresponding quarter ended March
31, 2004. This increase is due to higher operating and maintenance costs
incurred primarily from snow removal expenses during the period as compared to
the same period in the prior year.
Income from other real estate investments increased $10.4 million to
$16.6 million for the three months ended March 31, 2005, as compared to $6.2 for
the corresponding quarter ended March 31, 2004. This increase is primarily due
to (i) increased investment in the Company's Preferred Equity program which
contributed $6.8 million, including a $3.1 million profit participation earned
from a capital transaction, for the quarter ended March 31, 2005, as compared to
$1.3 million for the corresponding quarter ended March 31, 2004, (ii) increased
contributions from the Kimsouth investment of $5.8 million for the three months
ended March 31, 2005, as compared to $3.7 million for the three months ended
March 31, 2004 and (iii) approximately $3.1 million primarily from land sales
relating to the land resource management operations of Blue Ridge / Big Boulder
Real Estate, a consolidated entity in which the Company holds a 52% ownership
interest.
20
Management and other fee income increased approximately $1.9 million to
$7.7 million for the three months ended March 31, 2005, as compared to $5.8
million for the corresponding period in 2004. This increase is primarily due to
incremental fees earned from the growth in the co-investment program and
incentive management fees earned from disposition services the Company provided.
General and administrative expenses increased approximately $1.8
million to $12.0 million for the three months ended March 31, 2005, as compared
to $10.2 million in the corresponding period in 2004. This increase is primarily
due to (i) the non-cash expensing of the value attributable to stock options
granted and (ii) systems and other personnel-related costs, related to the
growth of the Company.
Equity in income of real estate joint ventures, net increased $10.4
million to $24.4 million for the three months ended March 31, 2005, as compared
to $14.0 million for the corresponding quarter ended March 31, 2004. This
increase is primarily attributable to (i) the increased equity in income from
the Kimco Income REIT joint venture investment ("KIR") resulting from the sale
of an operating property which provided a gain of $17.8 million, of which the
pro-rata share to the Company was $7.7 million, (ii) increased equity in income
from the Kimco Retail Opportunity Fund joint venture investment ("KROP")
resulting from the sale of an operating property which provided a gain of $3.0
million of which the pro-rata share to the Company was $0.6 million and (iii)
the Company's growth of its various other real estate joint ventures. The
Company has made additional capital investments in these and other joint
ventures for the acquisition of additional shopping center properties by the
ventures throughout 2004 and the three months ended March 31, 2005.
During the three months ended March 31, 2005, KDI, the Company's
wholly-owned development taxable REIT subsidiary, sold two of its recently
completed projects and nine out-parcels, in separate transactions, for
approximately $82.5 million. These sales resulted in gains of approximately $5.2
million, net of income taxes of $3.5 million.
During the three months ended March 31, 2004, KDI sold one project and
seven out-parcels, in separate transactions, for approximately $49.3 million,
which resulted in gains of approximately $3.9 million, net of income taxes of
$2.6 million.
21
During the three months ended March 31, 2005, the Company (i) disposed
of, in separate transactions, two operating properties for an aggregate sales
price of $8.2 million, (ii) transferred two operating properties to KROP, as
defined below, for an aggregate price of approximately $29.1 million, and (iii)
transferred four operating properties to various co-investment ventures in which
the Company has 20% non-controlling interests for an aggregate price of
approximately $63.2 million. For the three months ended March 31, 2005, these
transactions resulted in aggregate gains of approximately $4.0 million.
During the three months ended March 31, 2004, the Company (i) disposed
of three operating properties, in separate transactions, for an aggregate sales
price of $10.3 million and (ii) terminated one ground lease position. These
dispositions resulted in aggregate gains of approximately $1.2 million for the
three months ended March 31, 2004.
During the three months ended March 31, 2004, the Company reclassified
as held-for-sale two shopping center properties comprising approximately 0.3
million square feet. The book value of these properties, aggregating
approximately $8.7 million, net of accumulated depreciation of approximately
$4.2 million, exceeded their estimated fair value. The Company's determination
of the fair value of these properties, aggregating approximately $4.5 million,
was based upon contracts of sale with third parties less estimated selling
costs. As a result, the Company recorded a loss resulting from an adjustment of
property carrying values of $4.2 million. During March 2004, the Company
completed the sale of one of these properties, comprising approximately 0.1
million square feet of GLA, for a sales price of approximately $1.1 million.
Net income for the three months ended March 31, 2005 was $86.8 million,
as compared to $71.4 million for the three months ended March 31, 2004. On a
diluted per share basis, net income increased $0.12 to $0.73 for the three month
period ended March 31, 2005, as compared to $0.61 for the corresponding quarter
in the previous year. This increase is attributable to (i) increased income from
other real estate investments, primarily from the Company's Preferred Equity
program and Kimsouth investment, (ii) an increase in equity in income of real
estate joint ventures resulting from gains on sales of operating properties and
additional capital investments in the Company's joint venture investments for
the acquisition of additional shopping center properties by the ventures
throughout 2004 and the three months ended March 31, 2005 and (iii) increased
gains on sale of development properties and operating properties transferred for
the three months ended March 31, 2005, as compared to the same period last year,
partially offset by, (iv) a decrease in revenues from rental properties
primarily due to the transfer of properties to various unconsolidated joint
venture entities during 2004 and the three months ended March 31, 2005.
22
Tenant Concentration
The Company seeks to reduce its operating and leasing risks through
diversification achieved by the geographic distribution of its properties,
avoiding dependence on any single property, and a large tenant base. At March
31, 2005, the Company's five largest tenants were The Home Depot, TJX Companies,
Kohl's, Sears Holdings and Wal-Mart, which represented approximately 3.7%, 3.2%,
2.6%, 2.6% and 1.9%, respectively, of the Company's annualized base rental
revenues including the proportionate share of base rental revenues from
properties in which the Company has less than a 100% economic interest.
Liquidity and Capital Resources
It is management's intention that the Company continually have access
to the capital resources necessary to expand and develop its business. As such,
the Company intends to operate with and maintain a conservative capital
structure with a level of debt to total market capitalization of 50% or less. As
of March 31, 2005, the Company's level of debt to total market capitalization
was 25%. In addition, the Company intends to maintain strong debt service
coverage and fixed charge coverage ratios as part of its commitment to
maintaining its investment-grade debt ratings. The Company may, from time to
time, seek to obtain funds through additional equity offerings, unsecured debt
financings and/or mortgage financings and other debt and equity alternatives in
a manner consistent with its intention to operate with a conservative debt
structure.
Since the completion of the Company's IPO in 1991, the Company has
utilized the public debt and equity markets as its principal source of capital
for its expansion needs. Since the IPO, the Company has completed additional
offerings of its public unsecured debt and equity, raising in the aggregate over
$3.7 billion for the purposes of, among other things, repaying indebtedness,
acquiring interests in neighborhood and community shopping centers, funding
ground-up development projects, expanding and improving properties in the
portfolio and other investments.
The Company has a $500.0 million unsecured revolving credit facility,
which is scheduled to expire in June 2006. This credit facility has made
available funds to both finance the purchase of properties and other investments
and meet any short-term working capital requirements. As of March 31, 2005,
there was $90.0 million outstanding under this credit facility.
During September 2004, the Company entered into a three-year Canadian
denominated ("CAD") $150.0 million unsecured revolving credit facility with a
group of banks. This facility bears interest at the CDOR Rate, as defined, plus
0.50% and was schedule to expire in September 2007. During March 2005, this
facility was increased to CAD $250.0 million and the scheduled maturity date was
extended to March 2008. Proceeds from this facility will be used for general
corporate purposes including the funding of Canadian denominated investments. As
of March 31, 2005, there was CAD $118.0 million (approximately USD $97.6
million) outstanding under this facility.
23
The Company also has a $400.0 million medium-term notes ("MTN") program
pursuant to which it may, from time to time, offer for sale its senior unsecured
debt for any general corporate purposes, including (i) funding specific
liquidity requirements in its business, including property acquisitions,
development and redevelopment costs and (ii) managing the Company's debt
maturities. As of March 31, 2005, the Company had $300.0 million available for
issuance under the MTN program.
In addition to the public equity and debt markets as capital sources,
the Company may, from time to time, obtain mortgage financing on selected
properties. As of March 31, 2005, the Company had over 350 unencumbered property
interests in its portfolio.
During May 2003, the Company filed a shelf registration statement on
Form S-3 for up to $1.0 billion of debt securities, preferred stock, depositary
shares, common stock and common stock warrants. As of March 31, 2005, the
Company had $309.7 million available for issuance under this shelf registration
statement.
In connection with its intention to continue to qualify as a REIT for
federal income tax purposes, the Company expects to continue paying regular
dividends to its stockholders. These dividends will be paid from operating cash
flows which are expected to increase due to property acquisitions, growth in
operating income in the existing portfolio and from other investments. Since
cash used to pay dividends reduces amounts available for capital investment, the
Company generally intends to maintain a conservative dividend payout ratio,
reserving such amounts as it considers necessary for the expansion and
renovation of shopping centers in its portfolio, debt reduction, the acquisition
of interests in new properties and other investments as suitable opportunities
arise, and such other factors as the Board of Directors considers appropriate.
The Company anticipates that cash flows from operations will continue
to provide adequate capital to fund its operating and administrative expenses,
regular debt service obligations and all dividend payments in accordance with
REIT requirements in both the short-term and long-term. In addition, the Company
anticipates that cash on hand, availability under its revolving credit
facilities, issuance of equity and public debt, as well as other debt and equity
alternatives, will provide the necessary capital required by the Company. Cash
flows from operations increased to $111.7 million for the quarter ended March
31, 2005, as compared to $107.5 million for the corresponding period ended March
31, 2004.
24
Effects of Inflation
Many of the Company's leases contain provisions designed to mitigate
the adverse impact of inflation. Such provisions include clauses enabling the
Company to receive payment of additional rent calculated as a percentage of
tenants' gross sales above pre-determined thresholds, which generally increase
as prices rise, and/or escalation clauses, which generally increase rental rates
during the terms of the leases. Such escalation clauses often include increases
based upon changes in the consumer price index or similar inflation indices. In
addition, many of the Company's leases are for terms of less than 10 years,
which permits the Company to seek to increase rents to market rates upon
renewal. Most of the Company's leases require the tenant to pay an allocable
share of operating expenses, including common area maintenance costs, real
estate taxes and insurance, thereby reducing the Company's exposure to increases
in costs and operating expenses resulting from inflation. The Company
periodically evaluates its exposure to short-term interest rates and foreign
currency exchange rates and will, from time to time, enter into interest rate
protection agreements and/or foreign currency hedge agreements which mitigate,
but do not eliminate, the effect of changes in interest rates on its
floating-rate debt and fluctuations in foreign currency exchange rates.
New Accounting Pronouncements
In December 2004, the FASB issued SFAS No. 123, (revised 2004)
Share-Based Payment ("SFAS No. 123(R)"), which supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees and its related implementation
guidance. SFAS No. 123(R) established standards for the accounting for
transactions in which an entity exchanges its equity instruments for goods or
services. It also addresses transactions in which an entity incurs liabilities
in exchange for goods or services that are based on the fair value of the
entity's equity instruments or that may be settled by the issuance of those
equity instruments. SFAS No. 123(R) focuses primarily on accounting for
transactions in which an entity obtains employee services, in share-based
payment transactions. SFAS No. 123(R) is effective for fiscal years beginning
after December 15, 2005. The impact of adopting SFAS No. 123(R) is not expected
to have a material adverse impact on the Company's financial position or results
of operations.
In December 2004, the FASB issued Statement No. 153, Exchange of
Non-monetary Assets - an amendment of APB Opinion No 29 ("SFAS No. 153"). The
guidance in APB Opinion No. 29, Accounting for Non-monetary Transactions, is
based on the principle that exchanges of non-monetary assets should be measured
based on the fair value of the assets exchanged. The guidance in that Opinion,
however, included certain exceptions to that principle. SFAS No. 153 amends
Opinion No. 29 to eliminate the exception for non-monetary assets that do not
have commercial substance. A non-monetary exchange has commercial substance if
the future cash flows of the entity are expected to change significantly as a
result of the exchange. SFAS No. 153 is effective for non-monetary asset
exchanges occurring in fiscal periods beginning after June 15, 2005. The impact
of adopting SFAS No. 153 is not expected to have a material adverse impact on
the Company's financial position or results of operations.
25
Forward-looking Statements
This quarterly report on Form 10-Q, together with other statements and
information publicly disseminated by the Company, contains certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. The Company intends such forward-looking statements to be covered by
the safe harbor provisions for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995 and includes this statement for
purposes of complying with these safe harbor provisions. Forward-looking
statements, which are based on certain assumptions and describe the Company's
future plans, strategies and expectations, are generally identifiable by use of
the words "believe," "expect," "intend," "anticipate," "estimate," "project" or
similar expressions. You should not rely on forward-looking statements since
they involve known and unknown risks, uncertainties and other factors which are,
in some cases, beyond the Company's control and which could materially affect
actual results, performances or achievements. Factors which may cause actual
results to differ materially from current expectations include, but are not
limited to, (i) general economic and local real estate conditions, (ii) the
inability of major tenants to continue paying their rent obligations due to
bankruptcy, insolvency or general downturn in their business, (iii) financing
risks, such as the inability to obtain equity or debt financing on favorable
terms, (iv) changes in governmental laws and regulations, (v) the level and
volatility of interest rates, (vi) the availability of suitable acquisition
opportunities and (vii) increases in operating costs. Accordingly, there is no
assurance that the Company's expectations will be realized.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company's primary market risk exposure is interest rate risk and
foreign currency exchange rate risk.
26
The following table presents the Company's aggregate fixed rate and
variable rate debt obligations outstanding as of March 31, 2005, with
corresponding weighted-average interest rates sorted by maturity date (in
millions):
Fair
2005 2006 2007 2008 2009 2010+ Total Value
---- ---- ---- ---- ---- ----- ----- -----
Secured Debt
Fixed Rate $1.0 $29.0 - $61.3 $22.1 $172.4 $285.8 $301.9
Average
Interest 8.28% 8.27% - 7.15% 7.88% 7.64% 7.62%
Rate
Variable Rate $41.1 $92.8 $89.6 $13.5 - - $237.0 $237.0
Average
Interest 4.89% 4.90% 4.09% 4.56% - - 4.57%
Rate
Unsecured Debt
Fixed Rate $200.2 $85.0 $195.0 $100.0 $180.0 $567.0 $1,327.2 $1,351.6
Average
Interest 7.12% 7.30% 7.14% 3.95% 6.98% 5.33% 6.11%
Rate
Variable Rate $3.9 $190.0 - $97.6 - - $291.5 $291.5
Average
Interest 5.39% 2.68% - 3.10% - - 2.86%
Rate
As of March 31, 2005, the Company had Canadian investments totaling CAD
$286.2 million (approximately USD $236.6 million) comprised of a real estate
joint venture investments and marketable securities. In addition, the Company
has Mexican real estate investments of approximately MXN $683.5 million
(approximately USD $61.0 million). The foreign currency exchange risk has been
mitigated through the use of local currency denominated debt, foreign currency
forward contracts (the "Forward Contracts") and a cross currency swap (the "CC
Swap") with major financial institutions. The Company is exposed to credit risk
in the event of non-performance by the counter-party to the Forward Contracts
and the CC Swap. The Company believes it mitigates its credit risk by entering
into the Forward Contracts and the CC Swap with major financial institutions.
27
The Company has not, and does not plan to, enter into any derivative
financial instruments for trading or speculative purposes. As of March 31, 2005,
the Company had no other material exposure to market risk.
Item 4. Controls and Procedures
The Company's management, with the participation of the Company's chief
executive officer and chief financial officer, has evaluated the effectiveness
of the Company's disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) as of the end of the period covered by this
report. Based on such evaluation, the Company's chief executive officer and
chief financial officer have concluded that, as of the end of such period, the
Company's disclosure controls and procedures are effective in recording,
processing, summarizing and reporting, on a timely basis, information required
to be disclosed by the Company in the reports that it files or submits under the
Exchange Act.
There have not been any changes in the Company's internal control over
financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) during the fiscal quarter to which this report relates
that have materially affected, or are reasonably likely to materially affect,
the Company's internal control over financial reporting.
28
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not presently involved in any litigation, nor to its
knowledge is any litigation threatened against the Company or its subsidiaries,
that in management's opinion, would result in any material adverse effect on the
Company's ownership, management or operation of its properties, or which is not
covered by the Company's liability insurance.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
Not applicable.
Item 6. Exhibits
Exhibits -
4.1 Agreement to File Instruments
Kimco Realty Corporation (the "Registrant") hereby agrees to file with
the Securities and Exchange Commission, upon request of the Commission, all
instruments defining the rights of holders of long-term debt of the Registrant
and its consolidated subsidiaries, and for any of its unconsolidated
subsidiaries for which financial statements are required to be filed, and for
which the total amount of securities authorized thereunder does not exceed 10
percent of the total assets of the Registrant and its subsidiaries on a
consolidated basis.
31.1 Certification of the Company's Chief Executive Officer, Milton
Cooper, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
29
31.2 Certification of the Company's Chief Financial Officer, Michael V.
Pappagallo, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of the Company's Chief Executive Officer, Milton
Cooper, and the Company's Chief Financial Officer, Michael V. Pappagallo,
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KIMCO REALTY CORPORATION
April 29, 2005 /s/ Milton Cooper
- -------------- -----------------------
(Date) Milton Cooper
Chairman of the Board
April 29, 2005 /s/ Michael V. Pappagallo
- -------------- -----------------------------------
(Date) Michael V. Pappagallo
Chief Financial Officer
31