Kimco Realty Reports Second Quarter 2017 Results

High-Quality Portfolio Drives Strong Operating Results; Company Receives $24 million Distribution from Albertsons, Raises 2017 Guidance

NEW HYDE PARK, N.Y.--(BUSINESS WIRE)--July 26, 2017--Kimco Realty Corp. (NYSE:KIM) today reported results for the second quarter ended June 30, 2017.

Highlights:

• Received a $23.7 million cash distribution from the company’s investment in Albertsons LLC;
• Raises 2017 guidance for net income and Funds From Operations (NAREIT FFO) available to the company’s common shareholders;
• U.S. pro-rata occupancy increased 20 basis points sequentially over the prior quarter to 95.5%; and
• U.S. leasing spreads increased 17.0% for new leases and 7.8% for renewals/options. Combined leasing spreads increased 10.5%.

Financial Results

Net Income available to common shareholders for the second quarter of 2017 was $131.9 million, or $0.31 per diluted share, compared to $191.9 million, or $0.46 per diluted share, for the second quarter of 2016. The decrease was primarily due to $65.9 million* of lower gains on sales or pending dispositions of operating properties, net of impairments, as compared to the same quarter in 2016, when the company’s strategic portfolio repositioning was still underway. In the second quarter of 2017, Kimco sold interests in nine shopping centers for a gross price of $152.2 million, compared to the 34 shopping centers sold for $695.0 million in the second quarter of 2016. Both gains on sales and operating property impairments are excluded from the calculation of FFO available to the company’s common shareholders.

For the six months ended June 30, 2017, net income available to common shareholders was $197.0 million, or $0.46 per diluted share, compared to $321.0 million, or $0.77 per diluted share, for the six months ended June 30, 2016. The change was attributable to $134.8 million* of lower gains on sales or pending dispositions of operating properties, net of impairments, as compared to the same period in 2016. During the six months ended June 30, 2017, Kimco sold interests in 17 shopping centers for a gross price of $264.4 million, compared to the 47 shopping centers sold for $1.1 billion during the comparable period in 2016.

NAREIT FFO was $175.0 million, or $0.41 per diluted share, for the second quarter of 2017 compared to $158.1 million, or $0.38 per diluted share, for the second quarter of 2016. NAREIT FFO for the second quarter of 2017 included $14.3 million of transactional income (net of transactional charges) due to a $23.7 million cash distribution the company received from its investment in Albertsons LLC, offset by a $9.5 million impairment from a legacy Canada land parcel. This compares to $2.6 million of transactional income (net of transactional charges) in the second quarter of 2016.

For the six months ended June 30, 2017, NAREIT FFO was $330.1 million, or $0.78 per diluted share, compared to $316.3 million, or $0.76 per diluted share, for the same period last year. NAREIT FFO for the six months ended June 30, 2017 included $13.6 million of transactional income (net of transactional charges). This compares to $7.9 million of transactional income (net of transactional charges) for the same period in 2016.

FFO available to the company’s common shareholders as adjusted (FFO as adjusted), which excludes the effects of transactional income and charges, was $160.7 million, or $0.38 per diluted share, for the second quarter of 2017 compared to $155.5 million, or $0.37 per diluted share, during the same period in 2016. FFO as adjusted for the six months ended June 30, 2017 was $316.5 million, or $0.75 per diluted share, compared to $308.4 million, or $0.74 per diluted share, for the same period in 2016.

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

• Reported pro-rata portfolio occupancy of 95.5% at the end of the second quarter, representing a 20-basis-point sequential increase over the first quarter of 2017;
• Increased anchor and small shop occupancy by 20 basis points and 10 basis points, respectively, over the first quarter of 2017. At June 30, 2017, anchor and small shop occupancy was 97.5% and 89.7%, respectively;
• Expanded pro-rata leasing spreads by 10.5%, with rental rates for new leases up 17.0% and renewals/options growing 7.8%;
• Generated a 30-basis-point increase in same-property NOI compared to the same period in 2016, including the previously disclosed negative impact from Sports Authority which came in at 210 basis points; and
• Same-property NOI increased 1.20% for the six months ended June 30, 2017, compared to the same period in 2016.

Investment Activity

As part of the company’s strategic 2020 Vision, Kimco continues to upgrade the quality of its portfolio with selective acquisitions funded by proceeds from dispositions. As previously announced, Kimco reported its transaction activity during, and subsequent to, the second quarter of 2017:

Acquisitions: The company acquired a parcel adjacent to its Augusta Exchange shopping center in Augusta, Georgia, for a gross purchase price of $700,000. The acquisition presents an excellent redevelopment opportunity for an outparcel that will complement the existing tenant mix. Kimco’s share of the purchase price was $340,000.

After the second quarter, the company acquired Jantzen Beach, a high-quality, 746,000-square-foot flagship shopping center for $131.8 million. Jantzen Beach is the company’s eighth property in the Portland-Vancouver-Hillsboro MSA, expanding Kimco’s concentration in a top 25 market where it also maintains a regional office.

Jantzen Beach is situated on 67 acres along Portland’s busy I-5 artery, with traffic counts of over 128,000 cars per day, and a trade area extending over 10 miles reaching into neighboring Washington State. The center is 96% occupied and features a prime collection of national tenants in today’s strongest retail categories, and also benefits from sales tax-free shopping, attracting approximately five million visits per year.

The Jantzen Beach acquisition will expand the company’s future redevelopment pipeline through potential outparcel development of two 6,000-square-foot pad buildings and mixed-use densification opportunities supported by flexible zoning. The center also offers strong mark-to-market upside from several below-market anchor leases.

In addition, Kimco acquired an anchor parcel occupied by Whole Foods and Sierra Trading Post at the company’s Del Monte Plaza shopping center in Reno, Nevada, for $24.1 million. This high-volume Whole Foods is the grocer’s only location in the fast-growing Reno market, where recent investments by tech giants Tesla, Apple, Amazon and Google have created a technology manufacturing hub in the region, resulting in significant population and employment growth. Those factors, along with the low cost of living, zero state income tax and new residential development, have created a strong retail environment in the surrounding market.

Dispositions: Kimco disposed of interests in nine shopping centers, totaling 892,000 square feet, and two land parcels for a gross sales price of $155.8 million. Kimco’s share of the sales price was $128.1 million. With these dispositions, the company has exited the states of Maine and Louisiana.

2017 Guidance

The company is raising its 2017 guidance as follows:

A reconciliation of these forward-looking non-GAAP metrics (NAREIT FFO and FFO as adjusted) is provided in the tables accompanying this press release.

The company’s pro-rata operational assumptions for 2017 are revised as follows:

Dividend Declarations

Kimco’s board of directors declared a quarterly cash dividend of $0.27 per common share, payable on October 16, 2017, to shareholders of record on October 4, 2017 representing an ex-dividend date of October 2, 2017.

The board of directors also declared quarterly dividends with respect to the company’s Class I, Class J and Class K series of cumulative redeemable preferred shares. All dividends on the preferred shares will be paid on October 16, 2017, to shareholders of record on October 3, 2017 representing an ex-dividend date of September 29, 2017.

Conference Call

Kimco will hold its quarterly conference call on Thursday, July 27, 2017, at 10:00 a.m. EDT. The call will include a review of the company’s second quarter 2017 results as well as a discussion of the company’s strategy and expectations for the future. To participate, dial 1-888-317-6003 (Passcode: 1525994).

A replay will be available through October 27, 2017, by dialing 1-877-344-7529 (Passcode: 10107008). Access to the live call and replay will also 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, 2017, the company owned interests in 510 U.S. shopping centers comprising 84 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 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 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 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 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, 2016, 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 (i) gains or losses from sales of operating real estate assets and change in control of interests, plus (ii) depreciation and amortization of operating properties and (iii) impairment of depreciable real estate and in substance real estate equity investments and (iv) 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 including those properties under redevelopment. 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 particular 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.

*Amounts shown before any impact from taxes and non-controlling interests

Funds from operations is 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 as net income/(loss) available to the company's common shareholders computed in accordance with generally accepted accounting principles in the United States (“GAAP”), excluding (i) gains or losses from sales of operating real estate assets and change in control of interests, plus (ii) depreciation and amortization of operating properties and (iii) impairment of depreciable real estate and in substance real estate equity investments and (iv) after adjustments for unconsolidated partnerships and joint ventures calculated to reflect funds from operations on the same basis.

Same Property NOI is a supplemental non-GAAP financial 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. Same Property NOI is considered by management to be important performance measure of Kimco's operations, and management believes that this measure is frequently used by securities analysts and investors as a measure of Kimco's operating performance as this measure includes only the net operating income of properties that have been owned for the entire current and prior year reporting periods including those properties under redevelopment and exclude properties under development and pending stabilization. As such, Same Property NOI assists in eliminating disparities in net income due to the development, acquisition or disposition of properties during the particular periods presented, and thus provides a more consistent performance measure for the comparison of the operating performance of Kimco's properties.

Same Property NOI is calculated using revenues from rental properties (excluding straight-line rent adjustments, lease termination fees and above/below market rents) less charges for bad debt, less operating and maintenance expense, real estate taxes and rent expense, plus Kimco's proportionate share of Same Property NOI from unconsolidated real estate joint ventures, calculated on the same basis. Same Property NOI includes all properties that are owned for the entire current and prior year reporting periods and excludes properties under development and properties pending stabilization. Properties are deemed stabilized at the earlier of (i) reaching 90% leased or (ii) one year following their inclusion in operating real estate. Kimco’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.

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.

CONTACT:
Kimco Realty Corp.
David F. Bujnicki, 866-831-4297
Senior Vice President, Investor Relations and Strategy
dbujnicki@kimcorealty.com