Kimco Realty Corp. (KIM), a leading real estate investment trust (REIT), reported first quarter 2011 rental revenues of $224.0 million compared with $213.4 million in the year-earlier quarter – an increase of 5.0%. Total revenues for the reported quarter exceeded the Zacks Consensus Estimate of $216.0 million.
Kimco reported first quarter 2011 FFO (fund from operations) of $115.1 million or 28 cents per share compared with $126.0 million or 31 cents in the year-ago period. Fund from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
Excluding certain non-recurring items, FFO for the reported quarter was $121.2 million or 30 cents per share compared with $115.6 million or 28 cents in the year-earlier quarter. The recurring FFO for the quarter was in line with the Zacks Consensus Estimate.
Overall occupancy in Kimco’s combined shopping center portfolio was 92.8% at the end of the quarter, an increase of 20 bps compared with first quarter 2010. In the U.S. portfolio, occupancy was 92.5% as of March 31, 2011, an increase of 40 bps compared with the year-ago period. Same-store net operating income (cash-basis, excluding lease termination fees and including charges for bad debts) in the U.S. portfolio increased 1.1% year-over-year.
During the reported quarter, Kimco executed a total of 696 leases spanning 2.6 million square feet. These included 106 new leases in the same-store portfolio totaling 347,000 pro-rata square feet and 376 lease renewals and options for 1.8 million pro-rata square feet. In addition, Kimco executed over 200 new leases totaling 393,000 square feet for spaces vacant for more than one year. Leasing spreads in the U.S. portfolio increased 1.4% (cash basis).
The company acquired 2 shopping centers during the quarter, along with a land parcel for approximately $37.4 million, including $15.4 million in mortgage debt. Subsequent to the quarter-end, Kimco acquired a grocery anchored shopping center for $13.7 million, including $9.3 million of mortgage debt, and sold 2 unencumbered non-strategic shopping centers for $3.2 million.
The reported quarter also saw the company recognizing $9.7 million of fee income related to its investment management business, including $7.5 million in management fees, $0.1 million in acquisition fees and $2.1 million in other ongoing fees. Kimco had 284 properties in investment management funds with 24 institutional partners at quarter-end.
During the quarter, the company generated $15.1 million of income from its structured investments and other non-retail assets, out of which $14.6 million was recurring in nature. During first quarter 2011, Kimco reduced its non-retail investments by $11 million primarily from the sale of marketable securities as well as the sale of one of the Canadian hotels in the Westmont joint venture. As of April 30, 2011, Kimco reduced its non-retail assets to approximately $612 million compared to $1.2 billion at the end of first quarter 2009.
At quarter-end, Kimco had over $1.7 billion available under its revolving credit facilities. The company’s consolidated net debt to recurring EBITDA (earnings before interest, tax, depreciation and amortization) ratio was 6.2x. For fiscal 2011, the company reiterated its earlier recurring FFO guidance in the range of $1.17 – $1.21 per share.
We maintain our ‘Neutral’ recommendation for the long term on the stock, which presently has a Zacks #3 Rank translating into a short-term ‘Hold’ rating. However, we have an ‘Outperform’ recommendation and a Zacks #3 Rank for CBL & Associates Properties Inc. (CBL), one of the competitors of Kimco.