Acquisitions

Kimco in ‘sweet spot,’ fourth-quarter and full-year 2013 results show

Posted by: Dave Bujnicki Dave Bujnicki
on February 19, 2014

Kimco’s fourth-quarter and full-year results show a company that is in the sweet spot of supply and demand.

In the U.S., more than 81,000 stores are expected to open over the next two years (a five-year high), while new shopping center construction has hit a 35-year low.  As strong demand bumps up against scarce supply, Kimco’s high-quality properties are yielding impressive operating results, especially in the United States, our largest and most significant market.

  • In the U.S., occupancy overall was up sharply, to 94.9 percent; it reached 97.9 percent in our anchor space and 85.2 percent in our small shop space by year end.
  • Rents were markedly higher, as the leasing spread between old and new rents on the same space grew 5.9 percent overall in the fourth quarter; new leases jumped 8.2 percent and renewals and options increased 5.2 percent.
  • U.S. same-property net operating income (NOI) grew 4.1 percent in the fourth quarter; for the full year, it was up 3.8 percent.

These robust operating results, and those from our businesses in Canada and Latin America, translated into a 6.5 percent increase in reported funds from operations (FFO) in the fourth quarter and an 8.0 percent increase for the full year.  For more details, see our earnings release.

As we told our investors in December (see our Investor Day presentation), Kimco is following the TSR+ path to future growth.

The “T”:  We continue to transform our portfolio for greater growth and value by trading up to larger, higher quality properties in the top U.S. markets, where population, income and growth prospects are highest.  A prime example is our pending acquisition of a 24-property Boston-area portfolio that should close next month.

The “S”:  We are simplifying our business model by exiting investments in Mexico and South America, in addition to reducing the number of our joint ventures.  See our latest transaction activity release for more details.

The “R”:  We are spending close to $800 million over the next several years on redevelopment and value creation projects in our existing shopping centers, increasing property value, adding higher paying tenants, and earning a return on capital of about 10 percent on average.  For instance, a major opportunity exists to redevelop older anchor spaces formerly occupied by Kmart that allows us to reduce our exposure to this at-risk tenant and attract new, high-quality tenants at significantly higher rents.

The Plus: We will continue to pursue opportunistic retail investments, taking advantage of real estate buying opportunities with distressed retailers looking to shed assets and raise capital.  A great example:  our participation last year in an investment consortium that bought five grocery banners — Albertsons, Acme, Jewel-Osco, Shaw’s and Star Market — encompassing 877 stores, from Supervalu Inc.

TSR+ adds up to another TSR — Total Shareholder Return.  Since our IPO in 1991, Kimco shareholders have earned an average annual return of approximately 13 percent, beating the leading market indices during that time.  TSR always has been, and will continue to be, our number one focus.

We invite you to listen to a replay of our quarterly conference call on our website or by dialing 1-877-344-7529 (passcode: 10037461).  The replay will be available through 9:00 a.m. EDT on March 10, 2014.

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