Kimco Realty (KIM) Beats Q3 FFO Estimates, Raises Dividend

Retail real estate investment trust (“REIT”), Kimco Realty Corporation’s (NYSE:KIM) third-quarter 2016 adjusted funds from operations (“FFO”) per share came in at 38 cents, ahead of the prior-year quarter tally of 36 cents. The Zacks Consensus Estimate was pegged at 17 cents.

Including the effects of non-operating impairments and transactional income and expenses, FFO per share was 18 cents for the quarter, against 40 cents in the year-ago period.

Kimco also declared a 5.9% hike in its quarterly dividend payout. Further, the company remains on track with its strategic 2020 Vision, which envisages the ownership of premium assets in major metro markets in the U.S. as well as a reduction in the joint-venture portfolio.

However, Kimco’s revenues from rental properties slipped 1.4% from the prior-year quarter to $279.3 million and fell short of the Zacks Consensus Estimate of $286 million.

Quarter in Details

At quarter end, U.S. pro-rata occupancy came in at 95.1%, reflecting a contraction of 90 basis points (bps) sequentially and 50 bps year over year. The decline is due to the Sports Authority bankruptcy.

Further, pro-rata occupancy for small shop space (under 10,000 square feet) was 89.2%, unchanged sequentially and up 120 bps from a year ago, while anchor tenant occupancy was 97.0% and this included a 115 bps reduction, stemming from the Sports Authority bankruptcy.

U.S. same-property net operating income (NOI) climbed 3.3% year over year. U.S. pro-rata rental-rate leasing spreads moved north 12.9%, with new leases and renewals/options increasing 26.6% and 7.8%, respectively.

Balance Sheet Position

Kimco exited third-quarter 2016 with cash and cash equivalents of around $170.5 million, down from $189.5 million at year-end 2015.

Notably, under its at-the-market continuous offering program (ATM program), the company raised $146.7 million from the issuance of 4.8 million shares of common stock, at a weighted average price of $30.59 per share.

Moreover, it repaid two outstanding Canadian dollar-denominated bonds – CAD $150 million at 5.99% due 2018 and CAD $200 million at 3.855% due 2020 – and $428 million of U.S. debt that was due 2017, at a blended rate of 5.9%.

Portfolio Activity

Kimco’s third-quarter acquisitions totaled 1.0 million square feet of space, worth $292.8 million, of which the company’s share was $263.4 million.

On the other hand, Kimco’s third-quarter sales aggregated $150.7 million and included disposition of 12 shopping centers, totaling 1.4 million square feet. The company’s share of the sales price was $97.8 million.

Specifically, the company sold interests in five out of six remaining Canadian shopping centers for a gross price of USD $97.4 million. Kimco’s share of the sales price was USD $48.7 million. (Read more: Kimco's Q3 Deals Exceed $360M, Reshuffle Continues)

Guidance

Kimco revised its full-year 2016 guidance for FFO per share to $1.30–$1.32 against $1.34–$1.42 provided before. Also, adjusted FFO per share expectations were tweaked to $1.49–$1.51, compared with $1.48–$1.52 guided earlier. The Zacks Consensus Estimate is currently pegged at $1.39.

Notably, the company expects U.S. portfolio occupancy in the range of 95.2–95.7% as compared with the prior-guided range of 95.7–96.2%. Also, same-property NOI has been revised to 2.70–3.30%, compared with previous range of 2.50%–3.50%.

Dividend Raised

Kimco’s board of directors announced a 5.9% hike in the quarterly dividend rate. The company will now pay 27 cents per share, up from 25.5 cents paid in the prior quarter. The dividend will be paid on Jan 17, 2017, to shareholders of record as of Jan 3.

Our Viewpoint

Going forward, premium properties in high-growth areas, presence of well-capitalized retailers in its tenant roster, investments in high-quality neighborhood and community shopping centers and shedding of non-core assets augur well for Kimco’s growth. However, earnings dilution led by high disposition activity, along with competition from other players, remain causes of concern.

Kimco currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

KIMCO REALTY CO Price, Consensus and EPS Surprise

KIMCO REALTY CO Price, Consensus and EPS Surprise | KIMCO REALTY CO Quote

We now look forward to the earnings releases of retail REITs like General Growth Properties, Inc. (NYSE:GGP) , Regency Centers Corp. (NYSE:REG) and Taubman Centers, Inc. (NYSE:TCO) that are scheduled next week.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, 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.


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