KIM

Kimco Realty Corp. 10-Q Summary: Period Ended September 30, 2005

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended September 30, 2005, for Kimco Realty Corporation, a leading owner and operator of neighborhood and community shopping centers. As of October 19, 2005, the Company held interests in 944 properties totaling approximately 127.0 million square feet across 43 states, Canada, and Mexico. The Company operates as a Real Estate Investment Trust (REIT) and utilizes taxable REIT subsidiaries for development and advisory services. All per-share data reflects a two-for-one stock split effected on August 23, 2005.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Rental revenues increased 8.4% ($10.1 million) for the quarter and 0.5% ($1.8 million) for the nine-month period compared to 2004. Growth was driven by acquisitions and improved occupancy (94.2% vs. 92.9% in 2004), partially offset by property dispositions and transfers to joint ventures.
• Profitability: Net income increased 8.7% for the quarter and 15.6% for the nine-month period. Diluted EPS rose to $0.36 (quarter) and $1.07 (nine months) from $0.33 and $0.94, respectively, in the prior year.
• Investment Income: Income from other real estate investments surged 163% for the quarter and 106% for the nine months, primarily due to the Preferred Equity program and gains from joint venture property sales.
• Interest Expense: Interest expense increased 31.7% for the quarter and 14.7% for the nine months, attributed to higher average outstanding borrowings.
• Balance Sheet: Total assets grew to $5.17 billion from $4.75 billion at year-end 2004. Total liabilities increased to $2.70 billion, driven by new debt issuances and construction loans.

Guidance, Outlook, and Management Commentary

• Dividend Increase: The Board of Directors increased the quarterly dividend to $0.33 per share from $0.305, effective for the fourth quarter of 2005.
• Capital Strategy: Management intends to maintain a conservative capital structure with debt-to-total market capitalization at 50% or less (currently 24%). The Company plans to fund growth through operating cash flows, revolving credit facilities, and public debt/equity markets.
• Development Pipeline: The Company anticipates capital commitments of approximately $100.0 million to $125.0 million for ground-up development projects for the remainder of 2005, and $52.1 million for redevelopment projects.
• Recent Transactions: Significant activity included the consolidation of FNC Realty Corporation (formerly Frank's Nursery) following its emergence from bankruptcy, and the transfer of 52 operating properties to joint ventures for an aggregate price of $232.1 million.
• Risks: Key risks include general economic conditions, tenant insolvency (notably major retailers), financing availability, interest rate volatility, and foreign currency exchange risks related to Canadian and Mexican investments.

Investor Verification Checklist

• Joint Venture Exposure: Verify the carrying value of unconsolidated joint ventures ($666.1 million) and the terms of non-recourse debt held by these entities ($4.4 billion aggregate).
• Debt Maturities: Review the debt maturity schedule, noting significant unsecured fixed-rate debt maturing in 2010 and beyond, and variable-rate exposure to LIBOR.
• Development Costs: Confirm the budgeted costs and pre-leasing status of the 23 ground-up development projects currently in progress.
• Foreign Currency Hedging: Assess the effectiveness of hedging instruments (forward contracts and cross-currency swaps) covering CAD $271.2 million and MXN 412.4 million of foreign investments.
• REIT Compliance: Monitor dividend payout ratios to ensure compliance with REIT requirements (distributions must equal at least REIT taxable income).